UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the annual period ended	December 31, 2007

Commission File Number	33-22128-D

NEXIA HOLDINGS, INC. (Exact name of registrant as specified in its charter.)

Nevada (State of other jurisdiction of incorporation or organization)	84-1062062 (I.R.S. Employer Identification No.)

59 West 100 South Salt Lake City, UT (Address of principal executive offices)	84101 (Zip Code)

801-575-8073

(Registrant's telephone number)

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

YES [X] NO [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [X].

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date:

Common Stock, $.0001 Par Value – 934,209,883 shares as of May 13, 2008.

Indicate by check mark whether the registrant is a shell company. Yes [ ] No [ X ]

The issuer's total consolidated revenues for the year ended December 31, 2007 were $3,232,488.

The aggregate market value of the registrant's common stock, $0.0001 par value (the only class of voting stock), held by non-affiliates was approximately $90,223 based on the average closing bid and asked prices for the Common Stock on May 13, 2008, of $0.0001 per share.

TABLE OF CONTENTS

PART I

Item 1.	Description of Business	3

Item 2.	Description of Property	19

Item 3.	Legal Proceedings	21

Item 4.	Submission of Matters to a Vote of Security-Holders	22

PART II

Item 5.	Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities	23

Item 6.	Management's Discussion and Analysis or Plan of Operations	24

Item 7.	Financial Statements and Supplemental Data	F-1

Item 8.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	27

Item 8A.	Controls and Procedures	27

Item 8B.	Other Information	28

PART III

Item 9.	Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act	28

Item 10.	Executive Compensation	29

Item 11.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	30

Item 12.	Certain Relationships and Related Transactions	31

Item 13.	Exhibits	33

Item 14.	Principal Accountant Fees and Services	44

Signatures		45

Index to Exhibits		46

PART I

ITEM 1.

DESCRIPTION OF BUSINESS

Nexia’s current operations are conducted through its subsidiaries which consist of the operation of Black Chandelier, clothing and lifestyle retail operation with two stores located in the Salt Lake City, Utah market; Landis Salons, which operates two hair salons that sell Aveda™ products exclusively, and the leasing and selling of real estate. Nexia’s subsidiaries currently own and operate a 38,000 square foot retail/office building, an 11,000 square foot office building, and a 7,000 square foot retail building. All of these buildings are located in the greater Salt Lake City, Utah area.

This report contains forward-looking statements which involve risks and uncertainties, including trends in the real estate investment market, projected leasing and sales and future prospects of Nexia’s retail operations. Actual results could differ materially from those discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in "Risk Factors."

General

Nexia currently has three general areas in which it conducts business operations. The oldest is the acquisition, leasing and selling of commercial real estate properties in the greater Salt Lake City, Utah area. A subsidiary of the Company holds ownership interests in Landis Salons, which operates two Landis Lifestyle Salons selling Aveda™ products exclusively. These salons are located in Salt Lake City and Bountiful, Utah. At December 31, 2007 another subsidiary, Gold Fusion Laboratories, Inc. (“GFL”), operated 4 retail clothing stores under the name Black Chandelier in Utah and an online store at www.blackchandelier.com. Subsequently, GFL closed two of the Black Chandelier stores and ceased operations on or around March 31, 2008. Nexia executed upon its security interest in all of the assets of GFL and reinvested them into Style Perfect, Inc., a newly formed subsidiary that now operates two Black Chandelier retail locations and the online store.

The corporate structure as of May 13, 2008, is as set forth in the following chart:

Style Perfect, Inc.

Black Chandelier Operations

In August of 2006, Gold Fusion Laboratories, Inc., a 100% owned subsidiary of the Company signed an asset purchase agreement with Diversified Holdings X, Inc. to acquire the rights, assets, inventories and receivables of the Black Chandelier clothing lines. Diversified Holdings X, Inc. is controlled by Richard Surber and is deemed an affiliate of Nexia. Included in Gold Fusion Laboratories’ operations were two retail outlets operated under the Black Chandelier label, in the Trolley Square and Gateway shopping centers located in Salt Lake City, as well as the online shopping site, www.blackchandelier.com.

Black Chandelier designs, produces, and manufactures a majority of all items sold in its stores that are sold under the trademarks, Black Chandelier, Jared Gold, Olfactory Surrealism, and Pink Chandelier. The stores also carry merchandise from Kill City Jeans, Le Sportsac, Taschen books, Lomography Cameras, 7 Diamonds, Seychelles Shoes, and Tokidoki Italy.

The first Black Chandelier retail store has been in operation for over three years at the Trolley Square location. Jared Gold designed a pilot store to be used as a model for the opening of additional stores; this store is located in the Gateway Shopping Center in downtown Salt Lake City. A virtual tour of this store can be viewed at http://www.blackchandelier.com/Gateway.html.

For the year 2007, Black Chandelier had gross revenues of $962,079. Reported revenues for the year ended December 31, 2006 were $323,352. The Company has announced plans to explore the potential for opening additional stores in the U.S. and abroad over the next 3 to 5 years, subsequent to raising $1 to $1.5 million from funds through the S-1 filing or other sources.

Subsequent to the end of the year, Nexia exercised its security interest in the assets, inventory, and equipment held by Gold Fusion Laboratories, Inc. and used in the operations of Black Chandelier. Nexia is currently managing the Black Chandelier operations and in an effort to consolidate operations and reduce expenses has closed the Fashion Place Mall location in Murray, Utah and the store located in Provo, Utah.

Black Chandelier is a lifestyle company that produces clothing, candles, and active wear. The mission of Black Chandelier is to offer products designed with deliberateness and wild inspiration that indulge an individual’s innate drive to be unique. The overarching concept is to provide the consumer with an affordable alternative to “mass-market” offerings by extending a product that conveys a sense of eccentricity that stands apart in quality, style, and price from most of the homogenous fare offered to consumers by the mainstream apparel market. The clothing items are produced in small runs keeping merchandise offered in the stores fresh.

Black Chandelier stands in a unique position to establish a niche market among its customers. The clothing, accessories and other products are designed with an edgy sophistication that allows customers to fulfill their need to express their uniqueness. The consumer base of Black Chandelier has a very large age range. Female shoppers vary in age from 15 to 65. The income ranges vastly among this large age spread; however the average is $37,000. This typical consumer is fashion conscious and follows current trends and subscribes to or reads several fashion oriented women’s magazines. The expanding men’s division has garnered a large fan base in the age group from 15 to 35. These consumers read weekly entertainment guides and local underground publications and fanzines.

The operations of Black Chandelier are subject to normal government regulation at the federal, state, and local level. Black Chandelier must comply with governmental regulation regarding employment, wages, access for handicapped and disabled persons, and other laws, rules, regulations and ordinances. Although there are no anticipated changes in existing local, state, or federal regulations; if changes should occur, Black Chandelier operations would adapt to such new regulations without any significant effect on revenues or operations. However, no assurances can be made that compliance or failure to comply with future regulations will not have a materially adverse effect on the business, operating results, or financial situation of Black Chandelier.

The Company believes that local competition for the Black Chandelier retail is Lollabella and JMR. This assumption is based on their marketing and customer demographics. Nationally Black Chandelier will face Diesel, Urban Outfitters, and Anthropologie. These specialty retailers manufacture their own goods as well as sell third party product, are nationally marketed, and maintain company operated boutiques in most major cities. Black Chandelier’s edge over its competition is its sales of exclusive product in a market that is presently saturated with larger brands. Ancillary items are purchased from other vendors in small amounts and with studied curation, in order to keep merchandise on the cutting edge. Although the apparel industry is mature and slow growing, it exists in a dynamic and competitive environment. The apparel industry is extremely competitive and highly fragmented. The power of the big retailers is a major challenge to any new designer and manufacturer; however, specialized product with limited distribution can create a unique identity among retailers.

Landis Salon

Nexia currently owns 85% of Landis Salons, Inc. (“Landis”) and 100% of Newby Salon LLC (“Newby”). Landis operates two AvedaTM lifestyle salons that feature AvedaTM products for retail sale. Nexia, subsequent to the end of the second quarter 2006, signed an agreement to acquire Mr. Surber’s 60% ownership interest in Landis. As consideration for that acquisition Nexia and Diversified Holdings I, Inc. delivered to Mr. Surber (1) a promissory note in the amount of $250,000, bearing interest at the rate of 24% per annum, due in five annual payments, (2) issuance of 75,000 shares of Nexia’s Class A Preferred Stock, and (3) issuance of 2,000,000 shares of Nexia’s Class B Preferred Stock. A 5% interest was acquired from Seth Bullough in exchange for the issuance by Nexia of 5,000 shares of Class A Preferred Stock. Nexia purchased the second AvedaTM salon in the third quarter of 2007. The Company now owns 100% of Newby Salon, LLC, a Utah limited liability company that owns and operates the Reflections Hair & Image Studio. The new salon will operate as an additional AvedaTM lifestyle salon that features AvedaTM products in its services and for sale to the public. On November 9, 2007 the new salon was renamed as a Landis Salon. Landis Salon has two locations in the Salt Lake area and reported revenue of $2,025,281 during the year ended December 31, 2007. Additional information on the Landis Salons can be found on its website at www.landissalon.com.

Landis intends to limit the services offered in its salons to hair and makeup only. The current salons’ operations consist of three major components, an Aveda™ retail store, an advanced hair salon, and a training academy (for the training of future staff about the culture, services, and products provided by Landis). Pricing of hair services will reflect the experience level of the stylists with the training academy ranging from $16 to $25 and the advanced hair salon from $30 to $75. The design of the studio is intended to look clean, comfortable, and modern, appealing to both genders and all age groups.

The target market for Landis is 70% female and 30% male, seeking customers with high expectations at a reasonable cost. The average customer in Salt Lake City is expected to visit the salon 7-9 times a year, spending an average of $47 on services and purchasing $15 of retail Aveda™ product with each visit. The current location was selected for its central location to the Salt Lake market area, the high income demographics available within easy driving distance and the trendy, upwardly mobile nature of the area. The primary marketing efforts of Landis will be word of mouth, supplemented by carefully selected advertising campaigns, and seeking referrals from the existing customer base.

The operations of Landis are subject to normal government regulation at the federal, state and local level. Landis must comply with governmental regulation regarding employment, wages, access for handicapped and disabled persons and other laws, rules, regulations, and ordinances. Although there are no anticipated changes in existing local, state, or federal regulations, if changes should occur, Landis Salon operations would adapt to such new regulations without any significant effect on revenues or operations. However, no assurances can be made that compliance or failure to comply with future regulations will not have a materially adverse effect on the business, operating results or financial situation of Landis.

Primary competition will come from salons offering above-and-beyond customer service in the Salt Lake area market. Currently identified as offering this level of competition are salons named, Lunatic Fringe, Salon Zazou, and Salon RZ. Landis will also be in competition with large scale hair cutting operations such as Great Clips, Supercuts, and Fantastic Sams; although these operations do not compete in offering the extra services and products that Landis offers.

Overview of the Salt Lake City Real Estate Market

Trends in the current Salt Lake City real estate market are favorable in some respects to the Company’s real estate holdings. In general, these trends are as follows: the significant growth of retail sales in the city; increased interest in Salt Lake from specialty retailers; relatively low vacancy rates for retail space in the area; estimated slowdowns in the rate of new retail space construction; and Utah economic indicators pointing to above-average retail sales.

For purposes of the following discussion Class A office space is defined as a building that has excellent location and access, attracts high quality tenants, and are managed professionally. Rents are competitive with other new buildings. Class B buildings have good locations, management, and construction and tenant standards are high. Buildings have very little functional obsolescence and deterioration. Class C buildings are typically 15 to 25 years old but are maintaining steady occupancy and demand lower rent than Class B buildings.

Significant Growth. According to the Year-End 2006 Market Review of Commerce CRG published by national real estate broker Cushman & Wakefield, in the Salt Lake City office market “more than 1.45 million square feet of office space were absorbed in the Salt Lake valley in 2005”. This change represents greater absorption numbers than in the last three years combined.” The overall vacancy rate was 10.28% in 2006, a 0.53% drop from 2005 figures and a drop of 4.97% from 2004 figures. The closing of a major office center in the central business district has reduced available space and could provide additional impetus for the construction of new projects. Salt Lake City has, during the recent past, attracted new attention from national tenants seeking space in the area.

These reported trends have not, however, led to significant increased occupancy in Class C office buildings or retail space which would cover the holdings of Nexia at the present time, excluding a portion of the Wallace building that we own which is Class A office space. Vacancies in such buildings have remained much higher as the higher class buildings have completed tenant improvements to their space to attract new tenants, Class C vacancy rates were reported at 25.14% for the year of 2006 compared to an overall vacancy rate of 9.88% for the central business district. However, for retail space, lease rates for Class A space have reached record highs and may encourage local retailers to move into Class B and C spaces with their lower lease rates.

All of the retail space in the Wallace/Bennett buildings owned by our subsidiary Wasatch Capital is currently leased. The retail space of 7,000 square feet in the buildings located at 1374 South State Street are fully leased at this time. The balance of the Company’s holdings in the Salt Lake City market are of office or studio space. Plans have been made to improve the vacant spaces and ready them for more aggressive marketing.

Our Plan to Acquire and to Sell Commercial Properties

Our business plan is to buy more properties that we believe are undervalued compared to their cash flows and estimated resale value. We are looking for properties with sufficient rental income to enable us to cover the operating costs of our overall portfolio. We will sell properties when market conditions are favorable.

Our strategy is to identify properties with a favorable financing arrangement already in place, assume that financing, and satisfy any new down-payment with a relatively nominal cash payment. We plan to lease primarily to commercial tenants. We are prepared to make limited improvements to our properties so that we can increase occupancy, improve cash flows, and enhance potential resale value. We do not plan to limit the geographical area in which we buy properties; however, given our current financial condition, we will most likely seek properties in the Salt Lake City area.

From time to time, we will sell our commercial properties when favorable market conditions enable us to do so. While we are actively seeking tenants for all our properties, our real estate agents are also seeking buyers for those properties. Our goal ultimately is to maximize profits and not necessarily to be landlords.

The Company has currently signed two real-estate purchase contracts. The contract price for the Kearns building is $765,000 and for the Downtown building is $1,050,000. The closing on the two buildings is subject to due diligence.

Employees

Nexia’s wholly owned subsidiary Diversified Holdings I, Inc. currently employs 8 people on a full time basis and from time to time hires outside contractors to perform various services as required by the operations of the Company. Landis Salons, Inc. has approximately 53 employees and Style Perfect, Inc. the operator of the Black Chandelier stores has approximately 13 employees.

Risk Factors

An investment in the common stock of the Company is risky. The common stock of the Company inherently involves a high degree of risk, and investors should carefully consider the possibility of incurring a significant loss. Given this possibility, we encourage investors to evaluate the following risk factors and all other information contained in this report, public disclosures, and other filing by the Company with the SEC before buying the common stock of Nexia. Any of the following risks, alone or together, could adversely affect our business, our financial condition, or the results of our operations, and therefore the value of your Nexia common stock.

Risks Related to Nexia’s Business

There is substantial doubt about Nexia’s ability to continue as a going concern due to insufficient revenues to cover our operating costs, which means that we may not be able to continue operations unless we obtain additional funding.

Our independent auditors added a going concern qualification to each of their reports issued in connection with their audit of our December 31, 2007 and 2006 financial statements. The auditors noted in their report that Nexia generated significant losses from operations, had an accumulated deficit of $24,181,911 and a working capital deficit of $1,022,573 as of December 31, 2007. These factors raise substantial doubt about Nexia’s ability to continue as a going concern. These general conditions continued through the first quarter of 2008, resulting in additional deficits in the operations of the Company.

Management anticipates that Nexia will incur net losses for the year end results of December 31, 2008. To the extent that Nexia does not generate additional revenue from its existing properties, existing retail operations, acquire additional properties that generate revenue, obtain additional funding, that its stock price does not increase, that additional adjustments are not made to decrease operating expenses, Nexia may not have the ability to continue as a going concern. The financial statements which accompany this filing do not include any adjustments that might result from the outcome of this uncertainty.

Real Estate

Nexia's real estate investments are inherently risky and dependent on rental income.

Real estate investments are inherently risky. The value of a company’s real estate investments depends largely on the rental income and the capital appreciation generated by the properties which the company owns. If our properties do not generate enough cash flow from rental income to meet operating expenses (such as debt service, capital expenditures, and tenant improvements), our ability to develop our real estate business and have it become profitable will be adversely affected.

Income from real estate investments may be adversely affected by a number of factors, including:

the general economic climate and local real estate conditions (such as too much supply or too little demand for rental space, as well as changes in market rental rates);

prospective tenants' perceptions of a building's safety, convenience, and attractiveness, or the overall appeal of a particular building;

the property owner's ability to provide adequate management, maintenance, and insurance;

expenses for periodically renovating, repairing, and re-letting spaces;

falling operating costs for competing properties, which would allow them to undercut our rental rates;

rising unemployment rates in the area, which may reduce the demand for rental space;

adverse changes in zoning laws, tax laws, or other laws affecting real estate or businesses in the area;

damage from earthquakes or other natural disasters;

mortgage interest rates and the availability of financing.

Some significant expenses associated with real estate investment (such as mortgage payments, real estate taxes, insurance and maintenance costs) are fixed and generally can not be reduced if circumstances cause lower rental incomes from a building. For example, if we can not meet the mortgage payments, we could lose some or all of our investment in a building due to foreclosure by the holder of the lien on the property.

Our real estate investments have limited liquidity and no certainty of capital appreciation.

Our real estate investments have limited liquidity. Real estate investments in general are relatively illiquid. Our ability to vary our portfolio in response to changes in economic and other conditions will be limited. We cannot ascertain whether we will be able to sell an investment when a sale would be advantageous or necessary. The sale price may not be enough to recoup the amount of our investment. Nexia can provide no assurance that the value of its properties will appreciate.

There are numerous uncertainties in estimating real estate values and prospective appreciation value. The estimated values set forth in appraisals are based on various comparisons to other property sales; predictions about market conditions such as demand, vacancy rates, prospective vacancy rates, renewal terms, and other factors; assumptions about the property’s condition, conformance with laws and regulations, absence of material defects; estimates of lease revenues and operating expenses; and other factors. Any significant change in these comparisons, predictions, assumptions, and estimates, most of which are beyond our control, could materially and adversely affect the market values and appreciation potential of our properties.

We compete with substantially larger companies to acquire suitable buildings.

The commercial real estate market is highly competitive. We compete with substantially larger companies for the acquisition, development, and operation of properties that fit within the parameters of our business plan. Some of these companies are national or regional companies with far greater resources than ours. The presence of these competitors may significantly impede our business growth or survival.

Nexia's ability to generate enough revenue to operate its real estate holdings profitably is dependent on the ability to attract tenants and ensure that tenants meet their lease obligations.

Our business would be severely affected resulting from the loss of revenues that would occur if our current tenants fail to meet lease obligations or, if upon failure to meet lease obligations, we were unable to enter into new viable leases for the resulting vacant space. Further, if a tenant defaulted on a lease, we might experience a delay before the courts enforced our rights against the tenant. Our ability to lease the space during any court enforced action would be seriously impaired. Failure of a tenant’s business through bankruptcy would also reduce or eliminate our revenue flow. We can provide no assurance that tenants will faithfully meet their lease obligations or that tenants will not be impaired through some form of business failure or otherwise, with the result that our ability to operate our business would be materially and negatively affected. During 2007 the rate of default on tenant’s obligations billed during that period was 3%. A total of 17,760 square feet of space, or 48% of the rentable square feet available to the Company, are represented by leases that will expire within the next 12 months or are currently being leased on a month to month basis.

Our ability is questionable to satisfy fixed operating costs that may rise over time and which cannot be reduced in response to any decrease in our rental income, or passed through to our tenants.

Our ability to satisfy fixed operating costs associated with our property could be seriously affected by any rise in expenses such as: mortgage payments, insurance, utilities, cleaning, ventilation, air-conditioning, security, landscaping, building repairs and maintenance. While our tenants must often pay a portion of these escalating costs, there can be no assurance that they will agree to any increase in current fixed costs or that any increase in tenant payments would cover increased operating costs. Our current fixed costs for any future time period cannot be reduced in response to any decrease in rental income resulting from vacancies or non payment of rent and our ability to operate would be severely affected by any increase in the costs associated with owning our property.

All of Nexia’s material real estate holdings are located in the Salt Lake City, Utah market making the Company vulnerable to changes in economic conditions in that market.

All of Nexia’s material real estate holdings are located in the Salt Lake City, Utah market which creates a greater risk of harm from a downturn in that single market as compared to wider more diversified holdings in several geographic areas. Any significant change in the office or retail space in the Salt Lake City market will directly affect Nexia’s real estate operations.

Nexia may invest in properties in other real estate markets outside of the Salt Lake City, Utah area where the Company has no experience.

Nexia may make selected acquisitions or develop properties outside the area of its current focus of Salt Lake City, Utah as appropriate opportunities are located or as they may arise. No area outside of Salt Lake City has been identified nor has any market area been excluded from consideration. The historical experience of Nexia is in the Salt Lake City market area, and management may not be able to operate successfully in other market areas. Some of the risks in operating in new market areas would include: a lack of market knowledge and understanding of the local economies, an inability to identify promising acquisition or development opportunities, an inability to obtain qualified development and maintenance personnel, and a lack of familiarity with local government and permitting procedures. Any of these factors could cause Nexia to incur costs greater than anticipated and limit the success of any acquisition and development that may be undertaken, which would reduce the Company’s profitability and limit its growth.

We will need new funding, which may not be available, in order to fully execute our real estate business plan and maintain operations.

Our real estate business plan, “buying undervalued buildings”, will depend on our ability to raise more money. Management and shareholders have not committed to provide new funding. Except for that funding we hope to obtain as a result of selling our common stock to Dutchess, as detailed in the Company’s SB-2 filings, we have not investigated other sources, availability, or terms for new funding. There is no assurance that funding will be available from any source or, if available, that it can be obtained on acceptable terms. If we can not obtain new funding, our operations could be severely limited.

We project that in 2008 and beyond, our salon and retail store businesses will be able to generate sufficient revenues to meet their internal financial needs. We project the cash burn rate for the next twelve months, for the Company’s general needs and rental operations will be approximately $1,320,000. Funds to cover the burn rate will come from excess reduction in cash employee expenses through stock issuance, $750,000; and sale of stocks from an investment portfolio of at least $200,000. The total provided to cover the Company’s general needs and the rental operations will be approximately $950,000. The Company will need to find funding to cover the additional $370,000 needed to maintain current operations. These amounts do not include any funds that may be received from the Dutchess equity line of credit.

Environmental liability could affect our real estate investments.

Various federal, state and local environmental laws make a real estate owner liable for the costs of removal or remediation of certain hazardous or toxic substances on a property. These laws often impose environmental liability regardless of whether the owner was responsible or knew of the presence of hazardous substances. The presence of hazardous substances, or the failure to properly remediate them, may adversely affect our ability to sell or rent a property or to borrow using the property as collateral. No assurance can be given that the environmental assessments of our properties revealed all environmental liabilities, or that a material, adverse environmental condition does not exist on our properties.

We may face an uninsured loss.

Owners of real estate are subject to certain types of losses such as civil disturbance or pollution, which are either uninsurable or too expensive to insure. If an uninsured loss or a loss in excess of insured limits occurs, Nexia's investment in our real properties, as well as anticipated future revenues could be lost. Meanwhile, obligations on any mortgage debt for the properties would continue. Accordingly, any uninsured loss could adversely affect our financial condition and results of operation.

The Americans With Disabilities Act and similar legislation may increase our costs.

The Americans with Disabilities Act of 1980 (ADA) requires that commercial facilities and places of public accommodation be accessible to disabled people. A number of additional federal, state and local laws impose other requirements on owners concerning access by disabled people. We may need to make both structural and non-structural changes to our property in order to comply with the ADA and similar laws. Noncompliance could result in government fines or an award of damages to a private litigant. We have not been informed that any of our properties fail to comply with such laws. However, we may incur costs, which we cannot fully ascertain now, to ensure compliance in the future. While we do not expect the prospective costs of compliance to have a material effect on our operations, a potential for substantial costs exists. If changes are required, our financial condition and results of operations could be adversely affected.

Management

We are dependent on key personnel, specifically Richard Surber, and we have an employment agreement with him.

We are dependent on the services of Richard Surber, our President. We have an employment agreement with Mr. Surber through December 2011. Losing his services would likely have an adverse effect on our ability to conduct business. Mr. Surber serves as an Officer and Director of Nexia. Mr. Surber is currently employed by other businesses, and he will only allocate a portion of his time (estimated at an average of 50 hours per week) to the business of Nexia and its subsidiaries. Therefore, there is a risk that he might not devote enough time to Nexia in fulfilling our business plan. Further, Nexia has a limited number of full time employees.

Our ability to provide adequate management, maintenance and insurance.

To provide for adequate management, maintenance and insurance for the properties owned by Nexia, rental income will need to exceed the operating costs for those properties. Vacancies, falling rents, bankruptcy of tenants, unexpectedly higher maintenance costs or a loss not covered by insurance could adversely affect the ability of Nexia to provide adequate management, maintenance and insurance for its properties. If these services are not provided on an adequate basis, deterioration of the property would have a severely negative impact on Nexia.

Nexia has hedged its risk of losing any key employees by having Anthony Newby serve as the Chief Operating Officer to assist and help with growing Black Chandelier and Landis Salons, Inc.

Risks related to Nexia’s and its predecessors’ operating histories

In the current market, Nexia has not relied upon the sellers of real property to finance its real estate investments. Nexia has obtained the necessary funding on its own. However, Nexia and its predecessors have attempted in recent years to compete in other market trends which were not successful. For example, Nexia signed an agreement to acquire Creative Marketing Group, Inc. which holds a license to market coffee maker filters and ground coffee beans under the “Mr. Coffee” name. In another example, Nexia attempted to close on a manufacturing and repair company. In each of these situations, the executive management of Nexia and its predecessors was the same. In each of these failed attempts, Nexia attempted to acquire an existing business based on the incorrect information that the selling shareholder group would obtain the necessary financing to support the ongoing business of the franchise. Based upon past performance, there is the possibility that Nexia’s executive management may in the future commit resources to an acquisition that ultimately proves to be unsound and damages the Company financially.

We cannot predict our future capital needs and may not be able to secure additional funding.

Nexia’s management estimates that the Company’s current “burn rate,” the current rate at which expenses exceed revenue, is approximately $110,000 per month, or $1,320,000 per year. We will need to raise additional funds within the next twelve months in order to fund the current level of operations of the Company. We expect that the majority of these funds will come from the sale of our common shares to Dutchess or the sale or transfer of some of our preferred shares to private investors. Either method of funding could result in a significant dilution of ownership interests by the holders of our common stock.

Changes in consumer tastes and fashion trends can have a negative impact on our financial performance.

Both Landis Salons, Inc. and Black Chandelier operations could be negatively impacted by unforeseen and unfavorable changes in consumer tastes and fashion trends away from those targeted by the marketing and sales efforts of Landis and Black Chandelier. As these tastes and trends are not predictable and their effect on the operations of either retail operation cannot be estimated in advance, great effort is made in the operations of both companies to ensure that their products and services reasonably and adequately anticipate the business operation changes for each company. However, there is no way to assure success with these efforts.

The Series B Preferred Stock held by Richard Surber creates an anti-takeover or change of control limitation. Richard Surber currently holds voting control of Nexia through his ownership of voting preferred stock.

The ten million shares of Series B Preferred Stock held by Richard Surber provide him with voting control over any proposal requiring a vote of the shareholders. Through his ownership of 10,000,000 shares of the Series B Preferred Stock of the Company, he holds voting rights equal to 5,000,000,000 shares of common stock. This effectively gives him a veto over any attempt to take over or change control of the Company. Such an event would include a vote by the board of directors to conduct a reverse split of the common stock. The shares held by Mr. Surber thus have a strong anti-takeover effect. His interests may not always conform to the interests of the common stockholders, in general, and thus his voting rights may not always be exercised in the best interests of the common stockholders of the Company. The issuance of 8 million preferred shares was to compensate Mr. Surber for serving as the personal guarantor of the loans used to acquire all of the real estate holdings currently under the Company’s control, and an additional 2 million shares were recently issued as partial compensation for the transfer of Mr. Surber’s interest in Landis, LLC.

The Company has concluded discussions with the Department of Commerce in the State of Utah concerning private offerings made by the Company and their compliance with Utah regulations.

In October of 2006, the State of Utah through its Department of Commerce requested information from the Company to determine the compliance with Utah regulations regarding all offerings made by the Company within the past five years. Preliminary indications were that some shares have been issued within the State of Utah without full compliance with registration or qualification requirements under the securities laws of Utah. These discussions have led to the Company agreeing to offer a right of rescission to all residents of the state of Utah whose purchase of shares from the Company was not made in full compliance with registration or qualification requirements in the State of Utah. After making an offer of rescission to all Utah residents and several non-residents, none of those offers was accepted and the matter has been closed with the state of Utah.

Risks Related to Landis Salons, Inc. Operation of Landis Lifestyle Salon

The Landis Lifestyle Salon operations are dependent on key personnel.

The operations of the two Landis Lifestyle Salons are dependent on the day to day management of current staff at these locations who works in the salon and trains its personnel. Losing the services of these long term employees would likely have an adverse effect on the operations and business development of the salon business owned and operated by Landis Salons, Inc.

Our success depends on our ability to attract and retain trained stylists in order to support our existing salon business and to staff future expansion.

Landis is actively recruiting qualified candidates to fill stylist positions for the salons. There is substantial competition for experienced personnel in this area, which we expect to continue. We will compete for experienced candidates with companies who have substantially greater financial resources than we do. If we fail to attract, motivate and retain qualified stylists, it could harm our business and limit our ability to be successful and hamper expansion plans. For example, we will depend upon the expertise and training abilities of our current staff and management at the Landis Lifestyle Salons. Since we do not maintain insurance policies on any of our employees, if we lose the services of any key officers or employees it could harm our business and results of operations.

We face significant competition in the salon business, which could harm our sales and profitability

The primary competition to Landis operations will come from salons offering above-and-beyond customer service in the Salt Lake Area market. Currently identified as offering this level of competition are salons named, Lunatic Fringe, Salon Zazou and Salon RZ. Landis will also be in competition with large scale hair cutting operations such as Great Clips, Supercuts, and Fantastic Sams, though these operations do not compete in offering the extra services and products that Landis offers.

The loss of distribution rights to the Aveda™ line of products would damage the operation of the Landis Lifestyle Salon and have a significant and negative impact on its ability to operate and generate revenues.

Landis Salons, Inc. operates the Landis Lifestyle Salons and has a Retail Product Use Agreement with a distributor of the Aveda™ line of products, which are used exclusively in the services provided to customers of the salon and offered for retail sale at the salon location. Loss of the right to sell Aveda™ product would have a significant and negative impact on the operation of the salons and their ability to generate revenues from either retail sales of health and beauty products or from providing services to consumers at the salon. Landis believes that the high quality and reputation of this line of products is key to its current operations and future success.

Changes in consumer tastes and hairstyling trends can have a negative impact on our financial performance.

Landis’ salon operations could be negatively impacted by unforeseen and unfavorable changes in consumer tastes and hairstyling trends away from those targeted by the marketing and sales efforts of Landis. As these tastes and trends are not predictable and their effect on the operations of the salon cannot be estimated in advance, great effort is made in the operations of the salon to ensure that its products and services reasonably and adequately anticipate such changes and that theses changes are met with modifications in the salon’s operations to ensure continued consumer demand for its services and products. However, there is no way to assure success with these efforts.

Risks Related to Operation of Black Chandelier Clothing Line

The success of the Black Chandelier business plan depends in large part on our ability to identify fashion trends and to react to changing customer demand in a timely manner.

Consequently, we depend, in part, upon favorable market response to the creative efforts of the Black Chandelier operation.

Failure on our part to anticipate, identify, and respond effectively to changing consumer demands and fashion trends will adversely affect our sales.

If we are unable to obtain raw materials, or find manufacturing facilities, our financial condition may be harmed. Outside of a small sample room, we do not own any manufacturing facilities, and therefore depend on a limited number of third parties to manufacture our products. We place all of our orders for production of merchandise and raw materials by purchase order and do not have any long-term contracts with any manufacturer or supplier. If we fail to obtain sufficient quantities of raw materials, it could have a harmful effect on the results of our operations. Furthermore, we may receive shipments of products from manufacturers that fail to conform to our quality control standards. In such an event, unless we are able to obtain replacement products in a timely manner, we may lose sales. If we fail to maintain favorable relationships with these production facilities, or fail to obtain an adequate supply of quality raw materials on commercially reasonable terms, it could harm our business and results of operations.

Gold Fusion will be dependent on third party manufacturers for production, and its sales may be negatively affected if the manufacturers do not perform acceptably, or if design changes are communicated after the production has begun.

We will develop a significant portion of our merchandise in conjunction with third-party apparel manufacturers. In some cases, we select merchandise directly from these manufacturers’ lines. We do not have long-term contracts with any third party manufacturers and will purchase all of the merchandise from such manufacturers by purchase order. Furthermore, we may receive, in the future, shipments of products from third-party apparel manufacturers that fail to conform to our quality control standards. In such an event, unless we are able to obtain replacement products in a timely manner, we may lose sales. We cannot assure you that third party manufacturers (1) will not supply similar products to our competitors, (2) will not stop supplying products to us completely or, (3) will supply products that satisfy our quality control standards. In addition, certain of our third party manufacturers will store our raw materials. In the event our inventory is damaged or destroyed, and we are unable to obtain replacement raw materials, our ability to generate earnings may be negatively impacted. In addition, if we decide to change a key design element, after the manufacturing process has begun, we may negatively impact the manufacturer's ability to deliver the products on a timely basis, which could impact our ability to generate earnings.

Our success depends on our ability to attract and retain key employees in order to support our existing business and future expansion.

We are actively recruiting qualified candidates to fill key executive positions within the Company. There is substantial competition for experienced personnel, which we expect to continue. We will compete for experienced personnel with companies who have substantially greater financial resources than we do. If we fail to attract, motivate and retain qualified personnel, it could harm our business and limit our ability to be successful. For example, we will depend upon the expertise and design talents of Jared Gold, the founder of the Black Chandelier line of products. Since we do not maintain insurance policies on any of our employees, if we lose the services of any key officers or employees, like Mr. Gold, it could harm our business and results of operations.

We face significant competition in the retail and apparel industry, which could harm our sales and profitability.

The retail and apparel industries are highly competitive and are characterized by low barriers to entry. We expect competition in our markets to increase. The primary competitive factors in our markets are: brand name recognition, sourcing strategies, product styling, quality, presentation and pricing, timeliness of product development and delivery, customer service, and convenience. We compete with specialty store retailers, business to consumer websites, off-price retailers and direct marketers for, among other things, raw materials, market share, finished goods, sourcing and personnel. Because many of these competitors are larger and have substantially greater financial, distribution and marketing resources than we do, we may lack the resources to adequately compete with them. If we fail to compete in any way, it could harm our business, financial condition, and future results of operations.

Purchases of the merchandise we sell are generally discretionary and are therefore particularly susceptible to economic slowdowns.

If economic conditions are not favorable or if they should suffer a downward trend, our retail businesses, financial condition, and results of operations could be adversely affected. Consumers are generally more willing to make discretionary purchases, including purchases of fashion products and high-end home products, during periods in which favorable economic conditions prevail.

If we are not able to successfully protect our intellectual property, our ability to capitalize on the value of the Black Chandelier brand name may be impaired.

Even though we intend to take actions to establish, register and protect our trademarks and other proprietary rights, we cannot assure you that these efforts will be successful. These include the use of the existing Black Chandelier trademark and other product lines developed by Jared Gold that have been acquired by Gold Fusion Laboratories and newly developed products as well. There is a risk that others will imitate our products or infringe upon our intellectual property rights. In addition, we cannot assure you that others will not resist or seek to block the sale of our products as infringements of their trademark and proprietary rights. We are seeking to register our trademarks in the United States markets and other markets as they develop demand. In some of these markets, obstacles exist that may prevent us from obtaining a trademark for the Black Chandelier or related names. Furthermore, in some jurisdictions, despite successful registration of our trademarks, third parties may allege infringement and bring actions against us. We are not aware of any actual infringement by our products on any other trademarked product.

If an independent manufacturer violates labor or other laws, is accused of violating any such laws, or if their labor practices diverge from those generally accepted as ethical, it could harm our business and brand image.

While all our manufacturers are contractually required to comply with ethical labor practices, we cannot control the actions or public perception of such manufacturers, nor can we assure that these manufacturers will conduct their businesses using ethical or legal labor practices. Apparel companies may be held jointly liable for the wrongdoings of those that manufacture their products. While we do not control independent manufacturer’s employment conditions, or their business practices, people in general act in their own self-interest, and may act in a manner that produces a negative public perception of the Company. Accordingly, we could receive negative publicity or perhaps a court determination that we are jointly liable for such improper practices.

Additional capital is necessary to implement the Company's Business Plan for Black Chandelier operations.

The Company does not believe that it has sufficient cash, cash equivalents and operating income to maintain its business at its existing level through the next 12 months. The Black Chandelier operation will require significant new capital in order to execute its business plan. The Company’s success in raising this capital will depend upon its ability to access equity capital markets. We may not be able to do so, or do so on acceptable terms. If the Company fails to obtain funds on acceptable terms, it will not be able to execute the Black Chandelier business plan and would have to delay or abandon some or all of its plans for growth.

Risks Related to Investment

Nexia expects the price of its common stock to be volatile. As a result, investors could suffer greater market losses in a down market than they might experience with a more stable stock. Volatility in our stock may also increase the risk of having to defend a securities class action suit, which could be expensive and divert management’s attention from managing Nexia’s business.

The market price of Nexia’s common shares has been subject to wide fluctuations in response to several factors, such as:

Significant dilution

Actual or anticipated variation in the results of operations

Announcements of acquisitions

Changes in the areas of operations of the company

Conditions and trends in the real estate market in Salt Lake City, Utah and nationally

The stock markets generally, and the OTC Bulletin Board in particular, have experienced extreme price and volume fluctuations that are often unrelated and disproportionate to the operating performance of a particular company. These market fluctuations, as well as general economic, political and market conditions such as recessions or interest rate or international currency fluctuations, may adversely affect the market for the common stock of the company. In the past, class action litigation has often been brought against companies after periods of volatility in the market price of their securities. If such a class action suit is brought against the Company it could result in substantial costs and a diversion of management’s attention and resources, which would hurt business operations.

Our stock value is dependent on our ability to generate net cash flows.

A large portion of any potential return on our common stock will be dependent on our ability to generate net cash flows.

If we can not operate our commercial property and/or retail operations at a net profit, there will be no return on shareholders’ equity, and this could result in a loss of share value. No assurance can be given that we will be able to operate at a net profit now or in the future.

Our stock may be subject to significant restrictions on resale due to federal penny stock regulations.

Our stock differs from many stocks because it is a penny stock. The Securities and Exchange Commission (“SEC”) has adopted a number of rules to regulate penny stocks. These rules require that a broker or dealer, prior to entering into a transaction with a customer, must furnish certain information related to the penny stock. The information that must be disclosed includes quotes on the bid and offer, any form of compensation to be received by the broker in connection with the transaction and information related to any cash compensation paid to any person associated with the broker or dealer.

These rules may affect your ability to sell our shares in any market that may develop for Nexia stock. Should a market for our stock develop among dealers, it may be inactive. Investors in penny stocks are often unable to sell stock back to the dealer that sold it to them. The mark-ups or commissions charged by broker-dealers may be greater than any profit a seller can make. Because of large dealer spreads, investors may be unable to sell the stock immediately back to the dealer at the same price the dealer sold it to them. In some cases, the stock value may fall quickly. Investors may be unable to gain any profit from any sale of the stock, if they can sell it at all.

Potential investors should be aware that, according to the SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. These patterns include:

control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;

manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;

boiler room practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;

excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and

the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.

Investors must contact a broker-dealer to trade over-the-counter bulletin board securities. As a result, you may not be able to buy or sell our securities at the times you may wish.

Even though our securities are quoted on the OTC Bulletin Board, that may not permit our investors to sell securities when and in the manner that they wish. Because there are no automated systems for negotiating trades on the OTC Bulletin Board, they are conducted via telephone. In times of heavy market volume, the limitations of this process may result in a significant increase in the time it takes to execute investor orders. When investors place market orders to buy or sell a specific number of shares at the current market price it is possible for the price of a stock to go up or down significantly during the lapse of time between placing a market order and its execution.

If we fail to remain current on the reporting requirements that apply to Nexia, we could be removed from the OTC Bulletin Board which would limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities.

Companies trading on the OTC Bulletin Board, such as Nexia, must be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTC Bulletin Board. If we fail to remain current on our reporting requirements, shares of our common stock could be removed from the OTC Bulletin Board. As a result of that removal, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market. We filed late on our annual report for the year ended December 31, 2006. If we file late two more times, within one year on any of our quarterly or annual reports, we will be removed from the OTCBB and become traded on the Pink Sheets.

Reports to Security Holders

We are not required to deliver an annual report to security holders and do not plan to send a copy of the annual report to them. If we choose to create an annual report, it will contain audited financial statements. We intend to file all required information with the SEC. We plan to file with the SEC our Forms 10-K, 10-Q and all other forms that are or may become applicable to us.

The public may read and copy any materials filed with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. We have filed all statements and forms with the SEC electronically, and they are available for viewing or copy on the SEC's Internet site, that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The Internet address for this site is http://www.sec.gov.

ITEM 2. DESCRIPTION OF PROPERTY

Location and Description

Each of our properties competes with other general retail or office space in the greater Salt Lake City market. Occupancy rates for the area as a whole will most significantly impact our properties and the efforts to improve and upgrade the properties will enhance our ability to obtain tenants and maintain occupancy rates that will sustain the operating costs of the properties themselves.

Wasatch Capital Corporation ("Wasatch")

Wasatch, a 100% owned subsidiary of Nexia, owns the Wallace-Bennett Building, located at 55-65 West 100 South, Salt Lake City, Utah. The building is a 36,797 square foot, turn-of-the-century multi-story office building. The building was acquired in November of 1994 for a price of $800,000.

At the beginning of 2004, only the ground level was suitable for rent as retail space. The ground level comprises 7,816 square feet or 21% of the Building. A portion of this space is currently leased to Richard Wirick, the owner of the Oxford Shoe Shop, a retail outlet for men's shoes, for a monthly rental of $1,055 for 1350 square feet. A lounge occupies 1,900 square feet of the ground floor retail space at a monthly rental of $2,936 for the first year of a five year term ending February, 2013. A restaurant and an art gallery occupy the balance of the ground floor space. The average annual effective rental for the rentable ground level space is $15.21 per square foot or $118,917 in gross rental income. Tenants by contract are liable for their pro-rata shares of the taxes and insurance on the building and each tenant is liable for its own utilities.

In late 2004, the Company occupied a portion of the second floor as its main offices for which remodeling work was mostly completed during the year ended 2004. The Company occupies a total of 3,600 square feet and has space that includes a conference room and office space for the legal, accounting and executive employees of the Company. The renovations of the second floor incurred expenses totaling approximately $560,000 as of December 31, 2006.

Wasatch, on or about August 23, 2006, closed on a $1,000,000 refinancing of the Wallace-Bennett Building with a new loan secured by the building. The terms of the loan include a total loan in the sum of $1,000,000; a term of 10 years, with an interest rate of 7.125% fixed for ten years and provides for monthly payments based upon a 30 year amortization. The loan was personally guaranteed by Richard D. Surber, Nexia's President and C.E.O. Proceeds from the new financing were used to retire the prior loan secured by the building in the sum of $812,053 and included a cash payment of $149,572 to Wasatch. Wasatch intends to improve the remaining upper floor space as office space, studio locations and production space for low impact business. The terms set forth above, reclassify the loan held by Wasatch Capital from short-term debt to long-term debt which has substantially increased Nexia’s working capital.

Management believes that the building is adequately insured.

Downtown Development, Corp. ("DDC")

DDC, a 99.08% owned subsidiary of Nexia, owns a one story retail building located at 1374 South State Street, Salt Lake City, Utah, which it purchased on December 1, 1999 for $535,000. The balance on the financing owing at December 31, 2007 was $559,749. The building was appraised at $600,000 in November of 2002. In December of 2002, DDC obtained permanent financing with Community First National Bank; the loan bears interest at the rate of 7.16% per annum, with monthly payments of $3,061, with a final balloon payment due on December 5, 2012 (estimated amount $260,800). The loan was personally guaranteed by Richard D. Surber, Nexia's President and C.E.O. The building is 7,000 square feet, one story tall and constructed in the late 1960's. A bakery currently occupies 2,500 square feet of retail space under a lease in the building and a retail sporting equipment outlet leases the remaining 4,500 square footage of the building. DDC expended $34,100 through March 31, 2004 in renovations to the space occupied by the bakery in the property. The tenants are liable for their pro-rata share of the taxes and insurance for the building as well as their use of utilities. This figure does not include substantial improvements made by the tenant to the same portion of the property. The retail space in the building competes for tenants with other retail space on State Street which is a commercial zone for over one mile in each direction from the property.

DDC, on August 18, 2006, closed on the purchase of a lot immediately adjacent to the above described property and building located at 1374 South State Street. The total purchase price for the property was $250,000. This purchase price was financed with a short term (90 days) loan. The additional property is being used by a current tenant.

On September 21, 2006, DDC closed on refinancing of the loans on the building and lot on South State Street. A loan in the sum of $568,000 was secured from Cyprus Credit Federal Credit Union. The loan bears interest at the rate of 7.00% per annum, with monthly payments of $3,779, with a final balloon payment due on September 22, 2016 (estimated amount $491,000). The loan was personally guaranteed by Richard D. Surber, Nexia’s president and C.E.O. The remaining balance due to Rich Investment, LLC in the sum of $57,000 was restated in a new note bearing interest at the rate of 12% per annum. The $57,000 new note was repaid in full on March 15, 2007. The Company has signed a real estate purchase contract to sell the building for $1,050,000. The purchase closing is subject to due diligence.

Management believes the property held by DDC is adequately insured.

Kearns Development Corporation. ("Kearns")

Kearns, a 99% owned subsidiary of Nexia, owns one office building located on West Sams Boulevard in Kearns, Utah (a suburb of the Greater Salt Lake area). The building contains approximately 11,709 square feet of total floor space in a single story. The building was purchased on November 29, 2000 for a total price of $750,000. The purchase was financed with a $625,000 first mortgage from Brighton Bank with an initial variable rate of 10.97% amortized over 25 years and monthly payments of $5,632. The loan was personally guaranteed by Richard D. Surber, Nexia's President and C.E.O. This property was refinanced on January 9, 2003 for $660,000 by Community First Bank, at an interest rate of 7.16%. Monthly payments are $5,223 based upon a 20 year amortization with a balloon payment of the remaining balance due on January 9, 2013 (estimated amount of $441,325). The balance owing on this loan as of December 31, 2007 was $573,383. At the time of the refinancing, the building was appraised at $980,000. The building is leased to a tenant occupying approximately 35% of the office space and generating monthly rentals of $3,452 at an average rate of $10.25 per square foot. The gross annual rental income from the building is $41,420. Kearns has no present plans to renovate or improve the building. The building competes for tenants with other office space in the Kearns area. Management believes that this building is adequately insured. The Company has signed a real estate purchase contract to sell the building for $765,000. The purchase closing is subject to due diligence.

None of the financing for the above described properties provides for pre-payment penalties.

Contractual Obligations

	Total		2008		2009		2010		2011		2012		Thereafter
Mortgage debt	$	2,121,851	$	38,670	$	41,516	$	44,572	$	47,854	$	51,376	$	1,897,863
Promissory notes		1,456,817		945,534		143,948		146,843		150,402		44,417		25,673
Capital lease
obligation		68,280		18,224		20,251		22,507		7,298		-		-
Operating lease
obligation		995,521		411,597		225,812		210,385		147,757		-		-
	$	4,642,469	$	1,414,025	$	431,527	$	424,307	$	353,311	$	95,793	$	1,923,536

Detail of Costs Associated with Rental Revenue,

Years Ended December 31, 2007 and 2006

	Year Ended December 31,				Change
Expense Description	2007		2006		$			%

Mortgage interest	$	154,699	$	142,591	$	12,108			8.49
Depreciation		90,251		91,053		(802	)		(0.88	)
Payroll - mgt. and maintenance		24,934		10,392		14,542			139.93
Utilities		24,846		21,524		3,322			15.43
Property Tax		24,323		36,512		(12,189	)		(33.38	)
Maintenance and repairs		2,970		10,107		(7,137	)		(70.61	)
Insurance		7,407		7,857		(450	)		(5.73	)

	$	329,430	$	320,036	$	9,394			2.94

ITEM 3.

LEGAL PROCEEDINGS

The following civil actions may have a material impact on Nexia:

Nexia Holdings, Inc., a Nevada Corporation vs. Richard Bailey, Individually and Creative Marketing Group, Inc., a Nevada Corporation. This action was filed on September 28, 2004, in the Third Judicial District Court of Salt Lake County, State of Utah, Civil Case No. 040920424. Nexia filed this cause of action to recover its damages that resulted from the failure of the named defendants to perform the terms and conditions of a Stock Purchase Agreement and Plan of Reorganization signed on or about November 10, 2003. This agreement provided for Nexia to acquire a controlling interest in the defendant corporation which the Defendants have subsequently failed and refused to perform, despite Nexia having tendered full performance on its part. Both defendants were served with process in the case and failed to make an appearance before the Court; entry of default against each defendant has been signed by the court. A judgment in the sum of $88,036, attorney’s fees of $13,205, plus interest and cost of suit has been granted to the Company. Both named defendants have filed Chapter 7 bankruptcy cases in Nevada and no recovery from the judgment is expected as no recoverable assets are reported in either party’s case.

Nexia Holdings, Inc., a Nevada corporation vs. Collegestock, Inc. a Nevada corporation and Thomas J. McCarthy, Individually. Litigation was filed on July 19, 2007, in the Third Judicial District Court of Salt Lake County, State of Utah, Civil Case No, 070910429. Suit was filed seeking recovery of $20,000 paid to the defendants for consulting services and investor relations that Nexia alleges were never delivered and that fraudulent representations were made to induce Nexia into signing the agreement. Defendants have been avoiding service in person, the corporate defendant was recently served with a copy of the complaint through its registered agent in the State of Nevada. Nexia has filed a motion to strike the answer filed by a non attorney for the corporate defendant. Mr. McCarthy has not yet been served with a copy of the complaint.

Nexia Holdings, Inc., a Nevada corporation vs. Expedite Ventures, Inc. a Nevada corporation and Michael Maley, Individually. This action was filed on July 19, 2007, in the Third Judicial District Court of Salt Lake County, State of Utah, Civil case No. 070910431. Suit was filed based upon the breach of a contract to provide investor relations services to Nexia in exchange for a cash payment of $50,000. Recovery of the cash payment is sought. Defendants have retained counsel and filed answers, the corporate defendant has also filed a counterclaim seeking additional payment of $50,000 it alleges is due under the terms of the contract. A discovery plan is to be filed with the trial court in the near future to set forth a timeline for this cause of action.

Fashion Place, L.L.C., a Delaware limited liability company vs. Gold Fusion Laboratories, Inc., a Nevada corporation and Nexia Holdings, Inc., a Nevada corporation. This action was filed on March 31, 2008 in the Third Judicial District Court of Salt Lake County, State of Utah, Civil case No. 080905398. The suit seeks recovery from Nexia as a Guarantor of the lease obligations of Gold Fusion Laboratories for space lease in the Fashion Place Mall. The suit alleges damages of $25,676, plus late fees, interest, attorney’s fees and costs. Additional claims for unpaid rent are asserted until the space can be leased to a replacement tenant. Nexia has filed an answer and is considering its course of action.

Terranet Investments, L.C., a California limited liability company vs. Gold Fusion Laboratories, Inc. dba Black Chandelier, a Utah corporation; Jared Gold; an individual. This action was filed on March 7, 2008 in the Fourth Judicial District Court of Utah County, State of Utah, Civil case No. 080400750. The suit seeks recovery from Gold Fusion Laboratories, Inc., that is in fact a Nevada corporation and from Jared Gold as a guarantor for alleged unpaid rent arising from the operation of a Black Chandelier retail outlet in the Riverwoods Mall located in Provo, Utah. The cause of action seeks judgment in the sum of $48,023, the subsidiary of the Company has filed a response to the cause of action and will seek to protect all legal remedies available to it before the trial court.

Wasatch Capital Corporation, a Utah corporation vs. Olympus Contract Glazing, Inc. a Utah corporation. This action was filed on January 11, 2008, in the Third Judicial District Court of Salt Lake County, State of Utah, Civil Case No. 080900619. Wasatch filed this cause of action to recover its damages that resulted from the failure of the named defendants to repair the damage from glass that was installed in a damaged or imperfect condition in 2005. Attempts to resolve the matter prior to suit were never successful. A contract for the replacement of the defective materials was signed and costs of $17,882 were incurred for which recovery is sought from the defendant. A response to the action has been filed, alleging that other parties are liable for the damages, the glass manufacturing company or the shipping company, and seeking a trial by jury of the controversy. Discovery has not been started and no trial schedule has yet been determined.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.

PART II

ITEM 5.

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

The Company's common stock is quoted on the OTC Bulletin Board under the symbol, "NXHL". Trading of the common stock in the over-the-counter market has been limited and sporadic and the quotations set forth below are not necessarily indicative of actual market conditions. Further, these prices reflect inter-dealer prices without retail mark-up, mark-down, or commission and may not necessarily reflect actual transactions. The high and low bid prices for the common stock for the quarters indicated below for the years ended December 31, 2006, 2007 and the quarter ending March 31, 2008 are as follows:

YEAR	PERIOD ENDING	HIGH		LOW

2006	March 31, 2006	$	0.60	$	0.10

	June 30, 2006	$	0.60	$	0.20

	September 30, 2006	$	0.40	$	0.20

	December 31, 2006	$	0.40	$	0.20

2007	March 31, 2007	$	0.30	$	0.05

	June 30, 2007	$	0.12	$	0.01

	September 30, 2007	$	0.04	$	0.01

	December 31, 2007	$	0.01	$	0.001

2008	March 31, 2008	$	0.007	$	0.0001

200,000 Shares of Series A Preferred Stock are issued and outstanding.

There is only one holder of Series B Preferred Stock, Richard Surber, who holds 10 million shares.

As of May 6, 2008 there were fourteen holders of Series C Preferred Stock, Joseph Corso, who holds 541,000 shares, John E. Fry, Jr. who holds 10,500 shares, Jared Gold who holds 70,000 shares, Brooke Newby who holds 30,000 shares, NFC Escrow Holdings Corp holds 30,000 shares, Sean Pasinsky who holds 29,176 shares, Geoffrey Eiten who holds 60,000 shares, J.H. Darbie who holds 24,000 shares, AmeriResources holds 150,000 shares, Morgan Swenson who holds 30,000 shares, Guy Cook who holds 50,000 shares, Michael Golightly who holds 50,000 shares, Pamela Kushlan who holds 30,000 shares, John Mortensen who holds 30,000 shares and Fredrick Hunzeker who holds 30,000 shares.

Effective December 14, 2007, a 1 for 100 reverse stock split of the common stock was declared effective.

ITEM 6.

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Financial Statements and accompanying notes and the other financial information appearing elsewhere in this report. Our fiscal year end is December 31.

General

Our business plan for the next twelve months involves the continued operation of our office buildings in Salt Lake City, Utah coupled with our ongoing attempts to locate and acquire additional commercial space in the greater Salt Lake area and elsewhere and to locate suitable buyers for the properties as the circumstances may permit. We have acquired 85% of Landis and have plans to open two more locations over the next 18 months. We also operate two Black Chandelier stores and have plans to open at least two more in the Western United States by December 31, 2008. We anticipate opening an additional four locations over the next 24 to 36 months, subsequent to raising $1 to $1.5 million funds through the S-1 filing or other sources.

Results of Operations

Revenues

Year ended December 31, 2007. Gross operating revenues for the fiscal years ended December 31, 2006 and 2007 were $1,834,245 and $3,232,488, respectively. This represents a $1,398,243 or 76% increase from 2006 to 2007.

Gross rental revenues for the fiscal years ended December 31, 2006 and 2007 were $184,230 and $245,128, respectively. This was a increase of $60,898 or 33% from 2006 to 2007. The increase in rental revenues for 2007 came from the collection of past due receivables, an additional tenant in the downtown building, and increased rents on new lease agreements with the current tenants. We do not expect rental revenues to substantially increase in the next few years until such time as Nexia is able to successfully raise a substantial amount of capital which will provide the means to purchase additional properties to replace those which have been sold over the last few years.

The revenues attributable to sales from Landis and Gold Fusion totaled $1,649,365 for the year ended December 31, 2006 compared to $2,987,360 of sales generated by sales for the year ended December 31, 2007. The increase of $1,337,995 or 81% from 2006 to 2007 is as a result of the increased number of retail outlets for Black Chandelier and the addition of the Bountiful Landis salon.

Expenses

Year ended December 31, 2007. Total operating expenses for the fiscal years ended December 31, 2006 and 2007 were $5,444,591 and $7,212,599, respectively. This is a $1,768,008 increase or a 32% increase from 2006 to 2007. The increase was attributable primarily to the amount of costs incurred by the increase in operating the additional retail locations acquired by the Company during 2007 that were not operating during 2006 and the increased administrative costs resulting from the expansion of operations by Landis and Black Chandelier.

Depreciation and amortization expenses for the year ended December 31, 2006, were $166,874 compared to $222,059 for same period in 2007. The increase in expense of $55,185, or 33%, was primarily the result of the acquisition of additional depreciable assets by Landis and Black Chandelier over the course of the year 2007.

Nexia expects expenses as a percent of revenues to continue to increase through 2008 as Nexia steps up its effort to expand its retail operations as well as acquire additional properties.

The net increase in general and administrative expenses from 2006 to 2007 was $3,504,534 explained in detail in the table below:

	Increase
Payroll Expenses	$	1,716,643
Adjustment to stock subscriptions receivable		773,870
Increase in marketing Company stock expense		643,241
Directors fees in 2007, none were recorded in 2006		304,000
Other miscellaneous expense increases		66,780
Net increase from 2006 to 2007	$	3,504,534

Operating Losses

Nexia recorded an operating loss of $4,447,454 for the year ended December 31, 2006 compared to $5,732,773 for the comparable period in the year 2007. The increase in operating loss of $1,285,319 or a 29% increase was the result of the increased operating expenses related to the operation of the Landis Salon, Black Chandelier costs of expansion, adjustments to stock subscriptions receivable, increase in marketing expenses for the Company’s stock, and director’s fees paid out during 2007, when no fees were paid in 2006. No director’s fees were paid with cash during the years ended December 31, 2006 and 2007.

Net Losses

Nexia recorded a net loss of $1,983,297 for the year ended December 31, 2006, as compared to a net loss of $8,498,219 for the comparable period in 2007. The increase in the amount of net loss represents a change of $6,514,922, or 328%, compared to the same period in 2006, reported above. The largest contributing factors to the increase in net loss is the loss recognized from issuing preferred stock of $2,087,027, loss on termination of convertible debt of $807,182, adjustment to stock subscriptions receivable of $773,870, increased expense in marketing Company stock of $643,241, directors fees of $340,000, and increased payroll expenses of $1,716,643. Increased expenses mentioned above that are non cash items total $4,651,320.

Nexia does not expect to operate at a profit through fiscal 2008. Since Nexia's activities in the past were tied to its ability to operate its real estate properties at a profit, future profitability or its revenue growth tended to follow changes in the real estate market place. The recent diversification into retail operations represented by its investment in Landis Salons, Inc. and Gold Fusion Laboratories during 2007 will broaden Nexia’s operations and make it less dependent on the real estate market and its fluctuations. There can be no guarantee that profitability or revenue growth will be realized in the future.

Impact of Inflation

The Company believes that inflation may have a negligible effect on future operations. The Company believes that it may be able to offset inflationary increases in the cost of revenue by increasing revenue and improving operating efficiencies.

Liquidity and Capital Resources

On December 31, 2007, Nexia had current assets of $1,036,555 and $4,845,485 in total assets compared to current assets of $1,022,549 and total assets of $4,734,635 as of December 31, 2006. Nexia had net working capital deficit of $1,223,156 at December 31, 2006, as compared to a net working capital deficit of $1,694,448 at December 31, 2007. The increase in working capital deficit of $471,292 is due primarily to increased accrued liabilities and current maturities of long-term debt.

Cash used by operating activities was $956,880 for the year ended December 31, 2006, compared to cash used by operating activities of $855,448 for the comparable period in 2007. The decrease in cash used of $101,432 or 11% was attributable to the preferred and common stock issued for services and loss on termination of convertible debenture generated by the expanded operations during 2007 over 2006.

Net cash provided by investing activities was $561,239 for the year ended December 31, 2006, compared to net cash used by investing activities of $72,034 for the year ended December 31, 2007. The increase in cash used of $633,273 was attributable primarily to the purchase of property, plant, and equipment and marketable securities in 2007. In 2006, the Company received cash from the sale of marketable securities, commercial real estate, and an increased investment in Landis.

Cash provided by financing activities was $372,314 for the year ended December 31, 2006, compared to cash provided of $899,084 for the year ended December 31, 2007. The increase of $526,770 in cash provided by financing activities was due primarily to the increase of proceeds from stock subscriptions receivable, preferred stock issued to acquire Newby Salon, change in accounting for the convertible debenture, and proceeds from issuing notes payable to related parties.

We project that in 2008 and beyond, our salon and retail store businesses will be able to generate sufficient revenues to meet their internal financial needs. We project the cash burn rate for the next twelve months, for the Company’s general needs and rental operations, will be approximately $1,320,000. Funds to cover the burn rate will come from the ESOP plan to pay employee compensation expenses, $750,000; and sale of stocks from an investment portfolio of at least $200,000. The total provided to cover the Company’s general needs and the rental operations will be approximately $950,000. Additional funds will be needed to cover the current operating expenses. These amounts do not include any funds that may be received from the Dutchess equity line of credit as described in the Company’s SB-2 Registration Statements and amendments thereto as filed with the Securities and Exchange Commission.

ITEM 7.

FINANCIAL STATEMENETS AND SUPPLEMENTARY DATA

NEXIA HOLDINGS, INC. AND SUBSIDIARIES

Index to Consolidated Financial Statements

		Page

Report of Independent Registered Public Accounting Firm – Hansen Barnett & Maxwell, P.C.		F-2

Report of Independent Registered Public Accounting Firm – DeJoya Griffith & Company, LLC		F-3

Consolidated Balance Sheets as of December 31, 2007 and 2006		F-4

Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2007 and 2006		F-6

Consolidated Statements of Stockholders’ Deficit for the Years Ended December 31, 2006 and 2007		F-8

Consolidated Statements of Cash Flows for the Years Ended December 31, 2007 and 2006		F-12

Notes to the Consolidated Financial Statements		F-15

F-1

HANSEN, BARNETT & MAXWELL, P.C.
A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS
5 Triad Center, Suite 750
Salt Lake City, UT 84180-1128
Phone: (801) 532-2200
Fax: (801) 532-7944
www.hbmcpas.com

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and the Shareholders

Nexia Holdings, Inc.

We have audited the accompanying consolidated balance sheet of Nexia Holdings, Inc. and subsidiaries (the Company) as of December 31, 2007, and the related consolidated statements of operations and comprehensive loss, stockholders’ deficit, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Nexia Holdings, Inc. and subsidiaries as of December 31, 2007 and the results of their operations and their cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, during the year ended December 31, 2007, the Company suffered a loss from operations of $8,498,219 and used $855,448 of cash in operating activities. As of December 31, 2007, the Company has accumulated a deficit of $24,181,911, had a working capital deficit of $1,694,448 and a stockholders’ deficit of $6,870,114. The Company has defaulted on several of its liabilities. Subsequent to December 31, 2007, the Company has closed two clothing retail stores, and has entered into agreements to sell two of its commercial real estate properties. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

HANSEN BARNETT & MAXWELL, P.C.

Salt Lake City, Utah

April 15, 2008

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

Nexia Holdings, Inc. and Subsidiaries

Salt Lake City, Utah

We have audited the accompanying consolidated balance sheet of Nexia Holdings, Inc. as of December 31, 2006, and the related consolidated statements of operations and other comprehensive income (loss), stockholders’ deficit, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

In our opinion, based on our audit, the financial statements referred to above present fairly, in all material respects, the financial position of Nexia Holdings, Inc. as of December 31, 2006, and the results of its operations and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the accompanying consolidated financial statements, the Company has incurred cumulative operating losses through December 31, 2006 of $15,683,692, and has a working capital deficit of $1,223,156 as of December 31, 2006, all of which raise substantial doubt about its ability to continue as a going concern. Management’s plan in regard to these matters is also discuss in Note 2. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

De Joya Griffith & Company, LLC

March 21, 2007, except for Note 2 and Note 24 which are April 17, 2008

Henderson, Nevada

F-3

NEXIA HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

	December 31,		December 31,
ASSETS	2007		2006
			(Restated)
CURRENT ASSETS

Cash	$	95,760	$	124,158
Investment in marketable equity securities - available for sale		195,499		265,532
Accounts receivable, trade and other - net of allowance for doubtful accounts of $91,036 and $103,732, respectively		50,343		32,841
Accounts receivable - employees and related parties		2,166		12,070
Accounts receivable - contingency		17,822
Notes receivable - net		-		10,142
Inventory		333,681		370,639
Prepaid expenses		341,284		207,167

TOTAL CURRENT ASSETS		1,036,555		1,022,549

PROPERTY AND EQUIPMENT

Property and equipment, net of $807,933 and $796,483 of accumulated depreciation, respectively		1,989,588		3,033,228
Land		181,945		633,520
Property - held for sale, net		1,362,950		-

NET PROPERTY AND EQUIPMENT		3,534,483		3,666,748

OTHER ASSETS
Goodwill		227,681		-
Loan costs, net		45,386		43,958
Trademarks		1,380		1,380

TOTAL ASSETS	$	4,845,485	$	4,734,635

The accompanying notes are an integral part of these consolidated financial statements

F-4

NEXIA HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Continued)

	December 31,			December 31,
LIABILITIES AND STOCKHOLDERS' DEFICIT	2007			2006
				(Restated)
CURRENT LIABILITIES
Accounts payable	$	640,142		$	765,059
Accounts payable - related parties		127,512			44,032
Accrued liabilities		757,201			562,144
Accrued interest - related parties		186,306			51,025
Refundable deposits		17,414			15,892
Convertible debenture		-			210,714
Current portion of notes payable		812,818			420,814
Current portion of notes payable - related parties		189,610			176,025

TOTAL CURRENT LIABILITIES		2,731,003			2,245,705

LONG-TERM LIABILITIES
Series A convertible preferred stock - $0.001 par value; 10,000,000 shares authorized; 200,000 shares and 150,000 shares outstanding; $2,000,000 liquidation value		2,000,000			-
Series C convertible preferred stock - $0.001 par value; 5,000,000 shares authorized; 832,225 shares and 190,500 shares outstanding; $4,161,125 liquidation value		4,161,125			-
Notes payable, net of current portion		2,314,520			2,196,580
Notes payable - related parties, net of current portion		330,000			437,000

TOTAL LONG-TERM LIABILITIES		8,805,645			2,633,580

TOTAL LIABILITIES		11,536,648			4,879,285

MINORITY INTEREST		178,951			91,344

STOCKHOLDERS' DEFICIT
Series A preferred stock		-			150
Series B preferred stock - $0.001 par value; 10,000,000 shares authorized; 10,000,000 shares outstanding		10,000			10,000
Series C preferred stock		-			191
Undesigated preferred stock - $0.001 par value; 25,000,000 shares authorized; no shares outstanding		-			-
Common stock - $0.0001 par value; 500,000,000 shares authorized; 149,773,988 shares and 8,114,769 shares outstanding, respectively		14,977			811
Additional paid-in capital		18,275,039			15,682,841
Treasury stock, 0 shares and 1,470 shares, respectively, at cost		-			(100,618	)
Receivable from stockholders		(168,663	)		(365,262	)
Accumulated other comprehensive income		(819,556	)		219,585
Accumulated deficit		(24,181,911	)		(15,683,692	)

TOTAL STOCKHOLDERS' DEFICIT		(6,870,114	)		(235,994	)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	4,845,485		$	4,734,635

The accompanying notes are an integral part of these consolidated financial statements

F-5

NEXIA HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations and Other Comprehensive Income (Loss)

	For the Years Ended December 31,
	2007			2006
				(Restated)
REVENUE
Sales - Salon and Retail	$	2,987,360		$	1,649,365
Rental revenue		245,128			184,230
Consulting revenue		-			650

TOTAL REVENUE		3,232,488			1,834,245

COST OF REVENUE
Cost of sales - Salon and Retail		1,564,428			638,586
Cost associated with rental revenue		97,983			94,517
Depreciation and amortization on rentals		90,251			104,005

TOTAL COST OF REVENUE		1,752,662			837,108

GROSS PROFIT		1,479,826			997,137

EXPENSES
General and administrative expense		6,398,067			2,893,533
Consulting fees		528,025			2,345,598
Depreciation and amortization expense		131,808			62,869
Interest expense associated with rental revenue		154,699			142,591

TOTAL EXPENSES		7,212,599			5,444,591

OPERATING LOSS		(5,732,773	)		(4,447,454	)

OTHER INCOME (EXPENSE)
Derivative loss related to Series A and C convertible preferred stock		(2,087,027	)		-
Loss on termination of convertible debt		(807,182	)		-
Interest expense		(218,309	)		(128,666	)
Interest income		2,036			15,476
Litigation settlements		60,000			109,791
Sale of marketable securities		288,402			2,301,967
Gain or (loss) on disposal of assets		(250	)		34,124
Loss on impairment of asset		(26,715	)		-
Other income		19,735			128,618

TOTAL OTHER INCOME (EXPENSE)		(2,769,310	)		2,461,310

LOSS BEFORE INCOME TAXES		(8,502,083	)		(1,986,144	)
Provision for state income tax		(3,900	)		-

LOSS BEFORE MINORITY INTEREST		(8,505,983	)		(1,986,144	)

MINORITY INTEREST IN NET LOSS OF CONSOLIDATED SUBSIDIARIES		7,764			2,847

LOSS FROM CONTINUING OPERATIONS		(8,498,219	)		(1,983,297	)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS		-			-

NET LOSS	$	(8,498,219	)	$	(1,983,297	)

The accompanying notes are an integral part of these consolidated financial statements

F-6

NEXIA HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations and Comprehensive Loss (Continued)

	For the Years Ended December 31,
	2007			2006
				(Restated)
BASIC AND DILUTED LOSS PER COMMON SHARE	$	(0.18	)	$	(0.38	)

BASIC AND DILUTED WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING		46,076,060			5,174,979

COMPREHENSIVE INCOME (LOSS)

Net Loss	$	(8,498,219	)	$	(1,983,297	)
Change in unrealized value of marketable securities		(1,043,392	)		225,306

Comprehensive Income (Loss)	$	(9,541,611	)	$	(1,757,991	)

The accompanying notes are an integral part of these consolidated financial statements

F-7

NEXIA HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statement of Stockholders' Deficit

For the Year Ended December 31, 2006

Post Reverse Split Effective December 14, 2007

Description	Number of Preferred Shares		Preferred Stock		Number of Common Shares			Common Stock		APIC			Treasury Stock			Stock Subscriptions Receivable			Other Comprehensive Income - (Loss)			Retained Deficit			Total Stockholders Equity
Balance forward, Dec 31, 2005 (Restated)		8,100,000	$	8,100		3,539,945		$	354	$	14,673,833		$	(100,618	)	$	(11,325	)	$	(5,721	)	$	(13,733,362	)	$	831,261

Intrinsic value of options issued for past services		-		-		-			-		41,250			-			-			-			-			41,250

Fair value of options issued for past services		-		-		-			-		19,500			-			-			-			-			19,500

Common stock issued for options exercised		-		-		2,190,000			219		638,031			-			(394,704	)		-			-			243,546

Stock certificate returned and cancelled		-		-		(1	)		-		(11,800	)		-			-			-			-			(11,801	)

Adjust stock subscriptions receivable for sale of stock at fair market values less than the value when the stock was issued		-		-		-			-		(12,397	)		-			12,397			-			-			-

Adjust for cash received on subscriptions receivable in excess of amount receivable from an employee		-		-		-			-		(1,576	)		-			-			-			-			(1,576	)

Common stock issued for services		-		-		34,825			3		12,445			-			-			-			-			12,448

Add net credit balance to common stock paid-in capital resulting from writing off intercompany balances by forgiving debt of other Nexia companies or debt being forgiven by other Nexia companies		-		-		-			-		7,118			-			-			-			-			7,118

Preferred stock issued for increased investment in Landis		2,080,000		2,080							(76,579	)														(74,499	)

Preferred stock issued for acquisition of Black Chandelier net assets from DHX, Inc.		157,500		158							241,454															241,612

Preferred stock issued for making a loan to Nexia Holdings, Inc.		3,000		3							14,997															15,000

Adjust stock subscriptions receivable for difference between market value when stock was issued and sales proceeds		-		-		-			-		(32,487	)		-			24,365			-			-			(8,122	)

The accompanying notes are an integral part of these consolidated financial statements

F-8

NEXIA HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statement of Stockholders' Deficit

For the Year Ended December 31, 2006

Post Reverse Split Effective December 14, 2007

Description	Number of Preferred Shares		Preferred Stock		Number of Common Shares		Common Stock		APIC		Treasury Stock			Stock Subscriptions Receivable			Other Comprehensive Income - (Loss)		Retained Deficit			Total Stockholders Equity

Common stock issued to Diversified Holdings X, Inc. re. acquisition of net assets of Black Chandelier operation from DHX, Inc.(restricted)		-		-		2,000,000		200		41,703		-			-			-		-			41,903

Value of notes payable and common stock given greater than net assets received, acquisition of B.C. net assets from DHX, Inc., in excess of common stock issued for acquisition of Black Chandelier net assets from DHX, Inc. and compensation for loan made to Nexia Holdings, Inc.						100,000		10		29,990													30,000

The company increased its number of authorized shares to 50,000,000,000 and par value adjusted from $0.001 to $0.0001		-		-		-		-		-		-			-			-		-			-

Common stock issued for partial conversion of convertible debenture		-		-		250,000		25		52,475		-			-			-		-			52,500

Adjust Stock Subscriptions Receivable for differences between stock sales net proceeds and amount when stock was issued		-		-		-		-		-		-			4,005			-		-			4,005

Adjust amounts received from option stock sales at prices less than fair market value when the shares were issued from charges against paid-in capital to expense										44,884													44,884

Adjustment for deleting Landis, LLC from 2005 financial statements and including them in 2006 financial statements, resulting from increasing in 2006 the investment in Landis from 20% to 85%																				32,967			32,967

Change in comprehensive income, year ended December 31, 2006		-		-		-		-		-		-			-			225,306		-			225,306

Net consolidated loss for the year ended December 31, 2006		-		-		-		-		-		-			-			-		(1,983,297	)		(1,983,297	)

Balance at December 31, 2006 (Restated)		10,340,500	$	10,341		8,114,769	$	811	$	15,682,841	$	(100,618	)	$	(365,262	)	$	219,585	$	(15,683,692	)	$	(235,994	)

The accompanying notes are an integral part of these consolidated financial statements

F-9

NEXIA HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statement of Stockholders' Equity

For the Year Ended December 31, 2007

Post Reverse Split Effective December 14, 2007

	Number of Series B Preferred Shares (1)			Series B Preferred Stock (1)			Number of Common Shares		Common Stock		APIC			Treasury Stock			Stock Subscriptions Receivable			Other Comprehensive Income/Loss		Retained Deficit			Total Stockholders' Equity

Balance forward, December 31, 2006		10,340,500		$	10,341			8,114,769	$	811	$	15,682,841		$	(100,618	)	$	(365,262	)	$	219,585	$	(15,683,692	)	$	(235,993	)

Common stock issued for options exercised								48,715,175		4,872		2,053,401						(1,436,482	)							621,791

Common stock issued for past services								13,360,000		1,336		206,564														207,900

Common stock issued for conversion of part of a convertible debenture								10,534,280		1,053		110,388														111,441

Common stock issued for future future services								10,000,000		1,000		99,000														100,000

Issuance of common stock to Board Members for director fees								30,000,000		3,000		297,000														300,000

Adjust for difference between price of common stock when issued and when it was sold																		852,182								852,182

Receipt of cash for stock subscriptions receivable.																		790,518								790,518

Series C Preferred stock converted for common stock		(73,900	)		(74	)						(369,426	)													(369,426	)

Common stock issued for Series C Preferred stock conversion								29,049,000		2,905		366,595														369,500

Series C Preferred stock issued for past services		490,000			490							2,449,510														2,450,000

Series C Preferred stock issued to payoff convertible debenture		200,000			200							192,618														192,818

Series C Preferred stock issued for purchase of a style salon		60,000			60							299,940														300,000

Series C Preferred stock issued for investment in Green Endeavors		150,000			150							749,850														750,000

Adjust Preferred APIC for minority interest in Green Endeavors												(75,000	)													(75,000	)

Cash for stock subscriptions receivable used to purchase stock of another company																		130								130

Outstanding treasury stock transferred to broker for services												(100,618	)		100,618											-

Change option prices for prior issuances from $0.0001 to a percentage of gross sale proceeds																		(9,749	)							(9,749	)

The accompanying notes are an integral part of these consolidated financial statements

F-10

NEXIA HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statement of Stockholders' Equity

For the Year Ended December 31, 2007

Post Reverse Split Effective December 14, 2007

	Number of Series B Preferred Shares (1)			Series B Preferred Stock (1)			Number of Common Shares			Common Stock		APIC			Treasury Stock		Stock Subscriptions Receivable			Other Comprehensive Income/Loss			Retained Deficit			Total Stockholders' Equity

Adjustment to shares created from the prior reverse stock split								856

Return of common shares to company from Richard Surber for transfer								(92	)

Reclassification of Series A and C convertible Preferred shares as a derivative in long-term liabilities		(1,166,600	)		(1,167	)							(3,687,624	)

Change in comprehensive income, year 2007																					(1,039,141	)					(1,039,141	)

Net loss for the year ended 12/31/2007																								(8,498,219	)		(8,498,219	)


Balance, December 31, 2007		10,000,000		$	10,000			149,773,988		$	14,977	$	18,275,039		$	-	$	(168,663	)	$	(819,556	)	$	(24,181,911	)	$	(6,870,114	)

The accompanying notes are an integral part of these consolidated financial statements

(1) Series A and C Convertible Preferred Stock has been calculated at the converted values and reclassified as part of long-term debt.

F-11

NEXIA HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

	For the Year Ended
	December 31,
	2007			2006
				(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES

Net loss	$	(8,498,219	)	$	(1,983,297	)
Adjustments to reconcile net loss to net cash used in operating activities:
Minority interest in loss		12,607			2,847
Depreciation expense		268,533			159,429
Amortization of lease / loan costs		4,572			12,952
Preferred and common stock issued for services and contractual agreements		3,644,078			9,864
Derivative loss related to Series A and C Convertible
Preferred Stock		2,087,027			-
Loss on termination of convertible debenture		807,182			-
Series A Convertible Preferred Stock issued to Officer for past services		500,000			-
Impairment of goodwill		26,715			-
Loss on disposal of assets		89,421			73,746
Imparment of fixed		-			-
Adjusted amounts received from option stock sales at prices lower than fair market value when the shares were issued		-			44,884
Accumulated depreciation transfererred from another entity		-			7,029
Stock options issued		196,599			60,750
Issued option shares for services		-			77,625
Loss on sales at values lower than stock issued values		-			5,581
Allowance for bad debt		5,202			84,862
Loss on stock returned and cancelled		-			(11,800	)
Changes in operating assets and liabilities, net of effect from purchase of Newbys Salon, LLC:
Receivables		(22,704	)		(80,870	)
Accounts receivable - related parties		(22,900	)		(7,512	)
Contingent receivable		(17,822	)		-
Inventory		64,220			(257,811	)
Prepaid expense		390,216			(195,286	)
Accounts payable		20,495			650,370
Accounts payable - related parties		123,980			44,032
Accrued liabilities		245,133			346,685
Accrued liabilities - related parties		135,479			-
Refundable deposit		1,522			-
Deferred revenue		-			(960	)
Net cash used in operating activities		61,336			(956,880	)

The accompanying notes are an integral part of these consolidated financial statements

F-12

NEXIA HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Continued)

	For the Year Ended
	December 31,
	2007			2006
				(Restated)
CASH FLOWS FROM INVESTING ACTIVITIES

Sale of marketable securities		76,353			119,636
Purchase of marketable securities		(90,261	)		(7,022	)
Purchase of property, plant and equipment		(41,656	)		(389,004	)
Reimbursement of improvements from lessor		50,218			-
Proceeds from acquisition of Newby Salon, Inc.		6,192			-
Consulting fees paid with securities received from settlement agreement		-			2,400,000
Net gain on sale of marketable securities		-			(2,301,967	)
Purchase of land		-			(251,575	)
Sale of commercial real estate		-			802,126
Sale of residential real estate		-			70,205
Increased investment in Landis, LLC from 20% to 85%		-			120,058
Collect note receivable		-			100
Capitalized payroll expense as a fixed asset		-			(1,318	)
Net cash provided by (used in) investing activities		845			561,239

The accompanying notes are an integral part of these consolidated financial statements

F-13

NEXIA HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Continued)

	For the Year Ended
	December 31,
	2007			2006
				(Restated)
CASH FLOWS FROM FINANCING ACTIVITIES

Principal payments on long-term debt		(133,883	)		(85,684	)
Principal payments on long-term debt - related parties		(101,111	)		(3,000	)
Proceeds from issuing notes payable		167,066			300,000
Proceeds from issuing notes payable to related parties		-			66,025
Loan costs paid		(3,813	)		(52,940	)
Receipt of stock subscriptions receivable		-			150,470
Preferred stock issued to acquire Newby Salon		-
Adjustment related to change in accounting for convertible debenture retroactive to prior year		-			-
Proceeds from issuance of new long-term debt, mortgage refinancing		-			1,568,790
Proceeds from issuance of short-term debt for land purchase		-			250,000
Long-term debt of Landis, LLC included in 12-31-06 consolidation, not included in consolidation at 12-13-05		-			45,690
Note payable assumed in acquisition of Black Chandelier		-			7,169
Pay off mortgages, property sales and refinancing		-			(1,723,528	)
Principal payments on capital lease liabilities		(18,838	)		(5,901	)
Capitalized two new equipment leases from banks		-			48,223
Pay off part of short term debt for land purchase		-			(193,000	)
Net cash provided by (used in) financing activities		(90,579	)		372,314

NET DECREASE IN CASH AND CASH EQUIVALENTS		(28,398	)		(23,327	)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		124,158			147,485
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	95,760		$	124,158

SUPPLEMENTAL DISCLOSURE OF INFORMATION
Cash paid for interest	$	119,793		$	271,251

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for subscriptions receivable	$	1,438,482		$	546,750
Common stock issued to vendors and applied on accounts payable		228,250			18,753
Conversion of debenture to common stock		193,901			-
New note payable to vendor in satisfaction of accounts Payable balance		117,513			-
Common stock issued to acquire fixed assets		30,000			-
Increase investment in Landis, LLC from 20% to 85% by issuing a note payable and stock		-			(74,499	)
Certain assets and liabilities of Black Chandelier acquired from DHX, Inc. by issuing notes payable and stock		-			283,515
Stock received in settlement of a written off note receivable given to three consultants as compensation for their services		(2,265,000	)

The accompanying notes are an integral part of these consolidated financial statements

F-14

NEXIA HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT POLICIES

a. Organization and Nature of Operations

Nexia Holdings, Inc. (“Nexia” or “The Company”) was incorporated under the laws of the State of Colorado on April 20, 1987 as Metropolitan Acquisition Corporation. On October 5, 2000, Nexia merged with a Nevada corporation with the same name, effectively changing its state of domicile from Colorado to Nevada. Nexia is solely a holding company of a number of subsidiary companies.

Nexia’s operating subsidiaries during the year ended December 31, 2007 were Diversified Holdings I, Inc., Downtown Development Corporation, Wasatch Capital Corporation, Landis, LLC, Newby Salon, LLC, Gold Fusion Laboratories, Inc. and Kearns Development Corporation, and Green Endeavors, LTD.

b. Basis of Consolidation

The consolidated financial statements include the accounts of Nexia Holdings, Inc. and subsidiaries that are more than 50% owned. In addition, Nexia consolidates variable interest entities for which it is deemed to be the primary beneficiary. Nexia’s share of earnings or losses of associates is included in the consolidated operating results using the equity method of accounting.

Diversified Holdings 1, Inc. (“DH1”), a Nevada corporation is a 100% owned subsidiary of Nexia. DH1 was formed on March 22, 1996, and is a holding company which has majority ownership of the following subsidiaries:

Wasatch Capital Corporation (“WCC”), a Utah corporation, was incorporated on June 10, 1991. WCC owns and operates a commercially rented building in downtown Salt Lake City. DH1 owned 100% of Wasatch common stock as of December 31, 2006. During 2005 DH1 purchased the remaining shares of Wasatch’s common stock, increasing their ownership from 98% to 100%. On September 16, 2004 Wasatch issued one million shares of its common stock to DH1 in total satisfaction of its outstanding debt to DH1.

Kearns Development Corporation (“Kearns”), a Nevada corporation, was incorporated February 16, 1996 as Cyber Studio, Inc. On April 4, 2001, its name was changed to Kearns Development Corporation. During 2000, Kearns purchased a commercial rental building in Kearns, Utah. Kearns is owned 99% by DH1.

Downtown Development Corporation (“Downtown”) was incorporated by Nexia on November 30, 1999 in Utah as A-Z South State Corporation. On August 22, 2001, its name was changed to Downtown Development Corporation. Downtown owns a commercial rental building in Salt Lake City, Utah, and is 99.8% owned by DH1.

Landis Salons, Inc., a Utah corporation (“Landis”), was organized on May 4, 2005 for the purpose of operating an AvedaTM Lifestyle Salon. DH1 acquired a 20% interest in exchange for a $100,000 cash investment. An additional 65% interest was acquired by DH1 July 13, 2006, with 60% from Richard Surber and 5% from Seth Bullough, by issuing a $250,000 note payable, 80,000 Series A Preferred shares and 2,000,000 Series B Preferred shares. Landis is 85% owned by DH1 and a minority interest of 15% is held by a former employee.

F-15

NEXIA HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

Gold Fusion Laboratories, Inc. (“GFL”), a Nevada corporation, was incorporated July 19, 2006 for the purpose of acquiring certain assets and liabilities of the Black Chandelier, a fashion and lifestyle design, manufacture and retail sales operation from Diversified Holdings X, Inc. (“DHX”), a wholly owned corporation of Nexia’s CEO, Richard Surber, in exchange for issuing to DHX a $300,000 promissory note, 70,000 shares of Series A Preferred Stock and 2,000,000 shares (post reverse split) of restricted common stock. GFL is 100% owned by DH1. As of March 31, 2008 GFL voluntarily surrendered all its assets to Nexia for debts owed. GFL has currently ceased operations.

Newby Salon, L.L.C., a Utah limited liability company that owns and operates the Reflections Hair & Image Studio in Bountiful, Utah, is owned 100% by Nexia. Nexia purchased Newby Salon in exchange for 60,000 shares of Series C Preferred Stock. The agreement provides the Company with a second operating salon using exclusively AvedaTM products. The Reflections salon was re-named as a Landis Concept Salon on November 9, 2007.

Green Endeavors LTD, (GRNE”) a Deleware corporation, is a 90% owned subsidiary of Nexia. GRNE was acquired by Nexia in October 2007 in exchange for 150,000 shares of Series C Preferred Stock. It is a publicly traded corporation. Subsequent to December 31, 2007, GRNE acquired Landis Salons, inc. and Newby Salon, LLC from Diversified Holdings 1, Inc., a 100% owned subsidiary of Nexia, in exchange for a $3,000,000 convertible debenture.

c. Accounting Method

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business.

d. Reclassification

Certain prior year balances have been reclassified to conform to the current year presentation.

e. Cash and Cash Equivalents

Cash and cash equivalents represent cash and short-term, highly liquid investments with original maturities of three months or less and amounts in-transit from banks for customer credit and debit cards. The process of transferring these funds usually takes between one to two business days and is classified as cash and cash equivalents on our Consolidated Balance Sheets.

F-16

NEXIA HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

f. Merchandise Inventory

Inventory is valued at the lower of the cost or market. Cost is determined using the first-in, first-out (“FIFO”) method. Market is determined based on the estimated net realizable value, which generally is the merchandise selling price. We review our inventory levels in order to identify slow-moving merchandise and damaged items and use markdowns to clear merchandise.

g. Property and Equipment

Property and equipment are stated at cost. Expenditures that materially increase the life of the assets are capitalized. Ordinary maintenance and repairs are charged to expense as incurred. When assets are sold, or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized at that time. All capital leases are added to the property and equipment and depreciated over the life of the assets. Depreciation is computed on the straight-line method over the following useful lives:

Building and improvements		6-39 Years
Furniture, equipment and fixtures		3-10 Years
Vehicles		5 Years
Computer equipment and software		3 years

When commercial buildings are sold, the net depreciated basis is deducted from the net cash received and the difference is a net gain or loss.

h. Revenue Recognition

The Company recognizes revenue from its four main sources of revenue as follows:

Rental Revenue

Rental revenues are recorded in the period in which they are earned in accordance with rental agreements and lease contracts. Rent payments are typically due by the 1st of each month.

Sales – Salon

Revenue from sales of services and products is recognized at the date of the services or the sale of products.

Sales – Retail Clothing

Revenue from clothing sales is recorded on the date of sale to the customer.

F-17

NEXIA HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

i. Marketable Securities

Securities investments are classified as available-for-sale securities. Available-for-sale securities are recorded at fair value with the change in fair value during the period excluded from earnings and recorded net of tax as a separate component of stockholders’ deficit. All marketable securities held by the Company have been classified as available-for-sale securities.

j. Stock-based Compensation

The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award computed using the Black-Scholes option pricing models. That cost recognized over the period during which an employee is required to provide services in exchange for the award.

Options granted by the Company are most often exercised immediately after the grant date. Consequently, the Company has determined the fair value of the options based on the price market of the Company’s stock on the date of grant.

k. Environmental Compliance and Remediation

The Company determines its potential liability for environmental compliance and remediation on a site by site basis and records a liability when its existence is probable and reasonably estimable. Expenditures that do not have a future economic benefit are expensed as incurred. Expenditures that extend the life of the related property or mitigate or prevent future environmental contamination are capitalized.

l. Impairment of Long-Lived Assets

The Company evaluates its long-lived assets in accordance with Statement of Financial Accounting Standard No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets.” The Company recognizes impairment losses as the difference between historical cost and fair value of the asset, less costs to sell, when management determines that events and circumstances indicate a need to assess impairment, and when that assessment indicates that historical cost materially exceeds fair value, less costs to sell. There was no impairment expense of long-lived assets for the years ended December 31, 2007 and 2006 except for goodwill which was impaired by $26,715 during the years ended December 31, 2007.

m. Advertising Expense

The Company expenses advertising costs as incurred. Advertising expense was $162,958 and $118,377 for the years ended December 31, 2007 and 2006, respectively.

n. Basic and Diluted Loss Per Common Share

The Company computes net loss per common share in accordance with SFAS No. 128, “Earnings per share” (SFAS 128) and SEC Staff Accounting Bulletin No. 98 (SAB 98). Under the provisions of SFAS 128 and SAB 98, basic net loss per share is computed by dividing the net loss available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive. For the years ended December 31, 2006 and 2007, options were excluded from the computation of diluted loss per share because their effect would be anti-dilutive.

F-18

NEXIA HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

o. Use of Estimates

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. Actual results could differ from those estimates.

p. Fair Value

The Company assesses the carrying value of goodwill relating to the Newby Salon for impairment annually or other indications of impairment exist. No impairment was recognized during the year ended December 31, 2007 or 2006.

q. Newly Issued Accounting Pronouncements

FASB Interpretation No. 159 "The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115" (FAS 159) - In February 2007, the FASB issued Statement No. 159. FAS 159 permits companies to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. The provisions of FAS 159 become effective as of the beginning of our 2009 fiscal year. We are currently evaluating the impact that FAS 159 will have on our future financial statements if we elect to adopt it.

FASB Statement No. 160 amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, and requires all entities to report noncontrolling (minority) interests in subsidiaries within equity in the consolidated financial statements, but separate from the parent shareholders’ equity. Statement No. 160 also requires any acquisitions or dispositions of noncontrolling interests that do not result in a change of control to be accounted for as equity transactions. Further, the Statement requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. FAS 160 is effective for fiscal years beginning after December 15, 2008. We are currently assessing the impact of adopting FAS 160 on our results of operations and financial condition.

FASB Statement No. 161, “Disclosures about Derivatives Instruments and Hedging Activities”, an amendment of FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“FAS 161”). In March 2008, the FASB issued SFAS No. 161, which changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures stating how and why an entity uses derivative instruments; how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations; and how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. FAS 161 requires that objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation. FAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. FAS 161 also encourages but does not require comparative disclosures for earlier periods at initial adoption. The Company is currently evaluating whether the adoption of FAS 161 will have an impact on our financial statements.

F-19

NEXIA HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

NOTE 2 - GOING CONCERN

The Company's consolidated financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred cumulative operating losses through December 31, 2007 of $24,181,911, has a working capital deficit of $1,694,448 and a stockholders’deficit of $6,870,114 at December 31, 2007. In addition, the Company has defaulted on several of its liabilities, has closed two retail clothing stores, and has entered into agreements to sell two of its commercial real estate properties. These matters raise substantial doubt about the Company’s ability to continue as a going concern.

Primarily, revenues have not been sufficient to cover the Company’s operating costs. Management’s plans to enable the Company to continue as a going concern include the following:

•	Increase retail sales of Landis Salons, Inc. and Style Perfect

•	Closing underperforming retail locations

•	Using stock and option-based compensation to cover payroll and other permissible labor costs

•	Raise capital through the Company’s equity line of credit upon the effectiveness of a pending S-1 Registration Statement

•	Increasing revenues from rental properties by implementing new marketing programs

•	Making certain improvements to certain rental properties in order to make them more marketable

•	Reduce expenses through consolidating or disposing of certain subsidiary companies

•	Convert certain debt into shares of the Company’s common stock

•	Purchasing revenue producing real estate

There can be no assurance that the Company can or will be successful in implementing any of its plans or that it will be successful in enabling the Company to continue as a going concern. The Company’s consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 3 - INCOME TAXES

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

F-20

NEXIA HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

	2007			2006
Deferred tax assets:

Net operating loss carryover	$	5,006,000		$	2,736,994

Accrued expense		142,000			45,682

Bad debts allowance, accounts receivable		36,000			36,306

Bad debts allowance, notes receivable		-			31,500

Charitable contributions carryover		4,000			4,294

Deferred tax liabilities:

Unrealized gain on derivative		-			(25,687	)

Series A and C convertible preferred		(2,733,000	)		-

Valuation allowance		(2,455,000	)		(2,829,089	)

Net deferred tax asset	$	-		$	-

Deferred income tax assets of $2,455,000 and $2,829,089 at December 31, 2007 and 2006, respectively were offset in full by a valuation allowance.

Reconciliation between the amounts of income tax benefit determined by applying the applicable Federal and State statutory income tax rate to pre-tax loss is as follows:

	As of	As of
	December 31,	December 31,
	2007	2006
Statutory federal income tax	(35.0%)	(35.0%)
Statutory state income tax	( 5.0%)	( 5.0%)
Change in valuation allowance on deferred tax assets	40.0%	40.0%

At December 31, 2007, the Company had a net operating loss carryforward of approximately $12,584,043 that may be offset against future taxable income from the years 2008 through 2015. No tax benefit has been reported in the December 31, 2007 consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount. The Company has not filed the 2007 corporation tax returns as of the date of filing of this Form 10-K. The Company has filed an automatic extension to file the 2007 tax returns and anticipates filing on time.

F-21

NEXIA HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carryforwards may be limited to future use.

NOTE 4 - NOTES RECEIVABLE

Notes receivable consist of the following at December 31, 2007 and 2006:

	2007			2006

Note receivable from an individual for the sale of a vehicle with interest at 6.99%, due in 60 monthly payments of $900, secured by the vehicle		-			10,142

Note receivable from a company, non-interest bearing, due on demand, unsecured		90,000			90,000
		90,000			100,142
Allowance for doubtful accounts		(90,000	)		(90,000	)

Total Notes Receivable	$	-		$	10,142

At December 31, 2007, two notes totaling $90,000, reported together above, were in default. Those two notes were from Creative Marketing, Inc. Nexia Holdings has taken legal action against the company owing the debt and its president, Rick Bailey.

NOTE 5 – INVENTORY

Inventory consisted of the following at December 31, 2007 and 2006:

	2007		2006

Raw Materials	$	20,529	$	25,512

Work in Process		41,454		34,464

Finished Goods		271,698		310,663

Total Inventory	$	333,681	$	370,639

F-22

NEXIA HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

NOTE 6 - INVESTMENT IN MARKETABLE EQUITY SECURITIES

The following is a summary of the Company's investment in available-for-sale securities as of December 31, 2007 and 2006:

	2007	2006
Equity securities free trading:

NEXIA HOLDINGS INC 10-K