UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December~~March 31, ~~2010~~2011

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 0-30507

BellaVista Capital, Inc.

(Exact name of registrant as specified in its charter)

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


15700 Winchester Blvd.
Los Gatos, CA		95030
(Address of principal offices)		(zip code)

(408) 354-8424

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [ ] No [ X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer Accelerated filer Yes [ ] No [X] ~~Accelerated filer~~ Yes [ ] No [X] Non-accelerated filer (Do not Check if a smaller reporting company) Smaller reporting company Yes [ ] No [ ] ~~Smaller reporting company~~ Yes [X] No [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING

THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes [ ] No [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of shares of the registrant’s only class of common equity, its common stock,

outstanding as of ~~September~~February 2310, ~~2011~~2012: 11,171,433

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

Table of Contents

Part I.	Financial Information
Item 1.	Financial Statements (unaudited)	2
	Condensed Consolidated Balance Sheets as of December 31, 2010 (unaudited) and September 30, 2010 (Note 1)	3
	Condensed Consolidated Balance Sheets as of March 31, 2011 (unaudited) and September 30, 2010 (Note 1)	3
	Condensed Consolidated Statements of Operations for the Three Months Ended December 31, 2010 and 2009 (unaudited)	4
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended March 31, 2011 and 2010 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2010 and 2009 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2011 and 2010 (unaudited)	5
	Notes to the Condensed Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1617
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2122
Item 4.	Controls and Procedures	2122
Part II.	Other Information
Item 1.	Legal Proceedings	2122
Item 1A.	Risk Factors	2122
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2522
Item 3.	Defaults Upon Senior Securities	2523
Item 4.	Submission of Matters to a Vote of Security Holders	2523
Item 5.	Other Information	2523
Item 6.	Exhibits	2624
	Signatures	2725

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Attached are the following unaudited financial statements of BellaVista Capital, Inc., formerly known as Primecore Mortgage Trust, Inc. (the “Company”):

(1) Condensed Consolidated Balance Sheets as of ~~December~~March 31, ~~2010~~2011 (unaudited), and September 30, 2010

(2) Condensed Consolidated Statements of Operations for the Three and Six Months ended ~~December~~March 31, ~~2010~~2011 and ~~2009~~2010 (unaudited)

(3) Condensed Consolidated Statements of Cash Flows for the ~~Three~~Six Months ended ~~December~~March 31, ~~2010~~2011 and ~~2009~~2010 (unaudited)

(4)

Notes to Condensed Consolidated Financial Statements (unaudited)

The financial statements referred to above should be read in conjunction with the Company’s audited financial statements for the fiscal year ended September 30, 2010 as filed with the Securities and Exchange Commission in our Annual Report on Form 10-K, filed June 9, 2011.

BELLAVISTA CAPITAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF ~~DECEMBER~~MARCH 31, ~~2010~~2011 AND SEPTEMBER 30, 2010

	December 31, 2010 (unaudited)			September 30, 2010 (Note 1)
	March 31, 2011 (unaudited)			September 30, 2010 (Note 1)
ASSETS:
Cash and cash equivalents	$	845,~~022~~890		$	14,112
Accounts receivable, net of allowance of $126,996 and $241,916 at December 31, 2010 and September 30, 2010, respectively		76,042			64,869
Accounts receivable, net of allowance of $56,996 and $241,916 at March 31, 2011 and September 30, 2010, respectively		162,348			64,869
Loans receivable secured by real estate		3,~~251~~147,~~220~~756			3,881,339
Joint venture investments in real estate developments		75,~~026~~410,~~949~~537			6,910,921
Investments in real estate developments		6,~~172~~692,~~645~~561			6,172,645
Investment in rental property, net of accumulated depreciation of $290,223 and $264,450 at December 31, 2010 and September 30, 2010, respectively		7,225,472			6,727,162
Investment in rental property, net of accumulated depreciation of $321,406 and $264,450 at March 31, 2011 and September 30, 2010, respectively		7,194,289			6,727,162
Other assets, net		~~267~~238,~~793~~980			346,606
Total assets	$	2422,~~028~~892,~~143~~361		$	24,117,654
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Liabilities:
Secured notes payable and lines of credit	$	65,~~425~~980,075		$	6,425,075
Unsecured notes payable		~~163~~28,~~056~~528			85,585
Accounts payable and accrued expenses		~~636~~608,~~926~~760			614,422
Total liabilities		76,~~225~~617,~~057~~363			7,125,082
Commitments and contingencies (see Note 11)	─			─
Shareholders’ Equity:
Common stock: par value $0.01, 50,000,000 shares authorized at December 31, 2010 and September 30, 2010; 11,171,433 shares issued and outstanding at December 31, 2010 and September 30, 2010		111,714			111,714
Common stock: par value $0.01, 50,000,000 shares authorized at March 31, 2011 and September 30, 2010; 11,171,433 shares issued and outstanding at March 31, 2011 and September 30, 2010		111,714			111,714
Additional paid-in capital		102,630,358			102,630,358
Accumulated deficit		(86,~~131~~659,~~708~~262	)		(85,749,500	)
Total BellaVista Capital shareholders’ equity		16,~~610~~082,~~364~~810			16,992,572
Non controlling interest		192,~~722~~188			-
Total shareholders’ equity		16,~~803~~274,~~086~~998			16,992,572
Total liabilities and shareholders’ equity	$	2422,~~028~~892,~~143~~361		$	24,117,654

See accompanying notes to these condensed consolidated financial statements

BELLAVISTA CAPITAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

~~For~~FOR ~~the~~THE ~~three~~THREE ~~months~~AND ~~ended~~SIX ~~December~~MONTHS ENDED MARCH 31, ~~2010~~2011 ~~and~~AND ~~2009~~2010

(~~unaudited~~Unaudited)

	Three Months Ended December 31,
	Three Months Ended March 31,					Six Months Ended March 31,
	2010				2009
	2011		2010			2011		2010
REVENUES:
Revenues from loans receivable	$ 71,937	~~50,132~~	$ 44,134		$	66$ 122,~~371~~069		$ 110,505
Revenues from joint venture investments in real estate developments	─		─			~~240,800~~─		240,800
Revenues from sales of investments in real estate developments	─		1,760,623			~~4,506,925~~─		6,267,548
REO property rental revenues	30,408	~~27,958~~	46,549			4558,~~778~~366		92,327
Rental revenues		198,136				105,547
Rental revenue	204,880		183,648			403,016		289,195
Total revenues	307,225	~~276,226~~	2,034,954			4583,~~965,421~~451		7,000,375
Cost of investments in real estate developments	─					(4,520,361	)
Cost of investments in real estate Developments	─		(1,697,057	)		─		(6,217,418	)
Rental expenses	(104,088	~~(134,507~~)	)(112,124	)		(77238,~~860~~595	)	(189,984	)
Gross profit	203,137	~~141,719~~	225,773			~~367~~344,~~200~~856		592,973
EXPENSES:
Legal and accounting expense	18,310	~~14,415~~	13,943			1732,~~507~~725		31,450
Board of directors fees	24,487	~~32,250~~	37,163			3756,~~250~~737		74,413
Asset management fee	34,429	~~52,500~~	55,000			6086,~~000~~929		115,000
Officers consulting fees for routine business operations – related party	5,625	~~8,350~~	23,800			1813,~~550~~975		42,350
D&O insurance expense	27,969	~~27,969~~	27,844			2755,~~844~~938		55,688
General and administrative expense	4,622	~~2,511~~	5,072			47,~~570~~133		9,642
Reserve for uncollectible interest	─		70,000			~~10,005~~─		80,005
Depreciation expense	─		792			~~792~~─		1,584
BellaVista operating expenses		137,995				176,518
BellaVista total operating expenses	115,442		233,614			253,437		410,132
REO carrying costs and expenses	112,757	~~158,323~~	170,712			~~232~~271,~~652~~080		403,364
Provision for impairment of real estate investments	359,600	~~75,167~~	270,255			~~227~~434,~~254~~767		497,509
Total operating expenses	587,799	~~371,485~~	674,581			~~636~~959,~~424~~284		1,311,005
Net loss from operations	(384,662	~~(229,766~~)	)(448,808	)		(~~269~~614,~~224~~428	)	(718,032	)
OTHER INCOME (EXPENSE):
OTHER INCOME (EXPENSE)
Interest expense	(141,909	~~(152,649~~)	)(157,261	)		(~~197~~294,~~133~~558	)	(354,394	)
Total other income (expense)	(141,909	~~(152,649~~)	)(157,261	)		(~~197~~294,~~133~~558	)	(354,394	)
Net loss before tax	(526,571	~~(382,415~~)	)(606,069	)		(~~466~~908,~~357~~986	)	(1,072,426	)
Income tax expense	─(1,517	)	(13,055	)		(151,~~890~~517	)	(28,945	)
Net loss	(528,088	~~(382,415~~)	)(619,124	)		(~~482~~910,~~247~~503	)	(1,101,371	)
Net loss attributable to non controlling interest	(534)	~~207~~	─		─	(741)		─
Net loss attributable to BellaVista Capital	$ (527,554	~~(382,208~~)	)$ (619,124	)	$	$ (~~482~~909,~~247~~762	)	$ (1,101,371	)
Basic and diluted net loss per common share	$ (0.05	~~(0.03~~)	)$ (0.06	)	$	$ (0.0408	)	$ (0.10	)
Basic and diluted weighted-average common shares outstanding		11,171,433				11,171,433
Basic and diluted weighted-average shares outstanding	11,171,433		11,171,433			11,171,433		11,171,433

See accompanying notes to these condensed consolidated financial statements

BELLAVISTA CAPITAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the ~~three~~six months ended ~~December~~March 31, ~~2010~~2011 and ~~2009~~2010

(unaudited)

	Three Months Ended December 31,
	Six Months Ended March 31,
	2010			2009
	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(~~382~~910,~~415~~503	)	$	(~~482~~1,~~247~~101,371	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		2556,~~773~~956			2048,~~117~~914
Gain on sale of fully impaired investments		-			(240,800	)
Allowance for uncollectible interest		-			1080,005
Provision for impairment		75434,~~167~~767			~~227~~497,~~254~~509
Increase in accounts receivable		(1197,~~173~~479	)		(2124,~~386~~240	)
Decrease in other assets		78107,~~813~~626			845,~~364~~681
Increase (decrease) in accounts payable and accrued expenses		22,504			(97,914	)
Decrease in accounts payable and accrued expenses		(5,662	)		(313,097	)
Net cash used in operating activities		(~~191~~414,~~331~~295	)		(~~576~~1,~~607~~007,399	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from repayments and sales of loans, joint ventures and investments in real estate		~~246~~1,~~248~~887,428			56,~~196~~866,~~287~~649
Investments in loans, joint ventures and real estate		(138,478	)		(247,824	)
Investments in loans, joint ventures and real estate developments		(939,298	)		(339,521	)
Net cash provided by investing activities		~~107~~948,~~770~~130			46,~~948~~527,~~463~~128
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under notes payable and lines of credit		106,000			~~100~~675,000
Repayment of notes payable and lines of credit		(28608,~~529~~057	)		(46,~~472~~163,~~375~~718	)
Net cash provided by (used in) financing activities		77,471			(4,372,375	)
Net cash used in financing activities		(502,057	)		(5,488,718	)
Net decrease in cash and cash equivalents		(6,090	)		(519	)
Net increase in cash and cash equivalents		31,778			31,011
Beginning cash and cash equivalents		14,112			44,422
Ending cash and cash equivalents	$	845,~~022~~890		$	4375,~~903~~433
Supplemental disclosure of cash flow information:
Cash paid for interest	$	~~141~~297,~~489~~331		$	~~218~~351,~~459~~192
Cash paid for income taxes	$	-		$	~~15,890~~-
Assets acquired through foreclosure	$	599,250		$	-
Debt acquired through foreclosure	$	-		$	2,800,000

See accompanying notes to these condensed consolidated financial statements

BELLAVISTA CAPITAL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. ORGANIZATION AND BUSINESS:

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months and six months ended ~~December~~March 31, ~~2010~~2011 are not necessarily indicative of the results to be expected for any future period or the full fiscal year.

The condensed consolidated balance sheet at September 30, 2010 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the BellaVista Capital, Inc. Annual Report on Form 10-K for the fiscal year ended September 30, 2010.

Organization

BellaVista Capital, Inc., a Maryland corporation (the Company, BellaVista, BVC, our, we), was formed on March 18, 1999 and commenced operations effective May 1, 1999. We have been engaged in the business of investing in real estate development projects, primarily in California. Our investments are structured as loans secured by real estate, loans made to real estate development entities and joint venture investments in real estate development entities. We are organized in a single operating segment for purposes of making operating decisions and assessing performance. In addition, BellaVista Capital, Inc. is the 100% shareholder of Frank Norris Condominiums Inc., a California corporation formed for the purpose of developing and selling residential real estate. The Company holds a 100% interest in Cummings Park Associates, LLC, a California Limited Liability Company formed to develop and sell a mixed use residential and retail project in East Palo Alto California. The Company holds a 100% interest in MSB Brighton LLC, currently operated as a rental property. Finally, the Company holds a 67.8% interest in 1472 Investors, LLC, a single asset LLC used to hold a commercial ~~REO~~ property, which is currently being operated as a rental property.

The financial statements are presented on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business as the company proceeds with is previously discussed plans for a controlled liquidation and repurchase of existing shares. The Company has experienced significant losses and expects to continue to generate negative cash flows due to REO and operating expenses. The Company’s ability to continue as a going concern is, therefore, dependent upon its ability and the timing to sell its existing real estate investments and obtain additional funds from those net proceeds and further borrowings, if necessary. Failure to do so would result in a depletion of its available funds. The Company believes that it currently has sufficient cash and financial resources to meet its REO and operating requirements over the next year.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Consolidation Policy

The consolidated financial statements include the accounts of BellaVista Capital, Inc. and its wholly owned subsidiaries: MSB Brighton LLC, Frank Norris Condominiums Inc., Cummings Park Associates, LLC, and 1472 Investors, LLC. All intercompany accounts and transactions have been eliminated in consolidation. We may enter into various joint venture agreements with unrelated third parties to hold or develop real estate assets. We must determine for each of these joint ventures whether to consolidate the entity or account for our investment under the equity or cost basis of accounting. Investments acquired or created are evaluated based on the accounting guidance relating to variable interest entities (“VIEs”), which requires the consolidation of VIEs in which we are considered to be the primary beneficiary. If the investment is determined not to be a VIE, then the investment is evaluated for consolidation (primarily using a voting interest model) under the remaining consolidation guidance relating to real estate. If we are the general partner in a limited partnership, or manager of a limited liability company, we also consider the consolidation guidance relating to the rights of limited partners or non-managing members, as the case may be, to assess whether any rights held by the limited partners, or non-managing members, as the case may be, overcome the presumption of control by us. We evaluate our accounting for investments on a quarterly basis or when a reconsideration event (as defined in GAAP) with respect to our investments occurs. The analysis required to identify VIEs and primary beneficiaries is complex and requires substantial management judgment. Accordingly, we believe the decisions made to choose an appropriate accounting framework are critical.

BELLAVISTA CAPITAL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

manager of a limited liability company, we also consider the consolidation guidance relating to the rights of limited partners or non-managing members, as the case may be, to assess whether any rights held by the limited partners, or non-managing members, as the case may be, overcome the presumption of control by us. We evaluate our accounting for investments on a quarterly basis or when a reconsideration event (as defined in GAAP) with respect to our investments occurs. The analysis required to identify VIEs and primary beneficiaries is complex and requires substantial judgment by management. Accordingly, we believe the decisions made to choose an appropriate accounting framework are critical.

Use of Estimates

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

Loans Receivable Secured By Real Estate

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

We establish and maintain credit reserves for loans receivable secured by real estate based on estimates of credit losses inherent in these loans as of the balance sheet date. To calculate the credit reserve, we assess inherent losses by determining loss factors (defaults, the timing of defaults, and loss severities upon defaults) that can be specifically applied to each loan. We follow the guidelines of ASC 310-10-S99-4 “Accounting for Loan Losses”, and ASC 450-10-05 “Loss Contingencies”, in setting credit reserves for our residential and commercial loans. We follow the guidelines of ASC 310-10-35-16 “Assessing Whether a Loan is Impaired”, in determining impairment on commercial real estate loans.

Joint Venture Investments in Real Estate Developments

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

ADC Loans

We have originated secured loans to acquire, develop and construct residential real estate. These loans contain many of the following characteristics which are identified with ADC loans:

1.	The lender has agreed to provide all or substantially all necessary funds to acquire, develop or construct the property. The borrower has title to but little or no cash equity in the project;

2.	The lender funds substantially all the interest and fees during the term of the loan by adding them to the loan balance;

3.	Typically, the lender’s only security is the project itself. The lender has no recourse to other assets of the borrower, and the borrower does not guarantee the debt;

4.	In order for the lender to recover its investment in the project, the property must be sold to independent third parties or the borrower must obtain refinancing from another source.

Because our ADC loans contain many of the characteristics of investments in real estate, they are classified for financial reporting purposes as joint venture investments in real estate developments (Note 4). ADC loans with no equity participation interest are stated at the lower of cost or fair value and accounted for as an investment in real estate. Revenue from interest and points is recognized as cash is received from the sale or refinancing of such properties. ADC loans that include an equity participation interest are accounted for in the same manner as joint venture investments in real estate developments. ADC loans include amounts funded under the loan agreements and capitalized interest expense, where applicable. If our ADC loans qualified as borrowings under US GAAP, interest and points would be recognized in income as earned instead of at the time of sale of the underlying property.

BELLAVISTA CAPITAL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

include amounts funded under the loan agreements and capitalized interest expense, where applicable. If our ADC loans qualified as borrowings under US GAAP, interest and points would be recognized in income as earned instead of at the time of sale of the underlying property.

Joint Venture Investments in Real Estate

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

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

Investments in Real Estate Developments

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

Cash and Cash Equivalents

Cash and cash equivalents include cash held in financial institutions and other highly liquid short-term investments with original maturities of three months or less.

Income Taxes

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

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

BELLAVISTA CAPITAL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Reclassifications

Certain amounts in the prior period presented have been reclassified to conform to the current period financial statement presentation. These reclassifications have no effect on previously reported financial performance.

Recent Accounting Pronouncements

In January 2010, the FASB issued guidance to improve disclosures about fair value measurements. The guidance provides amendments to require new disclosures regarding transfers in and out of Levels 1 and 2 of the fair value measurement hierarchy, and activity in Level 3, and to clarify existing disclosures regarding the level of disaggregation, inputs and valuation techniques. The guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the new disclosures regarding purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. We adopted the guidance, except for the new disclosures regarding purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements, as of January 1, 2010, as required. We do not expect that the January 1, 2010 adoption of the guidance will have a material impact on our consolidated financial statements. We are currently determining the impact of the new disclosures regarding purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements on our consolidated financial statements.

In January 2010, the FASB issued guidance to address implementation issues related to the changes in ownership provisions in ASC 810, "Consolidation," ("ASC 810"). The guidance clarifies the scope of the decrease in ownership provisions in ASC 810 and expands the disclosures about the deconsolidation of a subsidiary or derecognition of a group of assets within the scope of ASC 810. The guidance is effective beginning in the first interim or annual reporting period ending on or after December 15, 2009, and should be applied retrospectively to the first period that ASC 810 was adopted by us. We do not expect that the adoption of this guidance will have a material impact on our consolidated financial statements.

In ~~June~~April 2011, the FASB issued ASU No. 2011-0502, ~~Comprehensive~~Receivables ~~Income~~ (Topic ~~220~~310)~~—Presentation~~: A Creditor’s Determination of ~~Comprehensive~~Whether ~~Income~~a (Restructuring Is a Troubled Debt Restructuring. The ASU ~~2011-05),~~clarifies towhich ~~require~~loan anmodifications ~~entity~~constitute troubled debt restructurings. It is intended to ~~present~~assist creditors in determining whether a modification of the ~~total~~terms of ~~comprehensive~~a ~~income,~~receivable meets the ~~components~~criteria ofto ~~net~~be ~~income~~considered a troubled debt restructuring (“TDR”), ~~and~~both ~~the~~for ~~components~~purposes of ~~other~~recording ~~comprehensive~~an ~~income~~impairment ~~either~~loss inand for disclosure of a ~~single~~TDR. ~~continuous~~In ~~statement~~evaluating ofwhether ~~comprehensive~~a ~~income~~restructuring orconstitutes ina ~~two~~TDR, ~~separate~~a ~~but~~creditor ~~consecutive~~must ~~statements.~~separately ~~ASU~~conclude ~~2011-05~~that ~~eliminates~~both of the ~~option~~following toexist: ~~present~~(a) the ~~components~~restructuring ofconstitutes ~~other~~a ~~comprehensive~~concession; ~~income~~and as(b) ~~part~~the ofdebtor ~~the~~is ~~statement~~experiencing offinancial ~~equity~~difficulties. The amendments to ASU ~~2011-05~~Topic is310, ~~effective~~Receivables, ~~for~~clarify the ~~Company~~guidance inon ~~the~~a ~~first~~creditor’s ~~quarter~~evaluation of ~~fiscal~~whether ~~year~~it ~~2013~~has granted a concession and ~~should~~whether bea ~~applied~~debtor ~~retrospectively~~is experiencing financial difficulties. ~~The~~ASU ~~Company~~No. 2011-02 is ~~currently~~effective ~~evaluating~~for ~~the~~interim ~~impact~~and ofannual ~~its~~periods ~~pending~~beginning ~~adoption~~on ofor ~~ASU~~ after June 15, 2011~~-05~~, and applies retrospectively to restructurings occurring on ~~its~~or ~~consolidated~~after ~~financial~~the ~~statements~~beginning of the fiscal year of adoption.

3In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220)—Presentation of Comprehensive Income (ASU 2011-05), to require an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of equity. ASU 2011-05 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2011, with early adoption permitted. ~~LOANS~~The ~~RECEIVABLE~~future ~~SECURED~~adoption BYof ~~REAL~~this ~~ESTATE:~~update is not expected to have a material impact on the Company’s consolidated financial statements.

AsManagement ofdoes ~~December~~not ~~31,~~believe ~~2010~~that any other recently issued, ~~loans~~but ~~receivable~~not ~~secured~~yet byeffective ~~real~~accounting ~~estate~~pronouncements, ~~summarized~~if byadopted, ~~location~~would ~~consisted~~have ofa material effect on the ~~following:~~accompanying consolidated financial statements.

Description	Amount Invested		Recognized Cumulative Impairments		Carrying Amount		In Default
SF Bay Area	$	2,709,565	$	694,166	$	2,015,399	$	391,834
California Central Valley		437,500	─			437,500	─
Southern California		355,314		163,177		192,137	─
Other States		606,184	─			606,184		606,184
Total	$	4,108,563	$	857,343	$	3,251,220	$	998,018

BELLAVISTA CAPITAL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

3. LOANS RECEIVABLE SECURED BY REAL ESTATE:

As of March 31, 2011, loans receivable secured by real estate summarized by location consisted of the following:

Description	Amount Invested		Recognized Cumulative Impairments		Carrying Amount		In Default
SF Bay Area	$	2,749,103	$	836,166	$	1,912,937	$	391,834
California Central Valley		1,043,000	─			1,043,000	─
Southern California		354,996		163,177		191,819	─
Total	$	4,147,099	$	999,343	$	3,147,756	$	391,834

As of September 30, 2010, loans receivable secured by real estate summarized by location consisted of the following:

Description	Amount Invested		Recognized Cumulative Impairments		Carrying Amount		In Default
SF Bay Area	$	3,561,701	$	982,845	$	2,578,856	$	798,155
California Central Valley		505,500	─			505,500	─
Southern California		355,476		163,177		192,299	─
Other States		604,684	─			604,684		604,684
Total	$	5,027,361	$	1,146,022	$	3,881,339	$	1,402,839

Loans Receivable Secured by Real Estate consist of loans to real estate developers which are secured by deeds of trust on real property, accrue interest monthly and generally have repayment guarantees from the principals of the borrowing entity. Management ~~has~~periodically ~~evaluated~~evaluates the underlying collateral of ~~loans in default and believes no impairment exists at~~ the ~~balance~~loans ~~sheet~~which ~~dates~~are ~~based~~in ondefault ~~the~~as ~~value~~part of ~~the~~its ~~collateral~~impairment analysis.

As of ~~December~~March 31, ~~2010~~2011, $2,~~377~~850,~~083~~937 of these loans was secured by first trust deeds and $~~874~~296,~~137~~819 was secured by second trust deeds. As of September 30, 2010, $2,936,540 of these loans was secured by first trust deeds and $944,799 was secured by second trust deeds. As of ~~December~~March 31, ~~2010~~2011, ~~four~~two (42) loans totaling $~~998~~391,~~018~~834 were in default under the terms of our loans and we have recognized cumulative impairments on ~~six~~seven (67) of our loans receivable totaling $~~857~~999,343. As of September 30, 2010, six (6) loans totaling $1,402,839 were in default under the terms of our loans and we have recognized cumulative impairments on seven (7) of our loans receivable totaling $1,146,022.

Provision for impairment of loans receivable secured by real estate amounted to ~~zero~~$142,000 for the three and six months ended March 31, 2011. Provision for impairment of loans receivable secured by real estate amounted to $~~181~~263,~~254~~932 and $445,186 for the three and six months ended ~~December~~March 31, 2010 ~~and 2009~~, respectively.

4. JOINT VENTURE INVESTMENTS IN REAL ESTATE DEVELOPMENTS:

As of ~~December~~March 31, ~~2010~~2011, joint venture investments in real estate developments summarized by location consisted of the following:

Description	Amount Invested	Recognized Cumulative Impairments	Carrying Amount	Remaining Funding Obligation
SF Bay Area	$ 98,~~642~~159,~~147~~326	$ 3,~~038~~172,~~450~~222	$ 64,~~603~~987,~~697~~104	$ ─
Central Valley California	1,771,~~657~~838	1,348,405	423,~~252~~433	─
Southern California	7,484,906	7,484,906	─	─
Total	$ 1817,~~898~~416,~~710~~070	$ 1112,~~871~~005,~~761~~533	$ 75,~~026~~410,~~949~~537	$ ─

As of September 30, 2010, joint venture investments in real estate developments summarized by location consisted of the following:

Description	Amount Invested	Recognized Cumulative Impairments	Carrying Amount	Remaining Funding Obligation
SF Bay Area	$ 9,527,114	$ 3,038,450	$ 6,488,664	$ ─
Central Valley California	1,770,662	1,348,405	422,257	─
Southern California	7,484,906	7,484,906	─	─
Total	$ 18,782,682	$ 11,871,761	$ 6,910,921	$ ─

Joint Venture Investments in real estate developments consist of ADC loans and joint investments with real estate developers. ADC Loans are loan arrangements that are typically secured by real property, provide for the payment of interest from an interest reserve established from loan funds and may also provide for the payment of a share of project profits. Joint Venture investments are equity investments in operating entities formed for the purpose of developing real estate. Our investment typically earns a preferred return calculated based on our investment amount at a specific rate during the term of the investment and a share of the project profits.

BELLAVISTA CAPITAL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

~~Provision~~As ~~for~~of ~~impairment~~September of30, 2010, joint venture investments in real estate developments ~~amounted~~summarized toby ~~zero~~location ~~and~~consisted ~~$46,000~~of ~~for~~ the ~~three months ended December 31, 2010 and 2009, respectively.~~following:

Description	Amount Invested	Recognized Cumulative Impairments	Carrying Amount	Remaining Funding Obligation
SF Bay Area	$ 9,527,114	$ 3,038,450	$ 6,488,664	$ ─
Central Valley California	1,770,662	1,348,405	422,257	─
Southern California	7,484,906	7,484,906	─	─
Total	$ 18,782,682	$ 11,871,761	$ 6,910,921	$ ─

Provision for impairment of joint venture investments in real estate developments amounted to $133,772 for the three and six months ended March 31, 2011. Provision for impairment of joint venture investments in real estate developments amounted to $6,323 and $52,323 for the three and six months ended March 31, 2010, respectively.

5. INVESTMENTS IN REAL ESTATE DEVELOPMENTS:

Investments in Real Estate Developments (REOs) include real estate development projects we own, either directly or through a subsidiary company we own or control. As of ~~December~~March 31, ~~2010~~2011, investments in real estate developments summarized by location consisted of the following:

Description	Amount Invested (net of payments)		Recognized Cumulative Impairment	~~Recognized~~Carrying ~~Cumulative Impairment~~Amount		Costs to Complete	~~Carrying Amount~~		~~Costs to Complete~~
SF Bay Area	$ 10,182,954	~~10,189,973~~	$ 4,043,742	$ 6,139,212	~~4,017,328~~	$ 426,420	$	~~6,172,645~~	$	~~426,420~~
Other States	610,763		57,413	553,350		-
Total	$ 10,793,717		$ 4,101,155	$ 6,692,562		$ 426,420

As of September 30, 2010, investments in real estate developments summarized by location consisted of the following:

Description		Amount Invested (net of payments)		Recognized Cumulative Impairment		Carrying Amount		Costs to Complete
SF Bay Area		$ 10,189,973		$ 4,017,328		$ 6,172,645		$ 426,420

Provision for impairment of investments in real estate developments amounted to ~~zero~~$83,828 for the three and six months ended ~~December~~March 31, ~~2010~~2011. Provision for impairment of investments in real estate developments amounted to zero for the three and ~~2009~~six months ended March 31, 2010, respectively.

6. INVESTMENT IN RENTAL PROPERTY:

Investment in rental property at ~~December~~March 31, ~~2010~~2011 and September 30, 2010 consisted of the following:

		December 31, 2010			September 30, 2010
		March 31, 2011		September 30, 2010
Land	$	$2,867,978	~~2,867,978~~$	2,777,183	$	~~2,777,183~~
Buildings		4,635,187	~~4,635,187~~	4,201,899		~~4,201,899~~
Furniture, Fixtures & Equipment		12,530	~~12,530~~	12,530		~~12,530~~
Total Rental Property		7,515,695	~~7,515,695~~	6,991,612		~~6,991,612~~
Accumulated depreciation		(321,406)	~~(290,223~~	(264,450)		~~(264,450~~	)
Rental Property, net	$	$7,194,289	~~7,225,472~~$	6,727,162	$	~~6,727,162~~

Depreciation expense amounted to $25,773 and $19,325 for the three months ended December 31, 2010 and 2009, respectively.

Provision for impairment of investments in real estate developments amounted to $75,167 and zero for the three months ended December 31, 2010 and 2009, respectively.

7. FIXED ASSETS:

Fixed assets at December 31, 2010 and September 30, 2010 consisted of the following:

	December 31, 2010			September 30, 2010
Computer equipment	$	18,756		$	18,756
Accumulated depreciation		(18,756	)		(18,756	)
Fixed assets, net	$ ─			$ ─

Depreciation expense was zero and $792 for the three months ended December 31, 2010 and 2009, respectively.

BELLAVISTA CAPITAL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Depreciation expense amounted to $25,773 and $56,956 for the three and six months ended March 31, 2011, respectively compared with $28,005 and $48,914 for the three and six months ended March 31, 2010.

Provision for impairment of investments in rental property amounted to zero and 75,167 for the three and six months ended March 31, 2011, respectively. Provision for impairment of investments in real estate developments amounted to zero and $84,881 for the three and six months ended March 31, 2010, respectively.

7. FIXED ASSETS:

Fixed assets at March 31, 2011 and September 30, 2010 were fully depreciated.

Depreciation expense was zero for the three and six months ended March 31, 2011, compared with $792 and $1,584 for the three and six months ended March 31, 2010, respectively

8. NOTES PAYABLE AND LINES OF CREDIT:

Notes payable and lines of credit at ~~December~~March 31, ~~2010~~2011 and September 30, 2010 consisted of the following:

		December 31, 2010		September 30, 2010
	March 31, 2011		September 30, 2010
Cummings Park secured note	$ 625,075	$	$ 625,075	$	~~625,075~~
Alum Rock secured note	2,800,000		2,800,000		~~2,800,000~~
Brighton line of credit	1,280,000		1,500,000		~~1,500,000~~
Pulgas line of credit	1,275,000		1,500,000		~~1,500,000~~
Total	$ 5,980,075	$	$ 6,425,075	$	~~6,425,075~~

The Cummings Park secured note was originated for the purpose of financing the construction of a residential and retail mixed use project in East Palo Alto, California. The original amount of the note was $14.9 million. The note is owed by Cummings Park Associates, LLC and is secured by the real property that is owned by Cummings Park Associates, a wholly-owned subsidiary of the Company. The note bears interest at Prime plus 2% with a floor of 8.0%, (8.0% at ~~December~~March 31, ~~2010~~2011 and September 30, 2010) and matures on June 30, 2011. Interest-only payments are due monthly on the outstanding balance of the note. Principal payments will be made from the proceeds when units are sold. The Company completed a refinance of this note in August 2011 (~~see~~See ~~subsequent~~Note ~~events for details~~12).

The Alum Rock secured note was assumed by the Company during the year ended September 30, 2010. The note is secured by the Alum Rock rental property that is owned by the Company. The loan originally obligated the Company to pay interest in year one at a rate of 7.5%, year two at 8.5% and year three at 9.5%, and matures on March 1, 2013. In December 2010, the interest rate was modified and reduced to 6.0%, fixed rate, for the remainder of the term of the note. Interest-only payments are due monthly on the outstanding balance. The maturity date is March 1, 2013.

The $1.5 million Brighton line of credit, of which $1,~~500~~280,000 is outstanding as of ~~December~~March 31, ~~2010~~2011, is secured by our Brighton rental property in Modesto, California through our wholly-owned investment in MSB Brighton, LLC. The line bears interest at 11.5%. Interest~~-only~~ payments are due monthly on the outstanding balance. The line ~~matures~~matured on ~~October~~November 1, 2011. Although the line of credit has matured, the lenders continue to accept monthly interest payments. A portion of the outstanding balance at ~~December~~March 31, ~~2010~~2011 ~~of $1,500,000~~ is due to certain related parties (See Note 10). Principal payments made under this line amounted to ~~zero~~$220,000 and ~~draws~~borrowing on this line amounted to zero during the ~~three~~six months ended ~~December~~March 31, ~~2010~~2011.

The $1.5 million Pulgas line of credit, of which $1,~~500~~275,000 is outstanding as of ~~December~~March 31, ~~2010~~2011, is secured by one of our direct investments in real estate in East Palo Alto, CA. The line bears interest at 11.5%. Interest~~-only~~ payments are due monthly on the outstanding balance. The line ~~matures~~matured on February 1, 2012 and ~~is due to certain related parties (See Note 10). Principal payments made under this line amounted to zero and draws on this line amounted to zero during the three months ended December 31, 2010.~~

9. SHAREHOLDERS’ EQUITY:

There is currently no public trading market for our stock. We are authorized to issue up to 50,000,000 shares of Common Stock. As of December 31, 2010 we have repurchased and cancelled 1,564,097 shares in connection with legal settlements and 6,747,822 shares under tender offers at various prices. At December 31, 2010 and September 30, 2010 we had 11,171,433 shares of Common Stock outstanding.

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

BELLAVISTA CAPITAL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

~~During~~is ~~the~~due ~~three~~to ~~months~~certain ~~ended~~related ~~December~~parties ~~31,~~(See ~~2010~~Note ~~and~~10). Principal ~~the~~payments ~~year~~made ~~ended~~under ~~September~~this ~~30,~~line ~~2010~~amounted to $225,000 ~~the~~and ~~Company~~borrowings ~~made~~on nothis ~~stock~~line ~~repurchases~~amounted orto ~~cancellations~~zero during the six months ended March 31, 2011.

~~The Company had an investment in a promissory note which was secured by two commercial properties in Oakland, CA~~9. In December 2010, 1472 Investors, LLC, which was formed by the investors of the promissory note, foreclosed on the properties. The Company held a 67.8% ownership interest in the promissory note and therefore holds a 67.8% ownership interest in 1472 Investors, LLC. Accordingly, the Company consolidates 1472 Investors, LLC as a majority-owned subsidiary. The remaining ownership interest of the minority owners of 32.2% is reported in the CompanySHAREHOLDERS’s ~~financial statements as non controlling interest.~~EQUITY:

There is currently no public trading market for our stock. We are authorized to issue up to 50,000,000 shares of Common Stock. As of March 31, 2011 we have repurchased and cancelled 1,564,097 shares in connection with legal settlements and 6,747,822 shares under tender offers at various prices. At March 31, 2011 and September 30, 2010 we had 11,171,433 shares of Common Stock outstanding.

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

During the three and six months ended March 31, 2011 and 2010 and the year ended September 30, 2010, the Company made no stock repurchases or cancellations.

The Company had an investment in a promissory note which was secured by two commercial properties in Oakland, CA. In December 2010, 1472 Investors, LLC, which was formed by the investors of the promissory note, foreclosed on the properties. The Company held a 67.8% ownership interest in the promissory note and therefore holds a 67.8% ownership interest in 1472 Investors, LLC. Accordingly, the Company consolidates 1472 Investors, LLC as a majority-owned subsidiary. The remaining ownership interest of the minority owners of 32.2% is reported in the Company’s financial statements as non-controlling interest.

10. TRANSACTIONS WITH AFFILIATES:

During the fiscal year ended September 30, ~~2010~~2009 the Company obtained lines of credit that were partially or fully funded by some of its directors. The terms of these relationships and lines of credit have been previously disclosed in the Company’s Annual 10-K for 2010 filing and the Quarterly 10-Q filings for fiscal year 2011 filed with the Securities and Exchange Commission. They are detailed below.

It should be noted that both lines of credit were structured such that the Company could draw on them only as needed and repay principal at any time cash became available. In this way, the total interest costs paid by the Company would be minimized. Therefore, the principal balances of both these lines of credit fluctuate based on the draws and pay downs that routinely occur, typically on a monthly basis. These lines have been funded through advances by two related parties and two independent third party private lenders.

Brighton line of credit – The $1.5 million line of credit had an outstanding balance of $1.28 million and $1.5 million as of ~~December~~March 31, 2010 and September 30, 2010, respectively. The line is secured by our MSB Brighton rental property in Modesto, California through our wholly-owned investment in MSB Brighton LLC. The line bears interest at 11.5% and ~~matures~~matured on ~~October~~November 1, 2011. Interest~~-only~~ payments are due monthly on the outstanding balance. Although this line of credit has matured, the lenders continue to accept monthly interest payments. This line of credit is partially funded by ~~two~~one of our directors, ~~William Offenberg and~~ Jeffrey Black. Of the $1.528 million outstanding balance at ~~December~~March 31, ~~2010~~2011, $~~870~~650,000 is owed to ~~these parties~~Mr. Black. Since the inception of the note Mr. Offenberg sold and assigned $900,000 of his portion of the note balance to Mr. Black or other unrelated third party private lenders. Since the inception of the note Mr. Black has purchased $300,000 of the note balance from Mr. Offenberg or other unrelated third party private lenders. The following table sets forth the amounts attributed to each affiliated party:

		Three Months Ended December 31, 2010		Since Inception: October 30, 2008 to December 31, 2010
Balance of Line
William Offenberg	$	220,000	$	220,000
Jeffrey Black	$	650,000	$	650,000
Advances to the Company
William Offenberg	$	─	$	1,120,000
Jeffrey Black	$	─	$	350,000
Repayments to the Lenders
William Offenberg	$	─	$	─
Jeffrey Black	$	─	$	─
Interest paid or payable
William Offenberg	$	6,377	$	160,343
Jeffrey Black	$	16,841	$	141,782

Pulgas line of credit – The $1.5 million line of credit had an outstanding balance of $1.5 million as of December 31, 2010 and September 30, 2010. The line is secured by one of our direct investments in real estate in East Palo Alto, California. The line bears interest at 11.5% and matures on February 1, 2012. Interest-only payments are due monthly on the outstanding balance. This line of credit is principally funded by one of our directors, William Offenberg. The full balance of $1,500,000 at December 31, 2010 was owed to this party. The following table sets forth the amounts attributed to each affiliated party:

BELLAVISTA CAPITAL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

		Three Months Ended December 31, 2010		Since Inception: January 20, 2009 to December 31, 2010
		Six Months Ended March 31, 2011		Since Inception: October 30, 2008 to March 31, 2011
Balance of Line
William Offenberg	$	1,500,000	$	1,500,000
Jeffrey Black	$	─	$	─
Advances to the Company
William Offenberg	$	─	$	21,~~925~~120,000
Jeffrey Black	$	─	$	~~300~~650,000
Repayments to the Lenders
Repayments/Transfers to/by the Lenders
William Offenberg	$	─220,000	$	1,~~425~~120,000
Jeffrey Black	$	─	$	~~300,000~~─
Balance of Line
William Offenberg	$	─	$	─
Jeffrey Black	$	650,000	$	650,000
Interest paid or payable
William Offenberg	$	4412,~~083~~546	$	~~226~~166,~~815~~512
Jeffrey Black	$	─37,272	$	13162,~~695~~213

Pulgas line of credit – The $1.5 million line of credit had an outstanding balance of $1.275 million as of March 31, 2011 and $1.5 million as of September 30, 2010, respectively. The line is secured by one of our direct investments in real estate in East Palo Alto, California. The line bears interest at 11.5% and matures on February 1, 2012. Interest-only payments are due monthly on the outstanding balance. This line of credit is principally funded by one of our directors, William Offenberg. The balance of $1,275,000 at March 31, 2011 was owed to this director. The following table sets forth the amounts attributed to each affiliated party:

		Six Months Ended March 31, 2011		Since Inception: January 20, 2009 to March 31, 2011
Advances to the Company
William Offenberg	$	─	$	2,925,000
Jeffrey Black	$	─	$	300,000
Repayments to the Lenders
William Offenberg	$	225,000	$	1,650,000
Jeffrey Black	$	─	$	300,000
Balance of Line
William Offenberg	$	1,275,000	$	1,275,000
Jeffrey Black	$	─	$	─
Interest paid or payable
William Offenberg	$	87,136	$	269,868
Jeffrey Black	$	─	$	13,695

11. COMMITMENTS AND CONTINGENCIES

Litigation

As of ~~December~~March 31, ~~2010~~2011, the Company was involved in the following litigation in which claims for damages would be material if the plaintiff prevailed and there is at least a reasonable possibility that a loss may occur:

Richard Aster v BellaVista Capital, Inc. et al.

This action was initiated in California Civil Court on August 10, 2007. The plaintiff is Richard Aster, the party that purchased the completed home from BellaVista. The defendants are BellaVista, Ainsworth Construction, Masma (the original developer) and various subcontractors who did work for each of these two construction companies. This lawsuit alleges construction defects in the installation of windows, decking and roofing related to a single family home that was purchased by the plaintiff from the Company after the Company acquired the property through foreclosure. In this lawsuit the plaintiff is requesting compensation for all of their costs related to correcting the construction defects and pursuing this action. In addition, a lawsuit has been filed by the original ~~developer (Masma) against the Company for indemnification and defense. This litigation was settled in June 2011 on terms acceptable to the Company.~~

Eden CDM v MAC Homes, LLC

This action was initiated in the Superior Court of the State of California for the County of Alameda on July 20, 2009. The plaintiff is Eden CDM, the general contractor hired to build the MacArthur project. The defendant is MAC Homes, LLC, the developer and Bella Vista’s joint venture partner. The plaintiff is seeking the retention amounts not paid at completion and legal fees. The contract with the general contractor had penalty provisions for delayed completion, which the Company strongly believes are owed by the general contractor and are greater than the retention amounts sought. The Company has retained expert construction litigation counsel on behalf of MAC Homes. This litigation was settled in January 2011 on terms acceptable to the Company.

General Uninsured Losses

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

BELLAVISTA CAPITAL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

developer (Masma) against the Company for indemnification and defense. This litigation was settled in June 2011 on terms acceptable to the Company. As of March 31, 2011, the settlement amount has been included in these condensed consolidated financial statements.

Eden CDM v MAC Homes, LLC

139 Stillman Street Homeowners Association v BellaVista Capital, Inc. et al.

This action was initiated in San Francisco County Superior Court on January 19, 2011. The plaintiff is 139 Stillman Street Homeowners Association. The plaintiff alleges that there are certain defects to the project that the Company had previously foreclosed on, completed unfinished units and sold to the various homeowners. The Company has retained legal counsel and will vigorously defend against this action.

General Uninsured Losses

12. SUBSEQUENT EVENTS:

The following events occurred after ~~December~~March 31, ~~2010~~2011:

Balmore Avenue Project, El Sobrante, CA

The company had an investment in a note secured by twenty-five (25) single family residential parcels in El Sobrante, CA. The borrower defaulted on the note and in March 2011 the property was foreclosed on and put into a single asset LLC. BVC was a 9.15% owner of the note and therefore is a 9.15% stockholder in the new LLC. The new LLC will manage and liquidate the property.

Main Street, Pineville, NC

The company had an investment in a note secured by two parcels of commercial land in Pineville, NC. The borrower defaulted on the note and in March 2011 the Company completed a foreclosure and title is now held by the Company. The Company has listed the property for sale with a commercial real estate broker.

139 Stillman Street Homeowners Association v BellaVista Capital, Inc. et al.

Richard Aster v BellaVista Capital, Inc. et al.

This litigation was settled in June 2011 on terms acceptable to the Company.

Eden CDM v MAC Homes, LLC

This litigation was settled in January 2011 on terms acceptable to the Company.

Management Agreement between BellaVista and LG Servicing, Inc., a California corporation

On December 31, 2010, the Company terminated its management agreement with RMRF Enterprises and entered into a Management Agreement with LG Servicing Corporation, a California corporation. The new Management Agreement commenced January 1, 2011, and provides for LG Servicing Corporation to perform an equivalent set of services, including ongoing administrative and certain services related to the day to day operations and asset management.

Short Term Unsecured Loan

In December 2010 the Company borrowed $106,000 from Mr. Offenberg to pay property taxes on several REO properties. The company would have incurred a 10% penalty on property taxes due on December 10, 2010. The company borrowed funds for a period of approximately 40 days to avoid these substantial penalties. The note was paid back in January 2011 with interest at a rate of 1% per month.

Emilio Navarro v 1472 Investors, LLC. et al.

This action was initiated in Alameda County Superior Court on June 23, 2011. The plaintiff alleges that 1472 Investors, LLC, a majority-owned subsidiary of the Company, wrongfully foreclosed on the plaintiff’s real property in Oakland, CA. The Company has retained legal counsel and will vigorously defend against this action.

Cummings Park Associates, LLC – Completion of Refinance with Related Party

In August 2011, Cummings Park Associates, a wholly owned subsidiary, completed a refinancing of a note payable to Wells Fargo Bank (Wells Fargo). The Company obtained new financing from Mr. Jeff Black, a Director of the Company, totaling $635,000 at 8% per annum and matures in August 2012. The interest rate on the note payable to Mr. Black is the same as the interest rate charged by Wells Fargo during the preceding 12 months. The Company obtained financing from Mr. Black due to Wells Fargo not being able to extend the maturity date.

BELLAVISTA CAPITAL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Cummings Park Associates, LLC – Completion of Refinance with Related Party

Frank Norris, Inc. – Completion of Cash Out New Note with Related Party

In October 2011, Frank Norris, Inc., a wholly owned subsidiary, signed a line of credit agreement (the line) with a maximum borrowing amount of $500,000. The line is for a period of one year, with a rate of 9% per annum, with interest only payments due monthly on the outstanding balance. In October 2011, the Company obtained funding on this line from Mr. William Offenberg and Mr. Jeffrey Black, both of whom are Directors of the Company, in the amount of $170,000, due to cash flow needs by the Company and its subsidiaries. Subsequently, in December 2011, the same related parties, Mr. Black and Mr. Offenberg, advanced an additional $170,000. Total advances on the line of credit amounted to $340,000. The purpose of the advance in December 2011 was to pay property taxes on all REO and other real estate owned by the Company and its subsidiaries. This advance allowed the Company, and it consolidated entities, to avoid a ten (10%) late fee on property tax payments.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS.

General

Our material financial transactions have been purchasing and holding a portfolio of construction mortgage loans, and the construction and sale of real estate acquired through foreclosure or deed in lieu of foreclosure. Statements contained in this Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations,'' and elsewhere in this Form 10-Q, which are not historical facts, may be forward-looking statements. Forward-looking statements include statements which are predictive in nature, which depend upon or refer to future events or conditions, which include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” or similar expressions. In addition, any statements concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible future actions, which may be provided by management, are also forward-looking statements. These statements are not guaranties of future performance. Forward-looking statements are based on current expectations and projections about future events and are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include those described under the heading “Risk Factors” included in Part II, Item 1A. Investors are cautioned not to attribute undue certainty to these forward-looking statements, which speak only as of the date of this Form 10-Q. We undertake no obligation to publicly release any revisions to these forward-looking statements, to reflect events or circumstances after the date of this Form 10-Q, or to reflect the occurrence of unanticipated events, other than as required by law.

Overview

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

After 2000, the market for high-end real estate in the San Francisco Bay Area began to rapidly deteriorate; Primecore began to experience borrower defaults and through 2003 took title to 48 properties by way of foreclosure or deed in lieu of foreclosure. Primecore also recognized significant impairments in its portfolio. The impairment of the investment portfolio resulted in substantial operating losses. The Company realized that these net operating losses could be carried forward and used to reduce future taxable income. In prior years, the company used its REIT status, and the payment of dividends, to eliminate corporate level taxation. However, the REIT rules restricted the types of loans the Company could make. In particular, the Company was prohibited from making loans with equity participation. With the ability to carry forward prior years’ net operating losses to offset future taxable income, the Company was free to terminate its REIT status, which it did effective January 1, 2004, and was no longer restricted in the types of investments it could make.

In April 2004 Primecore changed its name to BellaVista Capital in order to reflect its new business focus. During 2004 new management focused on completing and liquidating the existing portfolio of assets, internalizing operations, resolving outstanding legal issues and developing a pipeline of new investment opportunities. In addition to the completion and sale of a number of our non-performing investments, management completed the transition to internal management and reduced continuing operating expenses.

In October 2007, the Board began a restructuring program that has ultimately resulted in significant operating cost savings and increased efficiencies, including: closing the Palo Alto office, terminating all direct employees, outsourcing the administration and asset management functions and enlisting a Board member to function as CFO on an as needed basis and another board member to assume the CEO responsibilities on an as-needed consulting basis.

The current real estate market in which our properties are located has experienced significant deflationary pricing and significant inventory buildup. While it is true that some recent publicly published statistics appear to demonstrate an increase in sale rate, a significant portion of this increase is at distressed or foreclosure pricing, a clear negative factor for pricing in the foreseeable future. As the credit markets appear to have begun to return to some form of normalcy, high unemployment and the insecurities fostered by layoffs have evolved as the latest major drag on the economy, consumer confidence and the real estate market. Thus, as indicated in Part 1, Item 1 of the Company’s Annual Report on Form 10-K for the year ended September 30, 2010, the Company has discontinued originating any new investments secured by deeds of trust or subordinated debt or investments in equity partnerships.

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As a result of the current difficult market conditions, the Company has taken control of certain underlying projects associated with certain nonperforming loans and equity partnership investments. Control was obtained by settlement with the borrower or by assuming the role of managing partner. These properties are now categorized as Investments in real estate developments (REOs). For each of these properties, the Company has developed individual plans in order to maximize value based on the local market conditions, potential for future appreciation, and the properties’ operating and debt structure. In a number of cases, these REO’s are being operated as either a rental or a hybrid of units used for rental and units available for sale. In a particular case of a condominium project, it was deemed appropriate to auction the individual units versus renting or offering for sale and thereby having to continue to fund the carrying costs for an extended period.

In terms of the path forward, as has been discussed in previous letters and meetings of shareholders, the Company has continued to evaluate the real estate and credit markets as well as our existing portfolio and is not planning on originating any new investments in the foreseeable future. The Company is managing the existing REO and other properties under its control with the goals of maximizing value and completing the sale of all these folio properties, which is expected to happen over the next several years (market permitting). The resulting proceeds will first be used to retire then current debt and fund then current operating and REO expenses and then be used to provide liquidity to existing shareholders through a share repurchase program. It should clearly be noted that the timing for share repurchases is highly dependent on when properties are sold, at what price and when all of the existing debt is repaid.

RESULTS OF OPERATIONS

Revenues

Revenues from Loans Receivable

We reported revenues from loans receivable of $5071,~~132~~937 and $122,069 for the ~~quarter~~three and six months ended ~~December~~March 31, ~~2010~~2011, arespectively, ~~24%~~compared ~~decrease~~with as$44,134 ~~compared~~and to $66110,~~371~~505 for the ~~quarter~~three and six months ended ~~December~~March 31, ~~2009~~2010. The ~~decrease~~increase is due to aan ~~decrease~~increase in the ~~average~~number ~~amount~~of ~~invested~~performing ~~in these~~ loans ~~during the comparable periods and a decline~~ in ~~our average return due to nonperforming loans in~~ the portfolio.

Revenues from Joint Venture Investments in Real Estate Developments

We reported no revenues from joint venture investments in real estate developments for the ~~quarter~~three and six months ended ~~December~~March 31, ~~2010~~2011, acompared ~~100%~~with ~~decrease~~revenues asof ~~compared~~$0 toand $240,800 for the ~~quarter~~three and six months ended ~~December~~March 31, ~~2009~~2010, respectively. The ~~December~~2010 ~~31, 2009~~ revenues represented gains from the disposition and sale of fully impaired investments. There were no such gains during the ~~quarter~~six months ended ~~December~~March 31, ~~2010~~2011.

Revenues from Sale of Investments in Real Estate Developments

We reported no revenues from the sale of investments in real estate developments for the ~~quarter~~three and six months ended ~~December~~March 31, ~~2010~~2011, ~~a 100% decrease as~~ compared to $41,~~506~~760,~~925~~623 and $6,267,548 for the ~~quarter~~three and six months ended ~~December~~March 31, ~~2009~~2010, respectively. The decrease is due to no sales of investments in Real Estate Developments during the current period. The revenue from ~~sale~~sales of investments will vary each period depending upon the timing of ~~the~~a sale(s).

REO Property Rental Revenues

We reported REO property rental revenues totaling $2730,~~958~~408 and $58,366 for the ~~quarter~~three and six months ended ~~December~~March 31, ~~2010~~2011, arespectively, ~~39%~~compared ~~decrease~~with as$46,459 ~~compared~~and to $4592,~~778~~327 for the ~~quarter~~three and six months ended ~~December~~March 31, ~~2009~~2010, respectively. The decrease is due to the continued sale of ~~several of~~ our REO properties that had previously been used as rental units.

Rental Revenue

We reported rental revenues totaling $~~198~~204,~~136~~880 and $403,016 for the ~~quarter~~three and six months ended ~~December~~March 31, ~~2010~~2011, anrespectively, ~~88% increase as~~ compared to $~~105~~183,~~547~~648 and $289,195 for the ~~quarter~~three and six months ended ~~December~~March 31, ~~2009~~2010. The ~~increase~~associated isrental ~~due~~expenses toincluding andepreciation ~~increase~~were in$104,088 ~~the~~and ~~number~~$238,595 offor ~~units~~the ~~rented~~three ~~at our Brighton project~~ and ~~the~~six ~~addition~~months ofending ~~the~~March ~~Alum~~31, ~~Rock~~2011, ~~Rental~~respectively, ~~project~~compared into ~~January~~$112,124 ~~2010. The~~and ~~associated rental expenses were~~ $~~134~~189,~~507~~984 for the ~~quarter~~three and six months ended ~~December~~March 31, 2010,. The aincrease ~~73%~~in ~~increase~~revenue asand ~~compared~~expenses is due to ~~$77,860~~the ~~for~~addition of the ~~quarter~~Alum ~~ended~~Rock ~~December~~Rental ~~31,~~project ~~2009~~acquired by foreclosure in January 2010.

Expenses

As a result of the continuing downturn in the real estate market and significant uncertainties associated with future investments, we have discontinued originating any new equity or subordinated debt investments and ceased originating new trust deed investments. In order to streamline the operations of the company and reduce operating expenses to compensate for the eroding market conditions and declining property values, the Board of Directors determined in 2007 that the best course of action to preserve shareholder’s value was to begin implementation of a restructuring program. The Board has continued to make significant progress under this program which has ultimately resulted in significant operating cost savings and increased efficiencies, including: closing the Palo Alto office, terminating all direct employees, outsourcing the administration and asset management functions. Additionally, in 2010, the size of the Board was reduced from 4 to 3 members and the CEO and CFO responsibilities were consolidated and are now fulfilled by a single Board member on as-needed consulting basis.

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significant progress under this program which has ultimately resulted in significant operating cost savings and increased efficiencies, including: closing the Palo Alto office, terminating all direct employees, outsourcing the administration and asset management functions. Additionally, in 2010, the size of the Board was reduced from 4 to 3 members and the CEO and CFO responsibilities were consolidated and are now fulfilled by a single Board member on as-needed consulting basis.

We group our expenses in three categories: BellaVista operating expenses, REO expenses, and impairments. BellaVista operating expenses are associated with the ongoing operations of the Company. REO expenses include all of the carrying costs for REO properties such as property taxes, insurance, maintenance, marketing, legal, debt service and general and administrative expenses.

BellaVista operating expenses before REO expenses and provision for impairment (including controllable, nonrecurring and non-cash expenses) were $~~137~~115,~~995~~442 and $253,437 for the ~~quarter~~three and six months ended ~~December~~March 31, ~~2010~~2011, arespectively, ~~22% decrease as~~ compared to $~~176~~233,~~518~~614 and $410,132 for the ~~quarter~~three and six months ended ~~December~~March 31, ~~2009~~2010. The decrease in ~~BellaVista~~Bella Vista operating expenses is mainly attributable to ~~decreased~~decrease in the following items: Board of Directors costs, CEO and CFO consulting fees, legal fees and administrative expenses. This significant reduction in BellaVista operating expenses is a direct result of the restructuring plan the Board of Directors began in 2007. Further, it is a clear and definitive indication of the BellaVista Board’s success and ongoing commitment to minimize controllable expenses and provide an efficient and cost effective controlled liquidation of the BellaVista portfolio and achieve the goal of a subsequent share repurchase program.

During the ~~quarter~~three and six months ended ~~December~~March 31, ~~2010~~2011, REO expenses were $~~158~~112,~~323,~~757 aand ~~32%~~$271,080, ~~decrease~~respectively, as compared to $~~232~~170,~~652~~712 and $403,364 for the ~~quarter~~three and six months ended ~~December~~March 31, ~~2009~~2010, respectively. This decrease is due to fewer REO properties being held for rental during the current period.

We recorded impairment charges totaling $75359,~~167~~600 and $434,767 for the ~~quarter~~three and six months ended ~~December~~March 31, ~~2010~~2011, arespectively, ~~67% decrease~~ as compared to $~~227~~270,~~254~~255 and $497,509 for the ~~quarter~~three and six months ended ~~December~~March 31, ~~2009~~2010. The impairments reported during the ~~quarter~~three and six months ended ~~December~~March 31, ~~2010~~2011 were related to certain investments whose values had declined due to the continuing decreases in real estate prices and longer than ~~normal~~ projected marketing periods. We have impaired these investments based on our estimate of the decrease in value and the increase in carrying and operating costs associated with either holding or renting these properties for periods longer than originally projected due to the continued weakness and highly uncertain conditions in the real estate and credit markets.

LIQUIDITY AND CAPITAL RESOURCES

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

Sources of Cash

At ~~December~~March 31, ~~2010~~2011, we had cash and cash equivalents of $845,~~022~~890 and our primary sources of liquidity were proceeds from the sale of our completed investments in REO properties, payoffs of loans receivable, interest from investments in trust deeds that ~~paid~~pay interest monthly, our lines of credit and cash on hand. ~~Subsequent~~During to2010 ~~December~~and 312011, ~~2010,~~and through the date of this filing, the Company has had adequate investment payoffs, revenue from different sources, and ~~revenue~~proceeds from borrowing to meet ongoing obligations. Historically, we have been able to obtain secured financing from our shareholders and management, however, we cannot ascertain if such funding will be available in the future or on terms acceptable to us.

We typically receive repayment on our investments when the development project has been completed and sold or refinanced to third parties. Accordingly, our repayments are a function of our developers’ ability to complete and sell the development properties in which we have invested. During the ~~quarter~~six months ended ~~December~~March 31, ~~2010~~2011 we received repayments of approximately $~~246~~1.9 million,~~248,~~ a 9572% decrease as compared to approximately $56.29 million during the ~~quarter~~six months ended ~~December~~March 31, ~~2009~~2010. Due to the continued weakness and uncertainty in the real estate and credit markets ~~in 2011~~, we believe that there is a high degree of uncertainty in estimating the timing of the sales or the amount of proceeds we might receive from the future sale of our properties.

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

We have two lines of credit secured by our Brighton and Pulgas investments, totaling $3.0 million of which $32.0555 million was outstanding as of ~~December~~March 31, ~~2010~~2011. The Company added a third line of credit (see Note 12).

The Company expects to continue to borrow against its real estate assets or sell its real estate projects in order to fund REO expenses, BellaVista operating expenses, and retire the Company’s indebtedness. The Company believes that it has adequate resources to secure necessary financing and assure its liquidity for the foreseeable future, but it cannot predict with certainty the availability or terms of any such financing.

Uses of Cash

Investment Fundings

We invested $~~138,478~~0.9M in the completion of continuing development projects during the ~~quarter~~six months ended ~~December~~March 31, ~~2010~~2011, a ~~44% decrease as~~ compared to $~~247,824~~0.3M for the ~~quarter~~six months ended ~~December~~March 31, ~~2009~~2010. At ~~December~~March 31, ~~2010~~2011, we estimated the costs to complete our Investments in Real Estate Developments plus the remaining funding obligation on our Joint Venture Investments in Real Estate developments to be approximately $426,000. All of these estimated costs relates to tenant improvements at the remaining retail space in East Palo Alto and will not be incurred until a tenant has been secured; consequently the timing is currently unknown.

Stock Repurchases and Cancellations

During the ~~quarters~~six months ended ~~December~~March 31, ~~2010~~2011 and ~~2009~~2010, the Company made no stock repurchases or cancellations.

STOCKHOLDER LIQUIDITY AND REALIZABLE VALUE OF INVESTMENTS

In the past, provided that certain Company liquidity requirements were satisfied, we have provided liquidity to our stockholders through the repurchase of outstanding shares. Because our stock does not trade in any secondary market, no market value exists for our stock and another method must be used to determine the repurchase price. The Board of Directors has used the net realizable value of the Company’s assets as well as an assessment of the risk profile for each of the investments in the portfolio to guide in the determination of the repurchase price for planned repurchases as well as Company repurchases in response to unsolicited tender offers.

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

Since June 2005, we have not used funds to pay dividends or distributions or, except in certain extraordinary circumstances, to redeem shares. Such extraordinary circumstances have included us making tender offers in response to unsolicited third party tender offers which the Board deemed inadequately priced and opportunistic. The Board will determine the timing and terms of any future share redemptions based on available liquidity, net realizable value, and assessment of the risk profile for each of the investments in the portfolio.

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

		December 31, 2010		September 30, 2010
		March 31, 2011		September 30, 2010
Loans receivable secured by real estate	$	3,~~251~~147,~~220~~756	$	3,881,339
Joint venture investments in real estate developments		75,~~026~~410,~~949~~537		6,910,921
Investments in real estate developments		6,~~172~~692,~~645~~561		6,172,645
Investment in rental property, net		7,~~225~~194,~~472~~289		6,727,162
Less: Non controlling interest in rental property		(192,~~722~~188	)	----
Total investments in real estate per US GAAP		2322,~~483~~252,~~564~~955		23,692,067
Collectible interest and preferred return not reportable per US GAAP		1,948,754		1,948,754
Estimated realizable value of investments in real estate	$	2524,~~432~~201,~~318~~709	$	25,640,821

Net Realizable Value of Assets per Share

The following calculation determines the estimated net realizable value per share of stock:

		December 31, 2010		September 30, 2010
		March 31, 2011		September 30, 2010
Cash and cash equivalents	$	845,~~022~~890	$	14,112
Other assets		~~343~~401,~~835~~328		411,475
Estimated realizable value of investments in real estate		2524,~~432~~201,~~318~~709		25,640,821
Total realizable assets		2524,~~784~~648,~~175~~927		26,066,408
Accounts and notes payable		(76,~~225~~617,~~057~~363)		(7,125,082	)
Estimated net realizable assets		18,~~559~~031,~~118~~564		18,941,326
Shares outstanding		11,171,433		11,171,433
Estimated net realizable assets per share	$	1.6661	$	1.70

Our estimated net realizable value of assets per share (NRV) was $1.6661 as of ~~December~~March 31, ~~2010~~2011, representing a decrease of $0.0409 during the ~~quarter~~six months ended ~~December~~March 31, 2011, as compared to the September 30, 2010 NRV of $1.70. The decrease was (1) primarily attributable to decreases in the estimated realizable value of our investments, and (2) secondarily attributable to the ongoing operational expenses and REO carrying costs.

Critical Accounting Policies and Estimates

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

Valuation of Investments

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

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Loan Accounting

In accordance with the ADC accounting rules, we treat these loans as if they were real estate joint ventures, and thus we do not accrue income for interest and points until the sale or refinancing of a property. Revenue from interest and points from these ADC loans is recognized as cash is received from the sale or refinancing of such properties. ADC loans are classified as joint venture investments in real estate developments and include amounts funded under the loan agreements. If our ADC loans qualified as loans under GAAP, interest and points would be recognized as income in periods prior to the sale of the underlying property.

In addition to ADC loans, we have made direct equity investments in real estate joint ventures. These joint venture investments are accounted for in the same manner as our ADC loans and are classified as joint venture investments in real estate developments. ~~During~~Prior ~~the~~to ~~year~~March ~~ended September 30~~31, ~~2008~~2011, we acquired control and became the 100% owner of ~~two~~three of our joint ventures investments; MSB Brighton, a multi-unit condominium conversion in Modesto, California, ~~and~~ Cummings Park Associates, a residential and retail project in East Palo Alto, and 1472 Investors, LLC, a retail and commercial property in Oakland. Due to weak market conditions we chose to convert MSB Brighton to a rental property and thus classified it as an investment in rental property on our consolidated financial statements. Cummings Park Associates continues to be carried as REO Rental Property on our consolidated financial statements. 1472 Investors, LLC is carried as an investment in rental property on our consolidated financial statements.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements as of ~~December~~March 31, ~~2010~~2011.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of ~~December~~March 31, ~~2010~~2011. Based on this evaluation, as a result of the significant deficiency in internal controls over financial reporting as previously disclosed in our Annual Report on Form 10-K for the year ended September 30, 2010 filed with the Securities and Exchange Commission on June 9, 2011, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not fully effective to ensure that all information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended ~~December~~March 31, ~~2010~~2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Refer to the discussion under the heading “Litigation” in Note 11 of the Notes to the Condensed Consolidated Financial Statements (unaudited), included in Part I, Item 1 above, for a description of certain Legal Proceedings in which the Company is involved.

ITEM 1A. RISK FACTORS.

~~General~~There ~~Economic~~have ~~Conditions~~been no material changes to Bella Vista Capital’s Risk Factors as previously disclosed in ~~Lending~~their ~~Areas~~Form 10-K for the year ended September 30, 2010.

Our business plan previously sought to diversify our investments throughout California and other states in the western United States of America. Approximately 78.8% of our investments are currently located in the San Francisco Bay Area, 17.9% in California’s Central Valley, 0.8% in Southern California, and 2.6% in other states of the United States of America. The potential success of real estate investments in general is subject to fluctuations in local market conditions, including fluctuations in the supply of and demand for similar properties, and the performance of our investments has and will continue to depend on the economic and real estate market conditions prevailing in the markets where our investments are located. Since the investments are located in a limited geographical region, they may be subject to a greater risk of delinquency or default if the industries concentrated in these areas suffer adverse economic or business developments.

Realization of Assets

The Company’s liquidity and ability to meet its obligations as they become due are subject to, among other things, its ability to obtain timely repayments or other dispositions of its investments. Many of the investments rely on the completion and sale of the developed real estate in order to realize repayment or other disposition proceeds. In the event that proceeds from repayments or other investment dispositions are not sufficient to timely meet our commitments and conventional commercial credit facilities are not available to us, we may therefore be required to seek credit facilities from private placement debt sources and/or to sell some of our investments prematurely. In such cases, the amount of proceeds received could be substantially less than what we would have expected if we allowed a proper marketing period for a particular investment. This would have a negative impact on the estimated net realizable value of our assets. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Demand for new homes is sensitive to economic conditions over which we have no control

Demand for homes is sensitive to changes in economic conditions such as the level of employment, consumer confidence, consumer income, the availability of financing and interest rate levels. If mortgage interest rates increase or if any of these other economic factors adversely change nationally, or in the market in which we operate, the ability or willingness of prospective buyers to purchase new homes could be adversely affected.

Our results of operations and financial condition are greatly affected by the performance of the real estate industry

Our real estate activities are subject to numerous factors beyond our control, including local real estate market conditions, substantial existing and potential competition, general national, regional and local economic conditions, fluctuations in interest rates and mortgage availability and changes in demographic and environmental conditions. Real estate markets have historically been subject to strong periodic cycles driven by numerous factors beyond the control of market participants. Real estate investments often cannot easily be converted into cash and market values may be adversely affected by these economic circumstances, market fundamentals, competition and demographic conditions. Because of the effect these factors have on real estate values, it is difficult to predict with certainty the level of future sales or sales prices that will be realized for individual assets.

We may not be able to conduct successful operations in the future

The results of our operations will depend, among other things, upon our ability to develop and market our properties. Furthermore, our proposed operations may not generate income sufficient to meet operating expenses or will generate income and capital appreciation, if any, at rates lower than those anticipated or necessary to sustain ourselves. Our operations may be affected by many factors, some known by us, some unknown, and some which are beyond our control. Any of these problems, or a combination thereof, could have a materially adverse effect on our viability as an entity and might cause the investment of our shareholders to be impaired or lost.

We are subject to risks associated with investments in real estate

The value of, and our income from, our properties may decline due to developments that adversely affect real estate generally and those that are specific to our properties. General factors that may adversely affect our real estate portfolios include:

· increases in interest rates;

· a general tightening of the availability of credit;

· a decline in the economic conditions in one or more of our primary markets;

· an increase in competition for customers or a decrease in demand by customers;

· an increase in supply of our property types in our primary markets;

· declines in consumer spending during an economic recession that adversely affect our revenue; and

· the adoption on the national, state or local level of more restrictive laws and governmental regulations, including more restrictive zoning, land use or environmental regulations and increased real estate taxes.

Additional factors may adversely affect the value of, and our income from, specific properties, including:

· adverse changes in the perceptions of prospective purchasers of the attractiveness of the property;

· opposition from local community or political groups with respect to development or construction at a particular site; · a change in existing comprehensive zoning plans or zoning regulations that impose additional restrictions on use or requirements with respect to our property;

· our inability to provide adequate management and maintenance or to obtain adequate insurance;

· an increase in operating costs;

· new development of a competitor's property in or in close proximity to one of our current markets; and

We are subject to real estate development risks

Our development projects are subject to significant risks relating to our ability to complete our projects on time and on budget. Factors that may result in a development project exceeding budget or being prevented from completion include:

· an inability to secure sufficient financing on favorable terms, including an inability to refinance construction loans;

· The subprime mortgage financial crisis beginning in 2008 brought about a rise in defaults and home foreclosures. It has also caused tighter lending standards. All this combined has driven down home prices and affected consumer confidence. The negative effect of the home mortgage lending crisis has continued to affect the Company’s ability to sell homes and secure financing.

· construction delays or cost overruns, either of which may increase project development costs;

· an increase in commodity costs;

· an inability to obtain zoning, occupancy and other required governmental permits and authorizations;

If any of these occur, we may not achieve our projected returns on properties under development and we could lose some or all of our investments in those properties.

The real estate business is competitive and many of our competitors are larger and financially stronger than we are

The real estate business is highly competitive. We compete with a large number of companies and individuals, and many of them have significantly greater financial and other resources than we have. Our competitors include local developers who are committed primarily to particular markets and also national developers who acquire properties throughout the U.S. We cannot assure that we will have the necessary resources to be competitive.

Unfavorable changes in economic conditions could adversely impact occupancy or rental rates

Weakened economic conditions, including decreased job growth and job losses, have affected and continue to significantly affect apartment home occupancy and rental rates. Significant decreases in occupancy or rental rates in the markets, in which we operate, in turn, may have a material adverse impact on our cash flows and operating results. The risks which may affect conditions in these markets include the following:

• changes in the national, regional, and local economic climates; • local conditions, such as an oversupply of apartments or other housing available for rent, or a reduction in demand for apartments in the area;

• declines in the financial condition of our tenants, which may make it more difficult for us to collect rents from some tenants; • changes in market rental rates;

• declines in mortgage interest rates, making alternative housing more affordable; • government or builder incentives which enable first time have buyers to put little or no money down, making alternative housing options more attractive;

• a continued economic downturn which simultaneously affects one or more of our geographical markets; and • increased operating costs, if these costs cannot be passed through to residents.

We may experience a decrease in rental revenues, an increase in operating expenses, or a combination of both, which may adversely affect our results of operations and our ability to satisfy our financial obligations.

Difficulties of selling real estate could limit our flexibility

We intend to evaluate the potential disposition of assets that may no longer help us meet our objectives. When we decide to sell an asset, we may encounter difficulty in finding buyers in a timely manner as real estate investments generally cannot be disposed of quickly, especially when market conditions are poor. These difficulties have been exacerbated in the current credit environment because buyers have experienced difficulty in obtaining the necessary financing. These factors may limit our ability to vary our portfolio promptly in response to changes in economic or other conditions and may also limit our ability to utilize sales proceeds as a source of liquidity, which would adversely affect our ability finance current operations or repay debt.

Investments through joint ventures involve risks not present in investments in which we are the sole investor

We have invested and may continue to invest as a joint venture partner in joint ventures. These investments involve risks, including the possibility the other joint venture partner may have business goals which are inconsistent with ours, be in a position to take action or withhold consent contrary to our requests, or become insolvent and require us to assume and fulfill the joint venture’s financial obligations. We and our joint venture partner may each have the right to initiate a buy-sell arrangement, which could cause us to sell our interest, or acquire our joint venture partner’s interest, at a time when we otherwise would not have entered into such a transaction. Each joint venture agreement is individually negotiated, and our ability to operate and/or dispose of a community in our sole discretion may be limited to varying degrees depending on the terms of the joint venture agreement.

We depend on our key personnel and resources

Our success depends in part on our ability to attract and retain the services of executive officers, board directors and other personnel resources. There is substantial competition for qualified personnel in the real estate industry, and the loss of any of our key personnel could have an adverse effect on us.

We may be unable to renew, repay, or refinance our outstanding debt

We are subject to the risk that indebtedness on our properties or our unsecured indebtedness will not be renewed, repaid, or refinanced when due or the terms of any renewal or refinancing will not be as favorable as the existing terms of such indebtedness. If we are unable to refinance our indebtedness on acceptable terms, or at all, we might be forced to dispose of one or more of the properties on disadvantageous terms, which might result in losses to us. Such losses could have a material adverse effect on us and our ability to pay amounts due on our debt. Furthermore, if a property is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments, the mortgagee could foreclose on the property, appoint a receiver and exercise rights under an assignment of rents and leases, or pursue other remedies, all with a consequent loss of our revenues and asset value.

Variable rate debt is subject to interest rate risk

We have mortgage debt with varying interest rates dependent upon various market indexes. In addition, we have a revolving credit facility bearing interest at a variable rate on all amounts drawn on the facility. We may incur additional variable rate debt in the future. Increases in interest rates on variable rate debt would increase our interest expense, unless we make arrangements which hedge the risk of rising interest rates, which would adversely affect net income and cash available for payment of our debt obligations.

Issuances of additional debt may adversely impact our financial condition

Our capital requirements depend on numerous factors, including the occupancy rates of our apartment properties, development and capital expenditures, and costs of operations. If our capital requirements vary materially from our plans, we may require additional financing earlier than anticipated. If we issue more debt, we could become more leveraged, resulting in increased risk of default on our obligations and an increase in our debt service requirements, both of which could adversely affect our financial condition and ability to access debt in the future.

Insurance and Environmental Risks

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

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

(a)	Not Applicable.

(b)	Not Applicable.

(cb) Not Applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

ITEM 5. OTHER INFORMATION.

Not applicable.

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ITEM 6. EXHIBITS.

(a)

Exhibits

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

Exhibit No.

Description of Exhibit

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

3(ii)

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

3(iii)

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

3(iv)

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

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

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

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

10.3	Compensation Agreement dated September 25, 2007 between BellaVista Capital, Inc. and William Offenberg, is incorporated by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-KSB for the year ended September 30, 2007, filed on December 31, 2007

10.4	Management Agreement between BellaVista and RMRF Enterprises, Inc., dba Cupertino Capital is incorporated by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-KSB for the year ended September 30, 2008, filed on January 3, 2009

10.5	Management Agreement between BellaVista and LG Servicing, Inc., a California corporation dated as of January 1, 2011.

11.1	Statement regarding computation of per share earnings

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

31.1	Certification of Chief Executive Officer and Chief Financial Officer

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

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Dated:	~~September 23, 2011~~	February 24, 2012	~~/s/ WILLIAM OFFENBERG~~	/s/ WILLIAM OFFENBERG
				~~William Offenberg, Chief Executive Officer~~	William Offenberg, Chief Executive Officer

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