**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


WASHINGTON,
      D.C. 20549





**FORM
      10-Q**





(MARK
      ONE)





**[X]
                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                THE****SECURITIES
                EXCHANGE ACT OF 1934**





For
      the
      quarterly period ended March
      31, 2007





**Or**





**[   ]
                TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                THE****SECURITIES
                EXCHANGE ACT OF 1934**





Transition
      Period From _______ To ________





*COMMISSION
      FILE NUMBER 333-105017*





**VESTIN
                FUND III, LLC**(Exact
                name of registrant as specified in its
                charter)








NEVADA
            
            87-0693972(State
                or Other Jurisdiction of
            
            (I.R.S.
                EmployerIncorporation
                or Organization)
            
            Identification
                No.)





**8379
      WEST SUNSET ROAD, LAS VEGAS, NEVADA**  **89113**


(Address
      of Principal Executive Offices) (Zip Code)





Registrant’s
      Telephone Number: 702.227.0965





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 [   ]





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):





Large
                accelerated filer [   ]
            Accelerated
                filer [   ]
            Non-accelerated
                filer [X]





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





Yes  [   ]     No  [X]





As
      of May
      10, 2007, 2,525,561 units of interest in the Company were
      outstanding.




*Table
          of Contents*




**TABLE
      OF CONTENTS**




PAGEPart
                  I
              FINANCIAL
                  INFORMATIONItem
                  1.
              Financial
                  StatementsBalance
                  Sheets as of March 31, 2007 (unaudited) and December
                  31, 2006
              1Statements
                  of Income (unaudited) for the Three Months Ended
                  March 31, 2007 and 2006
              2Statements
                  of Members’ Equity andOther
                  ComprehensiveIncome (unaudited) for the Three Months Ended March 31,
                  2007
              3Statements
                  of Cash Flows (unaudited) for the Three Months Ended
                  March 31, 2007 and 2006
              4Notes
                  to Financial Statements
                  (unaudited)
              5Report
                  of Independent Registered Public Accounting
                  Firm
              22Item
                  2.
              Management’s
                  Discussion and Analysis of Financial
                  Condition and Results of Operations
              23Item
                  3.
              Quantitative
                  and Qualitative Disclosures About Market
                  Risk
              32Item
                  4.
              Controls
                  and Procedures
              33Item
                  4T
              Controls
                  and Procedures
              34Part
                  II
              OTHER
                  INFORMATIONItem
                  1.
              Legal
                  Proceedings
              34Item
                  1A.
              Risk
                  Factors
              34Item
                  2.
              Unregistered
                  Sales of Equity - Securities and Use of
                  Proceeds
              44Item
                  3.
              Defaults
                  Upon Senior Securities
              45Item
                  4.
              Submission
                  of Matters to a Vote of Security
                  Holders
              45Item
                  5.
              Other
                  Information
              45Item
                  6.
              Exhibits
              46SIGNATURES
              47Exhibit
                  31.1Exhibit
                  31.2Exhibit
                  32




*Table
          of Contents*




**PART
      I - FINANCIALINFORMATION**





**ITEM
      1.**  **FINANCIAL
      STATEMENTS**





**VESTIN
                FUNDIII, LLC****BALANCE
                SHEETS****ASSETS****March
                31, 2007**
            
            **December
                31, 2006****(Unaudited)**AssetsCash
                and cash equivalents
            
            $
            426,000
            
            $
            821,000Cash
                - restricted
            
            
            985,000
            
            
            985,000Marketable
                securities - related party
            
            
            832,000
            
            
            829,000Interest
                and other receivables
            
            
            243,000
            
            
            270,000Real
                estate held for sale
            
            
            575,000
            
            
            575,000Investment
                in real estate loans, net of allowance for loan losses of $73,000
                at March
                31, 2007 and December 31, 2006
            
            
            24,666,000
            
            
            26,999,000Assets
                under secured borrowings
            
            
            2,206,000
            
            
            4,430,000Due
                from related parties
            
            
            --
            
            
            10,000Other
                assets
            
            
            4,000
            
            
            6,000Total
                assets
            
            $
            29,937,000
            
            $
            34,925,000**LIABILITIES
                AND MEMBERS' EQUITY**LiabilitiesAccounts
                payable and accrued liabilities
            
            $
            108,000
            
            $
            93,000Due
                to related parties
            
            
            2,000
            
            
            --Secured
                borrowings
            
            
            2,206,000
            
            
            4,430,000Deferred
                income
            
            
            985,000
            
            
            985,000Total
                liabilities
            
            
            3,301,000
            
            
            5,508,000Commitments
                and contingenciesMembers'
                equity - authorized 10,000,000 units, 2,515,950 units and 2,775,376
                units
                issued and outstanding at March 31, 2007 and December 31, 2006,
                respectively
            
            
            26,649,000
            
            
            29,434,000Accumulated
                other comprehensive loss
            
            
            (13,000
            )
            
            (17,000
            )Total
                members' equity
            
            
            26,636,000
            
            
            29,417,000Total
                liabilities and members' equity
            
            $
            29,937,000
            
            $
            34,925,000




See
            review report of Independent Registered Public Accounting Firm.
 The
            accompanying notes are an integral part of these statements.
 -
            1 -
 *Table
            of Contents*





**VESTIN
                FUNDIII, LLC****STATEMENTS
                OF INCOME****(UNAUDITED)****For
                the Three Months**
              **Ended
                March 31,****2007**
            
            **2006****Revenues**Interest
                income from investment in real estate loans
            
            $
            783,000
            
            $
            594,000Rental
                income - related party
            
            
            --
            
            
            257,000Dividend
                income - related party
            
            
            16,000
            
            
            --Other
            
            
            25,000
            
            
            18,000Total
                revenues
            
            
            824,000
            
            
            869,000**Operating
                expenses**Management
                fees - related party
            
            
            4,000
            
            
            12,000Interest
                expense related to secured borrowings
            
            
            79,000
            
            
            12,000Interest
                expense related to investment in real estate
            
            
            --
            
            
            68,000Depreciation
                and amortization
            
            
            --
            
            
            56,000Professional
                fees
            
            
            38,000
            
            
            65,000Professional
                fees - related party
            
            
            6,000
            
            
            1,000Other
            
            
            7,000
            
            
            5,000Total
                operating expenses
            
            
            134,000
            
            
            219,000**Income
                from operations**
            
            
            690,000
            
            
            650,000**Other
                expenses**Expenses
                related to real estate held for sale
            
            
            (3,000
            )
            
            --**NET
                INCOME**
            
            $
            687,000
            
            $
            650,000Net
                income allocated to members
            
            $
            687,000
            
            $
            650,000Net
                income allocated to members per weighted average membership
                unit
            
            $
            0.25
            
            $
            0.22Weighted
                average membership unit
            
            
            2,745,524
            
            
            2,986,887




See
            review report of Independent Registered Public Accounting Firm.
 The
            accompanying notes are an integral part of these statements.
 -
            2 -
 *Table
            of Contents*





**VESTIN
                FUNDIII, LLC****STATEMENTS
                OF MEMBERS' EQUITY AND OTHER COMPREHENSIVE INCOME****FOR
                THE THREE MONTHS ENDED MARCH 31, 2007****(UNAUDITED)****Units**
            
            **Amount**Members'
                equity at December 31, 2006
            
            
            2,775,376
            
            $
            29,417,000Comprehensive
                income:Net
                income
            
            
            
            
            
            687,000Unrealized
                gain on marketable securities
            
            
            
            
            
            3,000Total
                comprehensive income
            
            
            
            
            
            690,000Distributions
            
            
            
            
            
            (618,000
            )Reinvestments
                of distributions
            
            
            15,991
            
            
            176,000Members'
                redemptions
            
            
            (275,417
            )
            
            (3,029,000
            )Members'
                equity at March 31, 2007 (unaudited)
            
            
            2,515,950
            
            $
            26,636,000




See
            review report of Independent Registered Public Accounting Firm.
 The
            accompanying notes are an integral part of these statements.
 -
            3 -
 *Table
            of Contents*





**VESTIN
                FUNDIII, LLC****STATEMENTS
                OF CASH FLOWS****(UNAUDITED)****For
                the Three Months**
              **Ended
                March 31,****2007**
            
            **2006****Cash
                flows from operating activities:**Net
                income
            
            $
            687,000
            
            $
            650,000Adjustments
                to reconcile net income to net cash provided by operating
                activities:Depreciation
            
            
            --
            
            
            53,000Amortization
                of capitalized loan fees
            
            
            --
            
            
            3,000Change
                in operating assets and liabilities:Interest
                receivable
            
            
            27,000
            
            
            (8,000
            )Deferred
                rent receivable - related party
            
            
            --
            
            
            (34,000
            )Accounts
                payable
            
            
            15,000
            
            
            (42,000
            )Due
                to/from related parties
            
            
            12,000
            
            
            26,000Other
                assets
            
            
            2,000
            
            
            --Net
                cash provided by operating activities
            
            
            743,000
            
            
            648,000**Cash
                flows from investing activities:**Investments
                in real estate loans
            
            
            (1,500,000
            )
            
            (793,000
            )Proceeds
                from loan payoff
            
            
            2,533,000
            
            
            2,450,000Sale
                of investments in real estate loans to VRM II
            
            
            1,300,000
            
            
            --Net
                cash provided by investing activities
            
            
            2,333,000
            
            
            1,657,000**Cash
                flows from financing activities:**Payments
                on notes payable
            
            
            --
            
            
            (25,000
            )Members'
                redemptions
            
            
            (3,029,000
            )
            
            (705,000
            )Members'
                distributions, net of reinvestments
            
            
            (383,000
            )
            
            (407,000
            )Members'
                distributions - related party
            
            
            (59,000
            )
            
            (12,000
            )Net
                cash used in financing activities
            
            
            (3,471,000
            )
            
            (1,149,000
            )**NET
                CHANGE IN CASH**
            
            
            (395,000
            )
            
            1,156,000**Cash,
                beginning of period**
            
            
            821,000
            
            
            1,167,000**Cash,
                end of period**
            
            $
            426,000
            
            $
            2,323,000**Supplemental
                disclosures of cash flows information:**Interest
                paid during the period
            
            $
            79,000
            
            $
            80,000**Non-cash
                investing and financing activities:**Unrealized
                gain on marketable securities - related party
            
            $
            3,000
            
            $
            --Loans
                funded through secured borrowings
            
            $
            --
            
            $
            298,000Loan
                payoffs of loans funded through secured borrowings
            
            $
            2,224,000
            
            $
            --




See
          review report of Independent Registered Public Accounting Firm.
 The
          accompanying notes are an integral part of these statements.
 -
          4 -
 *Table
          of Contents*




**VESTIN
      FUNDIII, LLC**





**NOTES
      TO FINANCIAL STATEMENTS** ****





**MARCH
      31, 2007**





**(UNAUDITED)**








**NOTE
      A — ORGANIZATION**





Vestin
      Fund III, LLC was organized in April 2003 as a Nevada limited liability company
      for the purpose of investing in real estate loans and income-producing real
      property. On March 5, 2007, a majority of our members approved the Third Amended
      and Restated Operating Agreement, which limits the Company’s investment
      objectives to investments in real estate loans. Prior to adopting this
      amendment, we also invested in revenue-generating commercial real estate. We
      sold our last real estate investment in November 2006. In this report, we refer
      to Vestin Fund III, LLC as “the Company”, “our Company”, the “Fund”, “we”, “us”,
      or “our”.





We
      invest
      in loans secured by real estate through deeds of trust or mortgages (hereafter
      referred to collectively as “deeds of trust” and as defined in our Operating
      Agreement as “Mortgage Assets”). We commenced operations in February 2004. We
      will continue our operations until December 2023 unless dissolved prior thereto
      or extended by vote of the members under the provisions of our Operating
      Agreement.





We
      are
      not a mutual fund or an investment company within the meaning of the Investment
      Company Act of 1940, nor are we subject to any regulation thereunder. As a
      company investing in real estate loans we are subject to the North American
      Securities Administration Act Mortgage Program Guidelines (the “NASAA
      Guidelines”) promulgated by the state securities administrators. Prior to March
      5, 2007, we also invested in real estate and were subject to the North American
      Securities Administration Act Real Estate Guidelines.





On
      November 7, 2003, our Registration Statement as filed with the United States
      Securities and Exchange Commission (“SEC”) became effective for the initial
      public offering of up to 10,000,000 units at $10 per unit (“unit”). On November
      7, 2005, we discontinued the offering of our units; however, members may
      continue to purchase additional Units through our Distribution Reinvestment
      Plan
      whereby the members’ distributions may be used to purchase additional units at
      the current value. As of March 31, 2007, we had sold approximately 3,103,555
      units, which includes 237,634 units purchased through our Distribution
      Reinvestment Plan. On April 2, 2007, our manager decided to terminate our
      Distribution Reinvestment Plan effective May 7, 2007, pursuant to Section 8.5
      of
      our Operating Agreement. A letter was sent on April 2, 2007 to our members
      notifying them of the Distribution Reinvestment plan’s termination.





Our
      manager is Vestin Mortgage, Inc. (the “manager” or “Vestin Mortgage”), a Nevada
      corporation, which is a wholly owned subsidiary of Vestin Group, Inc. (“Vestin
      Group”), a Delaware corporation. Michael Shustek, the CEO and director of our
      manager, wholly owns Vestin Group, Inc., which is engaged in asset management,
      real estate lending and other financial services though its subsidiaries. Our
      manager, prior to June 30, 2006, also operated as a licensed Nevada mortgage
      broker and was engaged in the business of brokerage, placement and servicing
      of
      commercial loans secured by real property. On July 1, 2006, the mortgage broker
      license was issued to an affiliated company, Vestin Originations, Inc. that
      has
      continued the business of brokerage, placement and servicing of commercial
      real
      estate loans. Vestin Originations, Inc. is a wholly owned subsidiary of Vestin
      Group.





Pursuant
      to our Operating Agreement, our manager controls the daily operating activities
      of the Company, including the power to assign duties, to determine how to invest
      our assets, to sign bills of sale, title documents, leases, notes, security
      agreements, real estate loan investments and contracts, and to direct our
      business operations. Consequently, our operating results are dependent on our
      manager’s ability and intent to continue to service the Company’s assets. The
      Operating Agreement also provides that the members have certain rights,
      including the right to terminate our manager subject to a majority vote of
      the
      members.




See
            review report of Independent Registered Public Accounting Firm.
 -
            5 -
 *Table
            of Contents*




Vestin
      Mortgage, Inc. is also the manager of Vestin Realty Mortgage I, Inc., as the
      successor by merger to Vestin Fund I, LLC, (“VRM I”), Vestin Realty Mortgage II,
      Inc., as the successor by merger to Vestin Fund II, LLC, (“VRM II) and inVestin
      Nevada, Inc., (“inVestin”) a company wholly owned by our manager’s CEO. These
      entities also invest in commercial real estate loans.





For
      the
      three months ended March 31, 2006, the financial statements include the accounts
      of the Company and its wholly owned subsidiary, VF III HQ, LLC. All significant
      inter-company transactions and balances have been eliminated in consolidation.
      During December 2006, VF III HQ, LLC was dissolved.





**NOTE
      B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





**Management
      Estimates**





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America (“GAAP”) 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.





**Cash
      and Cash Equivalents**





Cash
      and
      cash equivalents include interest-bearing and non-interest-bearing bank
      deposits, money market accounts, short-term certificates of deposit with
      original maturities of three months or less, and short-term instruments with
      a
      liquidation provision of one month or less.





**Restricted
      Cash**





We
      have
      restricted cash, which relates to a cash deposit held as collateral by a banking
      institution to support rent payments on the property we sold during November
      2006. The requirement for the deposit expires in November 2007, which may be
      extended for an additional year.





**Revenue
      Recognition**





Interest
      is recognized as revenue when earned according to the terms of the loans, using
      the effective interest method. We do not accrue interest income on loans once
      they are determined to be impaired. A loan is impaired when based on current
      information and events, it is probable that we will be unable to collect all
      amounts due according to the contractual terms of the loan agreement or when
      the
      payment of interest is 90 days past due. Cash receipts will be allocated to
      interest income, except when such payments are specifically designated by the
      terms of the loan as principal reduction or when management does not believe
      our
      investment in the loan is fully recoverable.





**Investments
      in Real Estate Loans**





We
      may
      from time to time acquire or sell investments in real estate loans from or
      to
      our manager or other related parties pursuant to the terms of our Operating
      Agreement provided the price does not exceed the par value of the loan. The
      primary purpose is to either free up capital to provide liquidity for various
      reasons, such as loan diversification, or place excess capital in investments
      to
      maximize the use of our capital. Selling or buying loans allows us to diversify
      our loan portfolio within these parameters. Due to the short-term nature of
      the
      loans we make and the similarity of interest rates in loans we normally would
      invest in, the fair value of a loan typically approximates its carrying value.
      Accordingly, discounts or premiums typically do not apply upon sales of loans
      and therefore, generally no gain or loss is recorded on these transactions,
      regardless of whether to a related or unrelated party.




See
            review report of Independent Registered Public Accounting Firm.
 -
            6 -
 *Table
            of Contents*





Investments
      in real estate loans are secured by deeds of trust or mortgages. Generally,
      our
      real estate loans require interest only payments with a balloon payment of
      the
      principal at maturity. We have both the intent and ability to hold real estate
      loans until maturity and therefore, real estate loans are classified and
      accounted for as held for investment and are carried at amortized cost. Loans
      sold to or purchased from affiliates are accounted for at the principal balance
      and no gain or loss is recognized by us or any affiliate. Loan to value ratios
      are based on appraisals obtained at the time of loan origination and may not
      reflect subsequent changes in value estimates. Such appraisals are generally
      dated within 12 months of the date of loan origination and may be commissioned
      by the borrower. The appraisals may be for the current estimate of the “as-if
      developed” value of the property, which approximates the post-construction value
      of the collateralized property assuming that such property is developed. “As-if
      developed” values on raw land loans or acquisition and development loans often
      dramatically exceed the immediate sales value and may include anticipated zoning
      changes and timely successful development by the purchaser. As most of the
      appraisals will be prepared on an “as-if developed” basis, if a loan goes into
      default prior to any development of a project, the market value of the property
      may be substantially less than the appraised value. As a result, there may
      be
      less security than anticipated at the time the loan was originally made. If
      there is less security and a default occurs, we may not recover the full amount
      of the loan.





**Allowance
      for Loan Losses**





We
      maintain an allowance for loan losses on our investments in real estate loans
      for estimated credit impairment. Our manager’s estimate of losses is based on a
      number of factors including the types and dollar amounts of loans in the
      portfolio, adverse situations that may affect the borrower’s ability to repay,
      prevailing economic conditions and the underlying collateral securing the loan.
      Additions to the allowance are provided through a charge to earnings and are
      based on an assessment of certain factors, which may indicate estimated losses
      on the loans. Actual losses on loans are recorded as a charge-off or a reduction
      to the allowance for loan losses. Subsequent recoveries of amounts previously
      charged off are added back to the allowance or included as income.





Estimating
      allowances for loan losses requires significant judgment about the underlying
      collateral, including liquidation value, condition of the collateral, competency
      and cooperation of the related borrower and specific legal issues that affect
      loan collections or taking possession of the property. As a commercial real
      estate lender willing to invest in loans to borrowers who may not meet the
      credit standards of other financial institutional lenders, the default rate
      on
      our loans could be higher than those generally experienced in the real estate
      lending industry. We, our manager and Vestin Originations generally approves
      loans more quickly than other real estate lenders and, due to our expedited
      underwriting process, there is a risk that the credit inquiry we perform will
      not reveal all material facts pertaining to a borrower and the
      security.





Additional
      facts and circumstances are discovered as we continue our efforts in the
      collection and foreclosure processes. This additional information often causes
      management to reassess its estimates. Circumstances that may cause significant
      changes in our estimated allowance include, but are not limited to:





·
            Declines
                in real estate market conditions, which can cause a decrease in expected
                market value;





·
            Discovery
                of undisclosed liens for community improvement bonds, easements and
                delinquent property taxes;





·
            Lack
                of progress on real estate developments after we advance funds. We
                customarily utilize disbursement agents to monitor the progress of
                real
                estate developments and approve loan advances. After further inspection
                of
                the related property, progress on construction occasionally does
                not
                substantiate an increase in value to support the related loan
                advances;





·
            Unanticipated
                legal or business issues that may arise subsequent to loan origination
                or
                upon the sale of foreclosed upon property;
                and





·
            Appraisals,
                which are only opinions of value at the time of the appraisal, may
                not
                accurately reflect the value of the
                property.




See
            review report of Independent Registered Public Accounting Firm.
 -
            7 -
 *Table
            of Contents*





**Investments
      in Real Property**





As
      of
      March 31, 2007 and December 31, 2006, we had no investments in real property.
      A
      Special Meeting of our members was held on March 5, 2007 to vote on approval
      of
      the Third Amended and Restated Operating Agreement, which limits the Company’s
      investment objectives to investment in real estate loans. A majority of our
      members approved the Third Amended and Restated Operating
      Agreement.





**Real
      Estate Held For Sale**





Real
      estate held for sale includes real estate acquired through foreclosure and
      will
      be carried at the lower of the recorded amount, inclusive of any senior
      indebtedness, or the property's estimated fair value, less estimated costs
      to
      sell, with fair value based on appraisals and knowledge of local market
      conditions. While pursuing foreclosure actions, we seek to identify potential
      purchasers of such property. It is not our intent to invest in or own real
      estate as a long-term investment. In accordance with Statement of Financial
      Accounting Standards (“FAS”) 144 - *Accounting
      for the Impairment or Disposal of Long Lived Assets* (“FAS
      144”), we seek to sell properties acquired through foreclosure as quickly as
      circumstances permit. The carrying values of real estate held for sale are
      assessed on a regular basis from updated appraisals, comparable sales values
      or
      purchase offers.





Management
      classifies real estate held for sale when the following criteria are
      met:





·
            Management
                commits to a plan to sell the
                properties;





·
            The
                property is available for immediate sale in its present condition
                subject
                only to terms that are usual and
                customary;





·
            An
                active program to locate a buyer and other actions required to complete
                a
                sale have been initiated;





·
            The
                sale of the property is probable;





·
            The
                property is being actively marketed for sale at a reasonable price;
                and





·
            Withdrawal
                or significant modification of the sale is not
                likely.





**Classification
      of Operating Results from Real Estate Held for Sale**





FAS
      144 - *Accounting
      for the Impairment or Disposal of Long-Lived Assets* ("FAS
      144'') generally requires operating results from long lived assets held for
      sale
      to be classified as discontinued operations as a separately stated component
      of
      net income. Our operations related to real estate held for sale are separately
      identified in the accompanying statements of income.





**Secured
      Borrowings**





Secured
      borrowings provide an additional source of capital for our lending activity.
      Secured borrowings allow us to increase the diversification of our loan
      portfolio and to invest in loans that we might not otherwise invest in. We
      do
      not receive any fees for entering into secured borrowing arrangements; however,
      we may receive revenue in any differential of the interest spread, if
      applicable. Loans in which unaffiliated investors have participated through
      inter-creditor agreements (“Inter-creditor Agreements”) are accounted for as
      secured borrowings in accordance with Statement of Financial Accounting
      Standards (“FAS”) 140 - *Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities* (“FAS
      140”). The Inter-creditor Agreements provide us additional funding sources for
      real estate loans whereby an unaffiliated investor (the “Investor”) may
      participate on a non-pari passu basis in certain real estate loans with us
      and/or VRM I and/or VRM II (collectively, the “Lead Lenders”). In the event of
      borrower non-performance, the Inter-creditor Agreements generally provide that
      the Lead Lenders must repay the Investor’s loan amount either by (i) continuing
      to remit to the Investor the interest due on the participated loan amount;
      (ii)
      substituting an alternative loan acceptable to the Investor; or (iii)
      repurchasing the participation from the Investor for the outstanding balance
      plus accrued interest.





See
            review report of Independent Registered Public Accounting Firm.
 -
            8 -
 *Table
            of Contents*





Additionally,
      an Investor may participate in certain loans with the Lead Lenders through
      Participation Agreements. In the event of borrower non-performance, the
      Participation Agreement may allow the Investor to be repaid up to the amount
      of
      the Investor’s investment prior to the Lead Lender being repaid. Real estate
      loan financing under the Participation Agreements are also accounted for as
      a
      secured borrowing in accordance with FAS 140. We do not receive any revenues
      for
      entering into secured borrowing arrangements.





**Investment
      in Marketable Securities - Related Party**





Investment
      in marketable securities - related party consists of stock in VRM II. The
      securities are stated at fair value as determined by the market price as of
      March 31, 2007. All securities are classified as available-for-sale under the
      provisions of FAS 115 *Accounting
      for Certain Investments in Debt and Equity Securities* .





**Fair
      Value of Financial Instruments**





FAS
      107 - *Disclosures
      about Fair Value of Financial Instruments* (“FAS
      107”), requires the determination of fair value of our financial assets. The
      following methods and assumptions were used to estimate the fair value of
      financial instruments included in the following categories:





(a)
            Certificate
                of Deposits and Short-Term Investments: The carrying amounts of these
                instruments are at amortized cost, which approximates fair
                value.





(b)
            Investment
                in Real Estate Loans: The carrying value of these instruments, net
                of the
                allowance for loan losses, approximates the fair value due to their
                short-term maturities. Fair values for loans, which are delinquent
                and/or
                in foreclosure are determined by underlying collateral securing the
                loans.





(c)
            Assets
                under Secured Borrowing: The carrying amount of these instruments
                approximate fair value. The fair value is estimated based upon projected
                cash flows discounted at the estimated current interest rates at
                which
                similar loans would be made.





At
      March
      31, 2007 and December 31, 2006, the estimated fair values of the real estate
      loans were approximately $24.5 million and $27.0 million, respectively. At
      March
      31, 2007 and December 31, 2006, we had approximately $2.2 million and $4.4
      million, respectively, in assets under secured borrowings. These estimates
      were
      based upon the present value of expected cash flows discounted at rates
      currently available for similar loans. Fair value estimates are made at a
      specific point in time; based on relevant market information; are subjective
      in
      nature; and involve uncertainties and matters of significant judgment.
      Accordingly, the estimates presented herein are not necessarily indicative
      of
      the amounts that would be collected upon maturity or disposition of the
      loans.





**Net
      Income Allocated to Members Per Weighted Average Membership
      Unit**





Net
      income allocated to members per weighted average membership unit is computed
      by
      dividing net income calculated in accordance with GAAP by the weighted average
      number of membership units outstanding for the period.





**Segments**





As
      of
      March 31, 2007 and December 31, 2006, we had no investments in real property.
      A
      Special Meeting of our members was held on March 5, 2007 to vote on approval
      of
      the Third Amended and Restated Operating Agreement, which limits the Company’s
      investment objectives to investment in real estate loans. Accordingly, we now
      operate as one business segment.





**Income
      Taxes**





Income
      tax effects resulting from our operations pass through to our members
      individually and, accordingly, no provision for income taxes is included in
      the
      financial statements.




See
            review report of Independent Registered Public Accounting Firm.
 -
            9 -
 *Table
            of Contents*





**Reclassifications**





Certain
      reclassifications have been made to the prior periods’ consolidated financial
      statements to conform to the current period presentation.





**NOTE
      C — FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT
      RISK**





Financial
      instruments with concentration of credit and market risk include cash and loans
      secured by deeds of trust.





We
      maintain cash deposit accounts and certificates of deposit, which at times
      may
      exceed federally insured limits. We have not experienced any losses in such
      accounts and believe we are not exposed to any significant credit risk related
      to cash deposits. As of March 31, 2007 and December 31, 2006, we had
      approximately $2.8 million and $1.9 million, respectively, in excess of the
      federally insured limits.





As
      of
      March 31, 2007, 47.7%, 16.7%, 11.9% and 9.9% of our loans were in Nevada,
      Arizona, Oregon and California, respectively, compared to 43.5%, 16.2%, 12.0%
      and 10.8% at December 31, 2006, respectively. As a result of this geographical
      concentration of our real estate loans, a downturn in the local real estate
      markets in these states could have a material adverse effect on us.





At
      March
      31, 2007, the aggregate amount of loans to our two largest borrowers represented
      13.41% of our total investment in real estate loans. These real estate loans
      consisted of commercial and construction loans, located in Nevada and Oregon,
      with a first lien position, earning between 9% and 10%, with an aggregate
      outstanding balance of approximately $3.3 million. At December 31, 2006, the
      aggregate amount of loans to our three largest borrowers represented 17.48%
      of
      our total investment in real estate loans. These real estate loans consisted
      of
      commercial and construction loans, located in Nevada, Oregon, and Washington
      with first lien positions earning between 9% and 12%, with an aggregate
      outstanding balance of approximately $4.7 million. Because we have a significant
      concentration of credit risk with our three largest borrowers, a default by
      any
      of such borrowers could have a material adverse effect on us.





The
      success of a borrower’s ability to repay its real estate loan obligation in a
      large lump-sum payment may be dependent upon the borrower’s ability to refinance
      the obligation or otherwise raise a substantial amount of cash. An increase
      in
      interest rates over the loan rate applicable at origination of the loan may
      have
      an adverse effect on the borrower’s ability to refinance.





**NOTE
      D — INVESTMENTS IN REAL ESTATE LOANS**





As
      of
      March 31, 2007, all of our loans provided for payments of interest only with
      a
“balloon” payment of principal payable in full at the end of the
      term.





In
      addition, we invest in real estate loans that require borrowers to maintain
      interest reserves funded from the principal amount of the loan for a period
      of
      time. At March 31, 2007, we had approximately $7.8 million in investments in
      real estate loans that had interest reserves where the total outstanding
      principal due to us and our co-lenders was approximately $81.3 million. These
      loans had interest reserves of approximately $3.2 million, of which our portion
      was approximately $0.3 million. At December 31, 2006, we had approximately
      $12.3
      million in investments in real estate loans that had interest reserves where
      the
      total outstanding principal due to us and our co-lenders was approximately
      $120.3 million. These loans had interest reserves of approximately $5.6 million,
      of which our portion was approximately $0.6 million.





As
      of
      March 31, 2007, we had five real estate loan products consisting of commercial,
      construction, acquisition and development, land and residential loans. The
      effective interest rates on all product categories range from 9% to 13%. Revenue
      by product will fluctuate based upon relative balances during the
      period.




See
            review report of Independent Registered Public Accounting Firm.
 -
            10 -
 *Table
            of Contents*





Investments
      in real estate loans as of March 31, 2007, were as follows:





**Loan
                Type**
            
            **Number
                Of Loans**
            
            **Fund
                Balance (2)**
            
            **Weighted
                Average Interest Rate**
            
            **Portfolio
                Percentage**
            
            **Weighted
                Average Loan To Value (1)**Acquisition
                and development
            
            
            3
            
            $
            3,137,000
            
            
            12.00%
            
            
            12.68%
            
            
            64.34%Commercial
            
            
            9
            
            
            8,420,000
            
            
            10.52%
            
            
            34.04%
            
            
            74.91%Construction
            
            
            5
            
            
            4,132,000
            
            
            11.12%
            
            
            16.70%
            
            
            73.03%Land
            
            
            9
            
            
            8,550,000
            
            
            12.09%
            
            
            34.56%
            
            
            59.68%Residential
            
            
            1
            
            
            500,000
            
            
            12.00%
            
            
            2.02%
            
            
            80.00%27
            
            $
            24,739,000
            
            
            11.38%
            
            
            100.00%
            
            
            68.09%





Investments
      in real estate loans as of December 31, 2006 were as follows:





**Loan
                Type**
            
            **Number
                Of Loans**
            
            **Fund
                Balance (2)**
            
            **Weighted
                Average Interest Rate**
            
            **Portfolio
                Percentage**
            
            **Weighted
                Average Loan To Value (1)**Acquisition
                and development
            
            
            4
            
            $
            3,408,000
            
            
            12.08%
            
            
            12.59%
            
            
            62.78%Commercial
            
            
            9
            
            
            8,420,000
            
            
            10.39%
            
            
            31.10%
            
            
            72.51%Construction
            
            
            5
            
            
            5,843,000
            
            
            11.38%
            
            
            21.58%
            
            
            70.26%Land
            
            
            9
            
            
            9,401,000
            
            
            11.81%
            
            
            34.73%
            
            
            55.98%27
            
            $
            27,072,000
            
            
            11.31%
            
            
            100.00%
            
            
            65.06%





(1)
            Loan
                to value ratios are based on the most recent appraisals and may not
                reflect subsequent changes in value. Such appraisals, which may be
                commissioned by the borrower, are generally dated no greater than
                12
                months prior to the date of loan origination. The appraisals may
                be for
                the current estimate of the “as-if developed” value of the property, which
                approximates the post-construction value of the collateralized property
                assuming that such property is developed. “As-if developed” values on raw
                land loans or acquisition and development loans often dramatically
                exceed
                the immediate sales value and may include anticipated zoning changes,
                and
                successful development by the purchaser; upon which development is
                dependent on availability of financing. As most of the appraisals
                will be
                prepared on an “as-if developed” basis, if a loan goes into default prior
                to completion of the development of the project, the market value
                of the
                property may be substantially less than the appraised value. As a
                result,
                there may be less security than anticipated at the time the loan
                was
                originally made. If there is less security and a default occurs,
                we may
                not recover the full amount of the
                loan.





(2)
            The
                following table reconciles the balance of the loan portfolio to the
                amount
                shown on the accompanying Balance
                Sheets:





**March
                31, 2007**
              **Balance**
            
            **December
                31, 2006**
              **Balance**Balance
                per loan portfolio
            
            $
            24,739,000
            
            $
            27,072,000Less:Allowance
                for loan losses
            
            
            (73,000
            )
            
            (73,000
            )Balance
                per balance sheet
            
            $
            24,666,000
            
            $
            26,999,000




See
            review report of Independent Registered Public Accounting Firm.
 -
            11 -
 *Table
            of Contents*





The
      following is a schedule of priority of real estate loans as of March 31, 2007
      and December 31, 2006.





**Loan
                Type**
            
            **Number
                of Loans**
            
            **March
                31, 2007**
              **Balance***
            
            **Portfolio**
              **Percentage**
            
            **Number
                of Loans**
            
            **December
                31, 2006**
              **Balance***
            
            **Portfolio**
              **Percentage**First
                deeds of trust
            
            
            26
            
            $
            24,439,000
            
            
            98.79%
            
            
            26
            
            $
            26,772,000
            
            
            98.89%Second
                deeds of trust**
            
            
            1
            
            
            300,000
            
            
            1.21%
            
            
            1
            
            
            300,000
            
            
            1.11%27
            
            $
            24,739,000
            
            
            100.00%
            
            
            27
            
            $
            27,072,000
            
            
            100.00%





*
      Please
      see (2) above


**
      Generally, our second deeds of trust are junior to first deeds of trust
      positions held by either us or our manager.





The
      following is a schedule of contractual maturities of investments in real estate
      loans as of March 31, 2007:





April
                2007 - June 2007
            
            $
            11,217,000July
                2007 - September 2007
            
            
            7,670,000October
                2007 - December 2007
            
            
            4,352,000January
                2008 - March 2008
            
            
            1,500,000Thereafter
            
            
            --Total
            
            $
            24,739,000





The
      following is a schedule by geographic location of investments in real estate
      loans as of March 31, 2007 and December 31, 2006:





**March
                31, 2007 Balance***
            
            **Portfolio
                Percentage**
            
            **December
                31, 2006 Balance***
            
            **Portfolio
                Percentage**Arizona
            
            $
            4,139,000
            
            
            16.73%
            
            $
            4,390,000
            
            
            16.22%California
            
            
            2,436,000
            
            
            9.85%
            
            
            3,240,000
            
            
            11.97%Nevada
            
            
            11,789,000
            
            
            47.65%
            
            
            11,766,000
            
            
            43.46%Oklahoma
            
            
            1,000,000
            
            
            4.04%
            
            
            1,000,000
            
            
            3.69%Oregon
            
            
            2,932,000
            
            
            11.85%
            
            
            2,933,000
            
            
            10.83%Texas
            
            
            2,330,000
            
            
            9.42%
            
            
            2,330,000
            
            
            8.61%Washington
            
            
            113,000
            
            
            0.46%
            
            
            1,413,000
            
            
            5.22%Total
            
            $
            24,739,000
            
            
            100.00%
            
            $
            27,072,000
            
            
            100.00%





*
      Please
      see (2) above





At
      March
      31, 2007, the following loans were non-performing (based on current information
      and events, it is probable that we will be unable to collect all amounts due
      according to the contractual terms of the loan agreement or when the payment
      of
      interest is 90 days past due); Monterrey Associates LP, Forest Development
      LLC
      and Babuski LLC. These loans are currently carried on our books at a value
      of
      approximately $1.6 million. These loans have been placed on non-accrual of
      interest status and are the subject of pending foreclosure
      proceedings.




See
            review report of Independent Registered Public Accounting Firm.
 -
            12 -
 *Table
            of Contents*





·
            Monterrey
                Associates, L.P., is a loan secured by a 248 Unit apartment complex
                in
                Oklahoma City, OK, along with other real estate collateral, with
                an
                outstanding balance of approximately $4.4 million of which our portion
                is
                approximately $1.0 million. The loan is seven months in arrears in
                payments of interest. Our manager has commenced foreclosure proceedings
                and is filing litigation to enforce the personal guarantee on the
                loan.
                Our manager has evaluated this loan and believes that the value of
                the
                underlying collateral is sufficient to protect us from loss of principal.
                No specific allowance was deemed necessary. In addition, our manager
                completed foreclosure proceedings on a second mortgage on a 233 unit
                apartment complex during the three months ended March 31, 2007. We
                obtained title to the property subject to a non-recourse first mortgage,
                which was held by an unrelated third party. During the three months
                ended
                March 31, 2007, we sold this property to an unrelated third party
                who
                assumed the non-recourse first mortgage. This transaction did not
                result
                in any gain or loss.





·
            Forest
                Development, LLC, is a loan secured by two 4,000 square foot single
                family
                residences, together with the four remaining lots in the subdivision,
                located on Mt. Charleston, NV with an outstanding balance of approximately
                $2.6 million of which our portion is approximately $0.3 million.
                The loan
                isfive
                monthsin
                arrears in payment of interest. Our manager has commenced foreclosure
                proceedings and has filed litigation to enforce the personal guarantee
                on
                the loan. Forest Development subsequently counterclaimed and also
                filed a
                separate lawsuit against us, VRM I, VRM II, Fund I, Fund II, Vestin
                Mortgage, Inc. and Vestin Originations, Inc. (the “Defendants”) alleging
                that the Defendants breached the construction loan agreement and
                thus
                jeopardized the completion of the project alleging actions for fraud,
                breach of fiduciary duty, breach of Construction Loan Agreement,
                negligence, intentional interference with contractual relations,
                bad faith
                breach of contract, conversion, undue and improper control and
                interference over borrower’s business, joint venture or de facto
                partnership, and injunctive relief. The lawsuit seeks monetary damages,
                punitive damages, and seeks an injunction to stop the foreclosure.
                The
                Defendants believe that the allegations are without merit and that
                they
                have adequate defenses. The Defendants intend to undertake a vigorous
                defense. In April 2007, the borrower filed for protection under Chapter
                11
                of the United State Bankruptcy Code. Our manager has evaluated this
                loan
                and believes that the value of the underlying collateral is sufficient
                to
                protect us from loss of principal. No specific allowance was deemed
                necessary.





·
            Babuski,
                LLC, is a loan secured by approximately 9.23 acres of land at the
                northeast corner of the I-215 and Russell Road in Las Vegas, NV,
                with an
                outstanding balance of approximately $9.5 million of which our portion
                is
                approximately $0.3 million. The loan is four months in arrears in
                payments
                of interest. Our manager has commenced foreclosure proceedings and
                is
                filing litigation to enforce the personal guarantee on the loan.
                Our
                manager has evaluated this loan and believes that the value of the
                underlying collateral is sufficient to protect us from loss of principal.
                No specific allowance was deemed
                necessary.





The
      following schedule summarizes the non-performing loans as of March 31,
      2007:





**Description
                of Collateral**
            
            **Balance
                at**
              **March
                31, 2007**
            
            **Maturity
                Date**
            
            **Number
                of Months Non-Performing**
            
            **Percentage
                of Total Loan Balance**248-unit
                apartment complex in Oklahoma City, OK
            
            $
            1,000,000
            
            
            9/1/2006
            
            
            7
            
            
            23%2
                single family residences and 4 lots on Mt. Charleston, NV
            
            
            301,000
            
            
            10/27/2006
            
            
            5
            
            
            12%9.23
                acres of land in Las Vegas, NV
            
            
            293,000
            
            
            3/17/2007
            
            
            4
            
            
            3%$
            1,594,000




See
            review report of Independent Registered Public Accounting Firm.
 -
            13 -
 *Table
            of Contents*





Our
      manager regularly reviews and makes a determination as to whether the allowance
      for loan losses is adequate to cover any potential losses. Additions to the
      allowance for loan losses are made by charges to the provision for loan losses.
      Recoveries of previously charged off amounts are credited to the allowance
      for
      loan losses or included as income when the asset is disposed. As of March 31,
      2007 and December 31, 2006, we had provided a general allowance for loan losses
      of $73,000. As of March 31, 2007 and December 31, 2006 approximately $1.6
      million, in non-performing loans had no specific allowance for loan losses.
      Our
      manager evaluated the loans and believes that the underlying collateral was
      sufficient to protect us against further losses of principal. Our manager will
      continue to evaluate these loans in order to determine if any other allowance
      for loan losses should be recorded.





Because
      any decision regarding the allowance for loan losses reflects a judgment about
      the probability of future events, there is an inherent risk that such judgments
      will prove incorrect. In such event, actual losses may exceed (or be less than)
      the amount of any reserve. To the extent that we experience losses greater
      than
      the amount of our reserves, we may incur a charge to our earnings that will
      adversely affect our operating results and the amount of any distributions
      payable to our members.





The
      following is a roll-forward of the allowance for loan losses for the three
      months ended March 31, 2007:





**Description**
            
            **Balance
                at**
              **December
                31, 2006**
            
            **Provisions**
            
            **Deductions**
            
            **Balance
                at**
              **March
                31, 2007**Valuation
                allowance
            
            $
            73,000
            
            
            --
            
            
            --
            
            $
            73,000





In
      addition, our manager granted extensions on four loans pursuant to the terms
      of
      the original loan agreements, which permit extensions by mutual consent. Such
      extensions are generally provided on loans where the original term was 12 months
      or less and where a borrower requires additional time to complete a construction
      project or negotiate take-out financing. However, our manager only grants
      extensions when a borrower is in full compliance with the terms of the loan,
      including, but not limited to, the borrower’s obligation to make interest
      payments on the loan. The aggregate amount due from borrowers whose loans had
      been extended as of March 31, 2007, was approximately $3.4 million. Our manager
      believes that no allowance for loan loss was necessary with respect to these
      loans as of March 31, 2007.





**Asset
      Quality and Loan Reserves**





Losses
      may occur from investing in real estate loans. The amount of losses will vary
      as
      the loan portfolio is affected by changing economic conditions and the financial
      condition of borrowers.





The
      conclusion that a real estate loan is uncollectible or that collectibility
      is
      doubtful is a matter of judgment. On a regular basis, our manager evaluates
      our
      real estate loan portfolio for impairment. The fact that a loan is temporarily
      past due does not necessarily mean that the loan is impaired. Rather, all
      relevant circumstances are considered by our manager to determine impairment
      and
      the need for specific reserves. Such evaluation, which includes a review of
      all
      loans on which full collectibility may not be reasonably assured, considers
      among other matters:





·
            Prevailing
                economic conditions;





·
            Historical
                experience;





·
            The
                nature and volume of the loan
                portfolio;





·
            The
                borrowers’ financial condition and adverse situations that may affect the
                borrowers’ ability to pay;





·
            Evaluation
                of industry trends; and





·
            Estimated
                net realizable value of any underlying collateral in relation to
                the loan
                amount.




See
            review report of Independent Registered Public Accounting Firm.
 -
            14 -
 *Table
            of Contents*





Based
      upon this evaluation, a determination is made as to whether the allowance for
      loan losses is adequate to cover any potential losses. Additions to the
      allowance for loan losses are made by charges to the provision for loan losses.
      As of March 31, 2007 and December 31, 2006, none of the non-performing loans
      had
      a specific allowance for loan losses. At March 31, 2007, the following loans
      were non-performing (based on current information and events, it is probable
      that we will be unable to collect all amounts due according to the contractual
      terms of the loan agreement or when the payment of interest is 90 days past
      due); Monterrey Associates LP, Forest Development LLC and Babuski LLC. These
      loans are currently carried on our books at a value of approximately $1.6
      million. These loans have been placed on non-accrual of interest status and
      are
      the subject of pending foreclosure proceedings. Our manager evaluated the loans
      and believes that the underlying collateral was sufficient to protect us against
      further losses of principal or interest. Our manager will continue to evaluate
      these loans in order to determine if any other allowance for loan losses should
      be recorded.





**NOTE
      E — INVESTMENT IN MARKETABLE SECURITIES - RELATED PARTY**





As
      of
      March 31, 2007, we owned 158,191 shares of VRM II’s common stock, representing
      approximately 0.41% of their total outstanding common stock.





**NOTE
      F — REAL ESTATE HELD FOR SALE**





At
      March
      31, 2007, we
      held
      one property with a total carrying value of approximately $0.6 million, which
      was acquired through foreclosure and recorded as investments in real estate
      held
      for sale. The
      summary below includes our percentage ownership in the property. Our investments
      in real estate held for sale are accounted for at the lower of cost or fair
      value less costs to sell with fair value based on appraisals and knowledge
      of
      local market conditions. It is not our intent to invest in or own real estate
      as
      a long-term investment. We seek to sell properties acquired through foreclosure
      as quickly as circumstances permit. The following is a roll-forward of
      investments in real estate held for sale during the three months ended March
      31,
      2007:





**Description**
            
            **Date
                Acquired**
            
            **Percentage
                of Ownership**
            
            **Balance
                at**
              **December
                31, 2006**
            
            **Acquisitions
                (Reductions)**
            
            **Proceeds
                from Sales**
            
            **Gain
                (Loss) on Sale of Real Estate**
            
            **Balance
                at**
              **March
                31, 2007**480
                residential building lots and 2 single family dwellings in Rio Vista
                Village Subdivision in Cathedral City, CA
            
            12/21/2006
            
            2%
            $
            575,000
            $
            --
            $
            --
            $
            --
            $
            575,000$
            575,000
            $
            --
            $
            --
            $
            --
            $
            575,000





During
      December 2006, we, VRM I and VRM II acquired the collateral of a loan, 480
      residential building lots and two single family dwellings in Rio Vista Village
      Subdivision in Cathedral City, CA, through foreclosure. Our manager has
      evaluated the carrying value of the property and based on its estimate, no
      valuation allowance was deemed necessary as of March 31, 2007. The property
      was
      under a purchase agreement for a total sales price of approximately $29.9
      million, of which our portion would have been approximately $0.6 million;
      however, since the purchase agreement expired the purchaser has forfeited their
      earnest money deposit in the amount of $100,000.





**NOTE
      G — RELATED PARTY TRANSACTIONS**





From
      time
      to time, we may acquire or sell investments in real estate loans from/to our
      manager or other related parties pursuant to the terms of our Operating
      Agreement provided the price does not exceed the par value of the loan. No
      gain
      or loss is recorded on these transactions, as it is not our intent to make
      a
      profit on the purchase or sale of such investments. The purpose is generally
      to
      diversify our portfolio by syndicating loans, thereby providing us with
      additional capital to make additional loans.




See
            review report of Independent Registered Public Accounting Firm.
 -
            15 -
 *Table
            of Contents*





**Transactions
      with the Manager**





Our
      manager is entitled to receive from us a management (acquisition and advisory)
      fee up to 2.5% of the gross offering proceeds and up to 3% of our rental income.
      For the three months ended March 31, 2007 and 2006, we recorded fees to our
      manager of $4,000 and $12,000, respectively.





During
      the three months ended March 31, 2007 and 2006, we paid pro rata distributions
      owed to our manager totaling $12,000, during each period, based upon 54,862
      units owned by our manager.





We
      recognized $257,000 in rental income for the three months ended March 31, 2006,
      from Vestin Group related to an office building located in Las Vegas, Nevada.
      This building was sold to an unrelated third party during November
      2006.





**Transactions
      with Other Related Parties**





During
      the three months ended March 31, 2007, we sold $1.3 million in real estate
      loans
      to VRM II. There was no gain or loss associated with this
      transaction.





As
      of
      March 31, 2007, we owned 158,191 common shares of VRM II. For the three months
      ended March 31, 2007, we recorded $16,000 in dividend income based on the number
      of shares we held on the dividend record dates.





During
      the three months ended March 31, 2007 and 2006, we paid pro rata distributions
      owed to inVestin totaling $8,000, during each period, based upon 34,856 units
      owned by inVestin.





As
      of
      March 31, 2007, we owed related parties, under common management, $2,000 and
      as
      of December 31, 2006, we had receivables from related parties, under common
      management, of $10,000.





During
      the three months ended March 31, 2007 and 2006, we incurred expenses of $6,000
      and $1,000, respectively, for legal fees to the law firm of Levine, Garfinkel
      & Katz. The Secretary of Vestin Group has an equity ownership interest in
      the law firm.





**NOTE
      H — SECURED BORROWINGS**





Secured
      borrowings provide an additional source of capital for our lending activity.
      Secured borrowings allow us to increase the diversification of our loan
      portfolio and to invest in loans that we might not otherwise invest in. We
      do
      not receive any fees for entering into secured borrowing arrangements; however,
      we may receive revenue in any differential of the interest spread, if
      applicable. Loans in which unaffiliated investors have participated through
      inter-creditor agreements (“Inter-creditor Agreements”) are accounted for as
      secured borrowings in accordance with Statement of Financial Accounting
      Standards (“FAS”) 140 - *Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities* (“FAS
      140”). The Inter-creditor Agreements provide us additional funding sources for
      real estate loans whereby an unaffiliated investor (the “Investor”) may
      participate on a non-pari passu basis in certain real estate loans with us
      and/or VRM I and/or VRM II (collectively, the “Lead Lenders”). In the event of
      borrower non-performance, the Inter-creditor Agreements generally provide that
      the Lead Lenders must repay the Investor’s loan amount either by (i) continuing
      to remit to the Investor the interest due on the participated loan amount;
      (ii)
      substituting an alternative loan acceptable to the Investor; or (iii)
      repurchasing the participation from the Investor for the outstanding balance
      plus accrued interest.





Additionally,
      an Investor may participate in certain loans with the Lead Lenders through
      Participation Agreements. In the event of borrower non-performance, the
      Participation Agreement may allow the Investor to be repaid up to the amount
      of
      the Investor’s investment prior to the Lead Lender being repaid. Real estate
      loan financing under the Participation Agreements are also accounted for as
      a
      secured borrowing in accordance with FAS 140. We do not receive any revenues
      for
      entering into secured borrowings arrangements.




See
            review report of Independent Registered Public Accounting Firm.
 -
            16 -
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            of Contents*





During
      October 2006, we, our manager, Vestin Origination, Inc., VRM I and VRM II
      entered into an intercreditor agreement with an unrelated third party related
      to
      the funding of a construction real estate loan. (See exhibit 10.10 Intercreditor
      Agreement under the Exhibit Index included in Part II - Other Information,
      Item
      6 Exhibits of this Report Form 10-Q). The secured borrowing will be recognized
      pro rata between us, VRM I and VRM II for the amount each entity has funded
      for
      the loan.  As
      of
      March 31, 2007, approximately $18.8 million has been funded on this loan, of
      which our portion was $971,000. As of March 31, 2007, this secured borrowing
      totaled approximately $13.0 million, of which our portion was approximately
      $2.2
      million. In the event VRM I and VRM II were unable to pay their pro rata share
      of the secured borrowing, we would be liable for the full outstanding balance.
      As of December 31, 2006, we had approximately $4.4 million in funds being used
      under Inter-creditor Agreements.





**NOTE
      I — MEMBERS’ EQUITY**





**Membership
      Units**





During
      the three months ended March 31, 2007, members received 15,991 units as a result
      of reinvestments of distributions. On April 2, 2007, our manager decided to
      terminate our Distribution Reinvestment Plan effective May 7, 2007, pursuant
      to
      Section 8.5 of our Operating Agreement.





**Allocations
      and Distributions**





In
      accordance with our Operating Agreement, profits, gains and losses are to be
      credited to and charged against each member’s capital account in proportion to
      their respective capital accounts as of the close of business on the last day
      of
      each calendar month.





Distributions
      are paid monthly to members. For the three months ended March 31, 2007,
      distributions to members were $442,000, net of reinvestments of
      $176,000.





**Working
      Capital Reserves**





We
      are
      required by our Operating Agreement to maintain working capital reserves of
      approximately 3% of the aggregate capital accounts of the members. This reserve
      is available to pay any future expenses in excess of revenues, satisfy
      obligations of underlying secured properties, expend money to satisfy our
      unforeseen obligations and other permitted uses of our working capital. Working
      capital reserves up to 3% in cash, cash equivalents, certificates of deposit,
      short term investments and marketable securities are excluded from the funds
      committed to investments in determining what proportion of the offering proceeds
      and reinvested distributions have been invested in real estate loans or real
      property.





**Value
      of Members’ Capital Accounts**





In
      accordance with Section 7.8 of our Operating Agreement, our manager reviewed
      the
      value of our assets during the last quarter of fiscal year 2006. Based on this
      review, as a result the gain on sale of our real estate held for investment,
      the
      value of members’ capital accounts was adjusted from $10.50 per unit to $11.00
      per unit. As a result, new units sold through our Distribution Reinvestment
      Plan
      and units redeemed on or after December 15, 2006 have been sold or redeemed
      at
      $11.00 per unit. The change in valuation is primarily for tax and capital
      account purposes and does not reflect the change in the value of the units
      calculated in accordance with GAAP. Accordingly, unit prices calculated under
      GAAP may be different than the adjusted price per unit. On April 2, 2007, our
      manager decided to terminate our Distribution Reinvestment Plan effective May
      7,
      2007, pursuant to Section 8.5 of our Operating Agreement. A letter was sent
      on
      April 2, 2007 to our members notifying them of the Distribution Reinvestment
      plan’s termination.




See
            review report of Independent Registered Public Accounting Firm.
 -
            17 -
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            of Contents*





**Redemption
      Limitation**





In
      order
      to comply with our Operating Agreement and Internal Revenue Code, we may redeem
      no more than 10% of the aggregate Members’ capital in any calendar year. As of
      March 31, 2007, the total of redemptions made from inception was approximately
      $6.3 million. Balances in Members’ capital accounts as of January 1, 2007 were
      approximately $30.4 million, which limited redemptions to approximately $3.0
      million for calendar 2007. Total redemptions during the three months ended
      March
      31, 2007, were approximately $3.0 million. The remaining requests to redeem,
      as
      of March 31, 2007, were approximately $2.5 million in 2008, $2.1 million in
      2009, $340,000 in 2010 and $20,000 in 2011, subject to unit valuation
      adjustments.





**NOTE
      J— RECENT ACCOUNTING PRONOUNCEMENTS**





In
      February 2007, the Financial Accounting Standards Board (FASB) issued FAS 159, *The
      Fair Value Option for Financial Assets and Financial
      Liabilities* .
      FAS 159
      permits entities to choose to measure financial assets and liabilities (except
      for those that are specifically scoped out of the Statement) at fair value.
      The
      election to measure a financial asset or liability at fair value can be made
      on
      an instrument-by-instrument basis and is irrevocable. The difference between
      carrying value and fair value at the election date is recorded as a transition
      adjustment to opening retained earnings. Subsequent changes in fair value are
      recognized in earnings. The effective date for FAS 159 is as of the beginning
      of
      an entity's first fiscal year that begins after November 15, 2007. We are
      evaluating FAS 159 and have not yet determined the impact the adoption will
      have
      on our financial statements, but it is not expected to be
      significant.





**NOTE
      K— LEGAL MATTERS INVOLVING THE MANAGER**





The
      United States Securities and Exchange Commission (the “Commission”), conducted
      an investigation of certain matters related to us, our manager, Vestin Capital,
      VRM I and VRM II. We fully cooperated during the course of the investigation.
      On
      September 27, 2006, the investigation was resolved through the entry of an
      Administrative Order by the Commission (the “Order”). Our manager, Vestin
      Mortgage and its Chief Executive Officer, Michael Shustek, as well as Vestin
      Capital (collectively, the “Respondents”), consented to the entry of the Order
      without admitting or denying the findings therein. In the Order, the Commission
      finds that the Respondents violated Sections 17(a)(2) and 17(a)(3) of the
      Securities Act of 1933 through the use of certain slide presentations in
      connection with the sale of our units and units in Fund II, the predecessor
      to
      VRM II. The Respondents consented to the entry of a cease and desist order,
      the
      payment by Mr. Shustek of a fine of $100,000 and Mr. Shustek’s suspension from
      association with any broker or dealer for a period of six months, which expired
      in March 2007. In addition, the Respondents agreed to implement certain
      undertakings with respect to future sales of securities. We are not a party
      to
      the Order and we do not expect that the sanctions imposed upon the Respondents
      will have any material affect upon our operations.





On
      November 21, 2005, Desert Land filed a complaint in the state courts of Nevada
      against Vestin Group, Vestin Mortgage and Del Mar Mortgage, Inc. which complaint
      is substantially similar to a complaint previously filed by Desert Land in
      the
      United States District Court, which complaint was dismissed by the Ninth Circuit
      United Court of Appeals, which dismissal was upheld when the United States
      Supreme Court denied Desert Land’s Writ of Certiorari. The action is based upon
      allegations that Del Mar Mortgage, Inc. and/or Vestin Mortgage charged unlawful
      fees on various loans arranged by them in 1999. On March 6, 2006, Desert Land
      amended the state court complaint to name VRM I. Desert Land alleges that one
      or
      more of the defendants have transferred assets to other entities without
      receiving reasonable value therefore; alleges plaintiffs are informed and
      believe that defendants have made such transfers with the actual intent to
      hinder, delay or defraud Desert Land; that such transfers made the transferor
      insolvent and that sometime between February 27 and April 1, 2003, Vestin Group
      transferred $1.6 million to VRM I for that purpose. The state court complaint
      further alleges that Desert Land is entitled to avoid such transfers and that
      pursuant to NRS 112.20, Desert Land is entitled to an injunction to enjoin
      defendants from further disposition of assets. Additionally, Del Mar Mortgage,
      Inc. has indemnified Vestin Group and Vestin Mortgage for any losses and
      expenses in connection with the Action, and Mr. Shustek has guaranteed the
      indemnification. The Defendants believe that the allegations are without merit
      and that they have adequate defenses. The Defendants intend to undertake a
      vigorous defense.




See
            review report of Independent Registered Public Accounting Firm.
 -
            18 -
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            of Contents*





In
      April
      2006, the lenders filed suit against the State of Hawaii listing 26 causes
      of
      action, including allegations that the State of Hawaii has illegally blocked
      the
      lender’s right to foreclose and take title to its collateral by inappropriately
      attaching conditions to the granting of licenses needed to operate the business,
      the pre-need trust funds and the perpetual care trust funds and that the State
      of Hawaii has attempted to force the lenders to accept liability for any
      statutory trust fund deficits while no such lender liability exists under the
      laws of the State of Hawaii. The State of Hawaii responded by filing allegations
      against Vestin Mortgage, Inc. and VRM II alleging that these Vestin entities
      improperly influenced the former RightStar trustees to transfer trust funds
      to
      VRM II. We believe the State’s claims to be without merit and intend to
      vigorously pursue our remedies while defending against any allegations made
      by
      the State.





In
      October 2006, a Judge for the Circuit Court of the First Circuit in Hawaii
      imposed new restrictions upon our right to foreclose and denied any subsequent
      owner the licensing necessary to operate the funeral service until the alleged
      pre-need and perpetual care trust funds shortages are cured. We believe these
      restrictions are both unauthorized under state law and unconstitutional under
      federal law. In January 2007, the Lenders filed a petition with the Supreme
      Court of Hawaii seeking mandamus relief from that ruling. As of May 9, 2007,
      the
      Supreme Court of Hawaii has not ruled on the Lender’s petition, but has
      requested briefing from the State of Hawaii regarding the petition. On
      May 9,
      2007 , The
      State of Hawaii, VRM
      I , VRM
      II ,
      Vestin
      Mortgage and Comerica Incorporated announced that an arrangement has been
      reached ,
      pending
      approval from the court, to
      auction the Right S tar
      assets. The
      resolution agreement provides that the proceeds of the foreclosure sale will
      be
      allocated to fund the trusts statutory minimum balances, and to VRM I, VRM
      II
      and Vestin Mortgage. The State of Hawaii, VRM I, VRM II, Vestin Mortgage and
      Comerica have pledged to cooperate to recover additional amounts owed to the
      trusts and the creditors from others, while mutually releasing each other and
      RightStar from claims. The outcome of this litigation is unforeseeable at this
      time. We cannot estimate when the foreclosure will ultimately be completed
      or
      when the lenders may obtain title to the underlying properties.





VRM
      I and
      Vestin Mortgage, Inc. (“Defendants”) are defendants in a breach of contract
      action filed in San Diego Superior Court by certain plaintiffs who allege,
      among
      other things, that they were wrongfully denied appraisal rights in connection
      with the merger of Fund I into Vestin Realty Mortgage I, Inc. The action is
      being brought as a purported class action on behalf of all members of Vestin
      Fund I who did not vote in favor of the merger. The Defendants believe that
      the
      allegations are without merit and that they have adequate defenses. The
      Defendants intend to undertake a vigorous defense. The terms of VRM I’s
      management agreement and Fund I’s Operating Agreement contain indemnity
      provisions whereby, Vestin Mortgage and Michael V. Shustek may be eligible
      for
      indemnification by us with respect to the above actions.





VRM
      II
      and Vestin Mortgage, Inc. (“Defendants”) are defendants in a breach of contract
      action filed in San Diego Superior Court by certain plaintiffs who allege,
      among
      other things, that they were wrongfully denied appraisal rights in connection
      with the merger of Fund II into Vestin Realty Mortgage II, Inc. The action
      is
      being brought as a purported class action on behalf of all members of Vestin
      Fund II who did not vote in favor of the merger.  The Defendants believe
      that the allegations are without merit and that they have adequate defenses.
      The
      Defendants intend to undertake a vigorous defense. The terms of VRM II’s
      management agreement and Fund II’s Operating Agreement contain indemnity
      provisions whereby, Vestin Mortgage and Michael V. Shustek may be eligible
      for
      indemnification by VRM II with respect to the above actions.





VRM
      I,
      Michael V. Shustek and Vestin Mortgage, Inc. (“Defendants”) are defendants in a
      civil action filed by 25 separate plaintiffs (“Plaintiffs”) in District Court
      for Clark County, Nevada. The Plaintiffs allege, among other things, that
      Defendants: breached certain alleged contractual obligations owed to Plaintiffs;
      breached fiduciary duties supposedly owed to Plaintiffs; and misrepresented
      or
      omitted material facts regarding the conversion of Fund I into VRM I. The action
      seeks monetary damages, punitive damages and a rescission of the REIT
      conversion. The Defendants believe that the allegations are without merit and
      that they have adequate defenses. The Defendants intend to undertake a vigorous
      defense. The terms of VRM I’s management agreement and Fund I’s operating
      agreement contain indemnity provisions whereby, Vestin Mortgage and Michael
      V.
      Shustek may be eligible for indemnification by us with respect to the above
      actions.




See
            review report of Independent Registered Public Accounting Firm.
 -
            19 -
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            of Contents*





VRM
      II,
      Vestin Mortgage, Inc. and Michael V. Shustek (“Defendants”) are defendants in a
      civil action filed by 88 separate plaintiffs (“Plaintiffs”) in District Court
      for Clark County, Nevada. The Plaintiffs allege, among other things, that
      Defendants: breached certain alleged contractual obligations owed to Plaintiffs;
      breached fiduciary duties supposedly owed to Plaintiffs; and misrepresented
      or
      omitted material facts regarding the conversion of Fund II into VRM II. The
      Action seeks monetary damages and a rescission of the REIT conversion. The
      Defendants believe that the allegations are without merit and that they have
      adequate defenses. The Defendants intend to undertake a vigorous defense. The
      terms of VRM II’s management agreement and Fund II’s operating agreement contain
      indemnity provisions whereby, Vestin Mortgage and Michael V. Shustek may be
      eligible for indemnification by VRM II with respect to the above
      actions.





In
      addition to the matters described above, our manager is involved in a number
      of
      other legal proceedings concerning matters arising in connection with the
      conduct of its business activities. Our manager believes it has meritorious
      defenses to each of these actions and intends to defend them vigorously. Our
      manager believes that it is not a party to any other pending legal or
      arbitration proceedings that would have a material adverse effect on our
      manager’s financial condition or results of operations or cash flows, although
      it is possible that the outcome of any such proceedings could have a material
      impact on the manager’s net income in any particular period.





**NOTE
      L — LEGAL MATTERS INVOLVING THE COMPANY**





We
      believe that we are not a party to any pending legal or arbitration proceedings
      that would have a material adverse effect on our financial condition or results
      of operations or cash flows, although it is possible that the outcome of any
      such proceedings could have a material impact on our net income in any
      particular period.





**NOTE
      M — SEGMENT INFORMATION**





In
      November 2006, we sold our investment in real property to an unrelated third
      party. As of March 31, 2007 and December 31, 2006, we had no investments in
      real
      property. A Special Meeting of our members was held on March 5, 2007 to vote
      on
      approval of the Third Amended and Restated Operating Agreement, which limits
      the
      Company’s investment objectives to investment in real estate loans. Accordingly,
      we now operate as one business segment.





Operating
      segments are components of an enterprise in which separate financial information
      is available that is regularly reviewed by the chief operating decision makers
      in assessing performance and deciding how to allocate resources. Reportable
      segments consist of one or more operating segments with similar economic
      characteristics, products and services, production processes, type of customer,
      distribution system and regulatory environment.





The
      information provided for Segment Reporting is based on internal reports utilized
      by management. The presentation and allocation of overhead and the net
      contribution for the operating segments may not reflect the actual economic
      costs, contribution or results of operations of the segments as stand-alone
      businesses. If a different basis of allocation were utilized, the relative
      contributions of the segments might differ, but the relative trends in segments
      would, in management’s view, likely not be impacted.




See
            review report of Independent Registered Public Accounting Firm.
 -
            20 -
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            of Contents*





For
      the
      three months ended March 31, 2006, our two reportable segments were investments
      in real estate loans and investments in real estate. Financial information
      concerning our reportable segments is presented as follows:





**For
                the Three Months Ended March 31, 2006**
            
            **Investment
                in**
              **Real
                Estate Loans**
            
            **Investment
                in**
              **Real
                Estate****Revenues**Interest
                income from investments in real estate loans
            
            $
            594,000
            
            $
            594,000
            
            $
            --Rental
                income
            
            
            257,000
            
            
            --
            
            
            257,000Other
            
            
            18,000
            
            
            18,000
            
            
            --Total
                revenues
            
            
            869,000
            
            
            612,000
            
            
            257,000**Operating
                expenses**Management
                fees
            
            
            12,000
            
            
            5,000
            
            
            7,000Professional
                fees
            
            
            53,000
            
            
            38,000
            
            
            15,000Professional
                fees-related party
            
            
            13,000
            
            
            9,000
            
            
            4,000Other
            
            
            5,000
            
            
            4,000
            
            
            1,000Total
                operating expenses
            
            
            83,000
            
            
            56,000
            
            
            27,000**EBITDA***
            
            
            786,000
            
            
            556,000
            
            
            230,000Less:Depreciation
                and amortization
            
            
            56,000
            
            
            --
            
            
            56,000Interest
                expense related to secured borrowings
            
            
            12,000
            
            
            12,000
            
            
            --Interest
                expense related to investment in real estate
            
            
            68,000
            
            
            --
            
            
            68,000**NET
                INCOME**
            
            $
            650,000
            
            $
            544,000
            
            $
            106,000





*EBITDA
      represents Earnings Before Interest, Taxes, Depreciation, and Amortization.
      We
      present EBITDA because we consider it an important supplemental measure of
      our
      performance but it does not represent cash flows. EBITDA is a measure of our
      performance that is not required by, or presented in accordance with, GAAP.
      EBITDA is not a measurement of our financial performance under GAAP and should
      not be considered as an alternative to net earnings, operating income or any
      other performance measures derived in accordance with GAAP or as an alternative
      to cash flow from operating activities as a measure of our liquidity. We
      compensate for these limitations by relying primarily on our GAAP results and
      using EBITDA only supplementally. A reconciliation of EBITDA to net income
      is
      set forth above.





Although
      depreciation and amortization are non-cash charges, the assets being depreciated
      or amortized often will have to be replaced in the future, and EBITDA does
      not
      reflect any cash requirements for such replacements. Other companies in our
      industry may calculate EBITDA differently than we do, limiting its usefulness
      as
      a comparative measure. In addition, EBITDA does not reflect the impact
      of earnings or charges resulting from matters we consider not to be indicative
      of our ongoing operations.





**NOTE
      N — SUBSEQUENT EVENT**





In
      April
      2007, the borrower for the Forest Development, LLC, loan secured by two 4,000
      square foot single family residences, together with the four remaining lots
      in
      the subdivision, located on Mt. Charleston, NV, filed for protection under
      Chapter 11 of the United State Bankruptcy Code.




See
            review report of Independent Registered Public Accounting Firm.
 -
            21 -
 *Table
            of Contents*





REPORT
      OF
      INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRM








To
      the
      Board of Directors and Members of Vestin Fund III, LLC:





We
      have
      reviewed the accompanying balance sheet of Vestin Fund III, LLC as of March
      31,
      2007, and the related statements of income for the three-month periods ended
      March 31, 2007 and 2006, and members’ equity and other comprehensive income for
      the three-month period ended March 31, 2007, and cash flows for the three-month
      periods ended March 31, 2007 and 2006. All information included in these
      financial statements is the representation of the management of Vestin Fund
      III,
      LLC.





We
      conducted our review in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). A review of interim financial
      information consists principally of applying analytical procedures and making
      inquiries of persons responsible for financial and accounting matters. It is
      substantially less in scope than an audit conducted in accordance with the
      standards of the Public Company Accounting Oversight Board, the objective of
      which is the expression of an opinion regarding the financial statements taken
      as a whole. Accordingly, we do not express such an opinion.





Based
      on
      our review, we are not aware of any material modifications that should be made
      to the accompanying financial statements referred to above for them to be in
      conformity with accounting principles generally accepted in the United States
      of
      America.





We
      have
      previously audited, in accordance with the standards of the Public Company
      Accounting Oversight Board (United States), the balance sheet of Vestin Fund
      III, LLC as of December 31, 2006 and the related statements of income, members’
equity and other comprehensive income and cash flows for the year then ended
      not
      presented herein, and in our report dated March 28, 2007, we expressed an
      unqualified opinion on those financial statements. In our opinion, the
      information set forth in the accompanying balance sheet as of December 31,
      2006,
      is fairly stated, in all material respects, in relation to the balance sheet
      from which it has been derived.








/s/
      Moore
      Stephens Wurth Frazer and Torbet, LLP








Orange,
      California


May
      10,
      2007




-
            22 -
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            of Contents*





**ITEM
      2.**  **MANAGEMENT’S
      DISCUSSIONAND ANALYSIS OF FINANCIAL CONDITION AND
      RESULTS
      OF OPERATIONS**





The
      following is a financial review and analysis of our financial condition and
      results of operations for the three months ended March 31, 2007 and 2006. This
      discussion should be read in conjunction with our financial statements and
      accompanying notes and other detailed information regarding us appearing
      elsewhere in this report on Form 10-Q and our report on Form 10-K, Part II,
      Item
      7 *Management’s
      Discussion and Analysis of Financial Conditions and Results of
      Operations* for the
      year ended December 31, 2006.





**FORWARD
      LOOKING STATEMENTS**





Certain
      statements in this report, including, without limitation, matters discussed
      under this Item 2, “Management’s Discussion and Analysis of Financial Condition
      and Results of Operations,” should be read in conjunction with the financial
      statements, related notes, and other detailed information included elsewhere
      in
      this Quarterly Report on Form 10-Q. We are including this cautionary statement
      to make applicable and take advantage of the safe harbor provisions of the
      Private Securities Litigation Reform Act of 1995. Statements that are not
      historical fact are forward-looking statements. Certain of these forward-looking
      statements can be identified by the use of words such as “believes,”
“anticipates,” “expects,” “intends,” “plans,” “projects,” “estimates,”
“assumes,” “may,” “should,” “will,” or other similar expressions. Such
      forward-looking statements involve known and unknown risks, uncertainties and
      other important factors, which could cause actual results, performance or
      achievements to differ materially from future results, performance or
      achievements. These forward-looking statements are based on our current beliefs,
      intentions and expectations. These statements are not guarantees or indicative
      of future performance. Important assumptions and other important factors that
      could cause actual results to differ materially from those forward-looking
      statements include, but are not limited to, those factors, risks and
      uncertainties described in Part II Item 1A *Risk
      Factors* of this
      Quarterly Report on Form 10-Q, Part I Item 1A *Risk
      Factors* of our
      Annual Report on Form 10-K for the year ended December 31, 2006 and in our
      other
      securities filings with the Securities and Exchange Commission (“SEC”). Our
      future financial condition and results of operations, as well as any
      forward-looking statements, are subject to change and involve inherent risks
      and
      uncertainties. The forward-looking statements contained in this report are
      made
      only as of the date hereof. We undertake no obligation to update or revise
      information contained herein to reflect events or circumstances after the date
      hereof or to reflect the occurrence of unanticipated events.





**RESULTS
      OF OPERATIONS**





**OVERVIEW**





Our
      primary business objective is to generate income by investing in real estate
      loans. We believe there is a significant market opportunity to make real estate
      loans to owners and developers of real property whose financing needs are not
      met by other financial institutional real estate lenders. The loan underwriting
      standards utilized by our manager and Vestin Originations are less strict than
      other financial institutional real estate lenders. In addition, one of our
      competitive advantages is our ability to approve loan applications more quickly
      than other financial institutional lenders. As a result, in certain cases,
      we
      may make real estate loans that are riskier than real estate loans made by
      other
      financial institutional lenders such as commercial banks. However, in return,
      we
      seek a higher interest rate and our manager takes steps to mitigate the lending
      risks such as imposing a lower loan to value ratio. While we may assume more
      risk than other financial institutional real estate lenders, in return, we
      seek
      to generate higher yields from our real estate loans.





Prior
      to
      March 5, 2007, our real estate program objective was to invest in
      income-producing multifamily residential units, assisted living facilities,
      office buildings, industrial and retail properties and other income-producing
      real property, such as hotels and resorts, restaurants, parking lots and
      amusement parks. We disposed of our only investment in real estate in November
      2006 and on March 5, 2007, our members voted to amend our operating agreement
      so
      that in the future we will only invest in loans secured by mortgages on real
      estate.




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            23 -
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Our
      operating results are affected primarily by: (i) the amount of capital we have
      to invest in real estate loans, (ii) the level of real estate lending activity
      in the markets we service, (iii) our ability to identify and work with suitable
      borrowers, (iv) the interest rates we are able to charge on our loans and (v)
      the level of non-performing assets, foreclosures and related loan losses which
      we may experience. Our capital, subject to a 3% reserve, will constitute the
      bulk of the funds we have available for investment in real estate loans. We
      do
      not have any arrangements in place to materially increase the funds we will
      have
      available to invest from any other sources. See discussion under - “Capital and
      Liquidity.”





Our
      operating results during the past several months have been adversely affected
      by
      our non-performing loans. At March 31, 2007, the following loans were
      non-performing (based on current information and events, it is probable that
      we
      will be unable to collect all amounts due according to the contractual terms
      of
      the loan agreement or when the payment of interest is 90 days past due);
      Monterrey Associates LP, Forest Development LLC and Babuski LLC. These loans
      are
      currently carried on our books at a value of approximately $1.6 million. These
      loans have been placed on non-accrual of interest status and are the subject
      of
      pending foreclosure proceedings. For additional information see Note D - *Investments
      In Real Estate Loans* of the
      Notes to the Financial Statements included in Part I, Item 1 *Financial
      Statement* of
      this
      report Form 10-Q. Non-performing assets totaled approximately $2.2 million
      or
      7.2% of our total assets as of March 31, 2007, as compared to $2.2 million
      or
      6.2% of our total assets as of December 31, 2006. At March 31, 2007,
      non-performing assets consisted of approximately $0.6 million of real estate
      held for sale and approximately $1.6 million of non-performing loans. During
      the
      three months ended March 31, 2007, no transactions were completed related to
      our
      real estate held for sale.





The
      level
      of non-performing assets may reflect the continuing weakness in certain sectors
      of the economy and the risk inherent in our business strategy that entails
      more
      lenient underwriting standards and expedited loan approval procedures. If the
      economy weakens and our borrowers who develop and sell commercial real estate
      projects are unable to complete their projects or obtain takeout financing
      or
      are otherwise adversely impacted, we may experience an increase in loan
      defaults, which may reduce the amount of funds we have to pay dividends to
      our
      stockholders. Such conditions may also require us to restructure loans. The
      weighted average term of our outstanding loans, including extensions, as of
      March 31, 2007 and December 31, 2006, was 14 months.





Uncertain
      economic conditions during the next year could have a material impact on the
      collectibility of our loans. A downturn in the real estate markets where we
      conduct business might increase defaults on our loans and might require us
      to
      record additional reserves with respect to non-performing loans. To date, the
      problems experienced by some lenders in the sub-prime residential mortgage
      market have not had any material adverse affect upon the commercial mortgage
      markets in which we operate. Nonetheless, we are aware that weakness in
      residential lending could at some point have an adverse impact upon our markets.
      Recognizing the risk, we seek to maintain an adequate loan-to-value ratio.
      The
      weighted average loan to value ratio increased from 65.06%, as of December
      31,
      2006, to 68.09%, as of March 31, 2007, primarily due to two loans that were
      funded during the three-month period, totaling $1.5 million, with loan to value
      ratios ranging from 76.96% to 80.00%. We generally use appraisals prepared
      on an
“as-if developed” basis in connection with the loan origination. We hope to
      retain sufficient cushion in the underlying equity position to protect the
      value
      of our loans in the event of a default. Nevertheless, no assurances can be
      given
      that a marked increase in loan defaults accompanied by a rapid decline in real
      estate values will not have a material adverse effect upon our financial
      condition and operating results.





From
      time
      to time, we may acquire or sell investments in real estate loans from/to our
      manager or other related parties pursuant to the terms of our Operating
      Agreement provided the price does not exceed the par value of the loan. No
      gain
      or loss is recorded on these transactions, as it is not our intent to make
      a
      profit on the purchase or sale of such investments. The purpose is generally
      to
      diversify our portfolio by syndicating loans, thereby providing us with
      additional capital to make additional loans. For further information regarding
      related party transactions, refer to Note G - *Related
      Party Transactions* in the
      notes to our financials statements in Item 1 *Financial
      Statements* in Part
      I of this report Form 10-Q.





As
      of
      March 31, 2007, our loans were in the following states: Arizona, California,
      Nevada, Oklahoma, Oregon, Texas and Washington.




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            24 -
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            of Contents*





**Comparison
      of Operating Results for the three months ended March 31, 2007 to the three
      months ended March 31, 2006.**





**For
                the Three**
              **Months
                Ended**
            
            **For
                the Three**
              **Months
                Ended****March
                31, 2007**
            
            **March
                31, 2006**Total
                revenues
            
            $
            824,000
            
            $
            869,000Total
                operating expenses
            
            
            134,000
            
            
            219,000Other
                income and expenses
            
            
            (3,000
            )
            
            --**NET
                INCOME**
            
            $
            687,000
            
            $
            650,000Net
                income allocated to members per weighted average membership
                unit
            
            $
            0.25
            
            $
            0.22Weighted
                average common membership units
            
            
            2,745,524
            
            
            2,986,887Annualized
                rate of return to members**(a)**
            
            
            9.23%
            
            
            8.41%Cash
                distributions
            
            $
            618,000
            
            $
            645,000Cash
                distributions per weighted average membership unit
            
            $
            0.23
            
            $
            0.22





**(a)**
            The
                annualized rate of return to members is calculated based upon the
                net GAAP
                income allocated to members per weighted average unit as of March
                31, 2007
                and 2006, divided by the number of days during the period (90 for
                each
                period) and multiplied by three hundred and sixty five (365) days,
                then
                divided by $11.00 and $10.50, (the cost per unit) for the three months
                ended March 31, 2007 and 2006,
                respectively.





*Total
      Revenues* :
      For the
      three months ended March 31, 2007 total revenues decreased by $45,000 or 5.18%
      compared to the same period in 2006 due in significant part to the following
      factors:





·
            We
                recognized rental income during the three months ended March 31,
                2006
                of $257,000 from a building we sold in November 2006. No comparable
                income was realized during the three months ended March 31, 2007
                and we
                will no longer earn rental income because our Operating Agreement
                was
                amended by vote of our Members on March 5, 2007, limiting our investment
                objectives to investment in real estate
                loans.





·
            We
                recognized interest income from investments in real estate loans
                of
                $783,000 during the three months ended March 31, 2007 compared
                to $594,000 during the same period in 2006. Our revenue is dependent
                upon the balance of our investment in real estate loans and the interest
                earned on these loans. As of March 31, 2007, our investment in real
                estate
                loans was approximately $24.7 million with a weighted average interest
                rate of 11.38%. As of March 31, 2006, our investment in real estate
                loans,
                including loans related to seller financed real estate held for sale,
                was
                approximately $21.4 million with a weighted average interest rate
                of
                10.26%. The increase in our investment in real estate loans is primarily
                from the proceeds received from the sale of the building during November
                2006.





*Total
      Operating Expenses* :
      For the
      three months ended March 31, 2007, total operating expenses were $134,000
      compared to $219,000 during the three months ended March 31, 2006, a decrease
      of
      $85,000 or 38.81%. Expenses were primarily affected by the following
      factors:




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            25 -
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·
            During
                the three months ended March 31, 2006, we incurred depreciation expense
                of
                $56,000 on the building that was sold in November 2006. No comparable
                depreciation expense was recorded during the three months ended March
                31,
                2007.





·
            Interest
                expense remained relatively flat. While we did not incur any interest
                on
                loans related to investment in real estate, compared to $68,000 of
                such
                interest during the three months ended March 31, 2006, interest expense
                on
                secured borrowings increased by $67,000 due to an increase in secured
                borrowings of approximately $2 million from March 31, 2006 to March
                31,
                2007.





·
            Expenses
                related to professional fees decreased by $22,000. This was partially
                due
                to a decrease in accounting fees related to the measures undertaken
                by our
                manager to contain costs, including an enhancement of its internal
                accounting capabilities.





*Distributions
      to Members* :
      The
      following is a schedule of distributions made to members for the three months
      ended March 31, 2007 and 2006.





**For
                the Three Months Ended March 31, 2007**
            
            **For
                the Three Months Ended March 31, 2006**Distributions
                of net income available for distribution
            
            $
            618,000
            
            $
            645,000Distributions
                in excess of net Income available for distribution generated during
                the
                period
            
            
            --
            
            
            --Total
                distributions
            
            $
            618,000
            
            $
            645,000





Net
      Income Available for Distributions is a non-GAAP financial measure that is
      defined in our Operating Agreement as cash flows from operations, less certain
      reserves, and may exceed net income as calculated in accordance with GAAP.
      We
      have presented net income available for distribution because management believes
      this financial measure is useful and important to members. Although we generally
      do not plan to make distributions in excess of net income available for
      distribution, we may do so from time to time. Any such distribution will be
      treated as a return of capital for income tax purposes. In addition, cash flows
      from operations, which are the significant component of net income available
      for
      distribution, affect the capital available for investment in new loans. This
      non-GAAP financial measure should not be considered in isolation or as a
      substitute for measures of performance prepared in accordance with GAAP or
      as an
      alternative to cash flows from operating activities as a measure of our
      liquidity. We compensate for these limitations by relying primarily on our
      GAAP
      results and using net income available for distribution only
      supplementally.





The
      most
      directly comparable GAAP measure to net income available for distribution is
      cash flows from operating activities. The following table reconciles net income
      available for distribution to cash flows from operating activities and presents
      the two other major categories of our statement of cash flows:




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            26 -
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**For
                the Three Months**
              **Ended
                March 31,****2007**
            
            **2006**Distribution
                of net income available for distribution
            
            $
            618,000
            
            $
            645,000Additions
                to working capital reserves (amount not distributed)
            
            
            69,000
            
            
            61,000Change
                in operating assets and liabilities:Interest
                receivable
            
            
            27,000
            
            
            (8,000
            )Deferred
                rent receivable - related party
            
            
            --
            
            
            (34,000
            )Accounts
                payable
            
            
            15,000
            
            
            (42,000
            )Due
                to Manager
            
            
            12,000
            
            
            26,000Other
                assets
            
            
            2,000
            
            
            --Net
                cash provided by operating activities
            
            $
            743,000
            
            $
            648,000Net
                cash provided by investing activities
            
            $
            2,333,000
            
            $
            1,657,000Net
                cash used by financing activities
            
            $
            (3,471,000
            )
            $
            (1,149,000
            )





*Stated
      Unit Value Adjustment* :
      Following a periodic review by our manager as required pursuant to the Operating
      Agreement, as a result of the gain on sale of our real estate held for
      investment, effective December 15, 2006 we adjusted the stated unit value from
      $10.50 per unit to $11.00 per unit to reflect the estimated net unit value
      of
      each unit at that date. The periodic review of the estimated net unit value
      includes an analysis of unrealized gains that our manager reasonably believes
      exist at the time of the review, but that cannot be added to net asset value
      under GAAP.





*Redemptions* :
      In
      accordance with the terms of our Operating Agreement and Internal Revenue Code,
      we may redeem no more than 10% of the aggregate Members’ capital in any calendar
      year. As of March 31, 2007, the total of redemptions made from inception was
      approximately $6.3 million. Balances in Members’ capital accounts as of January
      1, 2007 were approximately $30.4 million, which limited redemptions to
      approximately $3.0 million for calendar 2007. Total redemptions during the
      three
      months ended March 31, 2007, were approximately $3.0 million. The remaining
      requests to redeem, as of March 31, 2007, were approximately $2.5 million in
      2008, $2.1 million in 2009, $340,000 in 2010 and $20,000 in 2011, subject to
      unit valuation adjustments.





**CAPITAL
      AND LIQUIDITY**





Liquidity
      is a measure of a company’s ability to meet potential cash requirements,
      including ongoing commitments to fund lending activities and general operating
      purposes. Subject to a 3% reserve, we generally use all of our available funds
      to invest in real estate loans. Distributable cash flow generated from such
      loans is paid out to our members unless they have elected to reinvest their
      distributions. We do not anticipate the need for hiring any employees, acquiring
      fixed assets such as office equipment or furniture, or incurring material office
      expenses during the next twelve months because our manager will manage our
      affairs.





During
      the three months ended March 31, 2007, cash flows provided by operating
      activities approximated $0.7 million. Investing activities consisted of cash
      provided by loan payoffs and sales of investments in real estate loans of
      approximately $3.8 million. Cash used for new investments and purchases of
      real
      estate loans totaled $1.5 million. Our financing activities primarily consisted
      of cash used for members’ distributions, net of reinvestments, of approximately
      $0.4 million and members’ redemptions of approximately $3.0
      million.





Our
      sources of liquidity include: repayments of outstanding loans and arrangements
      with third parties to participate in our loans, since we distribute most or
      all
      of our operating income, discontinued the offering of our units, effective
      November 7, 2005, and terminated our Distribution Reinvestment Plan effective
      May 7, 2007.




-
            27 -
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We
      rely
      primarily upon repayment of outstanding loans to provide capital for investment
      in new loans. Any significant level of defaults on outstanding loans could
      reduce the funds we have available for investment in new loans. Resulting
      foreclosure proceedings may not generate full repayment of our loans and may
      result in significant delays in the return of invested funds. This would
      diminish our capital resources and would impair our ability to invest in new
      loans. Non-performing assets totaled approximately $2.2 million or 7.2% of
      our
      total assets as of March 31, 2007, as compared to $2.2 million or 6.2% of our
      total assets as of December 31, 2006. At March 31, 2007, non-performing assets
      consisted of approximately $0.6 million of real estate held for sale and
      approximately $1.6 million of non-performing loans. It is possible that no
      earnings will be recognized from these assets until they are disposed of, or
      that no earnings will be recognized at all, and the time it will take to dispose
      of these assets cannot be predicted. Our manager believes that these
      non-performing assets are a result of factors unique to specific borrowers
      and
      properties. Because of the estimated value of the underlying properties, we
      do
      not currently believe that any losses beyond those already recognized will
      be
      incurred from these assets upon final disposition. However, it is possible
      that
      we will not be able to realize the full estimated carrying values upon
      disposition.





In
      addition, any significant level of redemptions by our members would reduce
      the
      capital we have available for investment. In order to comply with our Operating
      Agreement and Internal Revenue Code, we may redeem no more than 10% of the
      aggregate Members’ capital in any calendar year. As of March 31, 2007, the total
      of redemptions made from inception was approximately $6.3 million. Balances
      in
      Members’ capital accounts as of January 1, 2007 were approximately $30.4
      million, which limited redemptions to approximately $3.0 million for calendar
      year 2007. Total redemptions during the three months ended March 31, 2007,
      were
      approximately $3.0 million. The
      remaining requests to redeem, as of March 31, 2007, were approximately $2.5
      million in 2008, $2.1 million in 2009, $340,000 in 2010 and $20,000 in 2011,
      subject to unit valuation adjustments.





Loans
      in
      which unaffiliated investors have participated through inter-creditor agreements
      (“Inter-creditor Agreements”) are accounted for as secured borrowings in
      accordance with Statement of Financial Accounting Standards (“FAS”) 140 - *Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities* (“FAS
      140”). The Inter-creditor Agreements provide us additional funding sources for
      real estate loans whereby an unaffiliated investor (the “Investor”) may
      participate on a non-pari passu basis in certain real estate loans with us
      and/or VRM I and/or VRM II (collectively, the “Lead Lenders”). In the event of
      borrower non- performance, the Inter-creditor Agreements generally provide
      that
      the Lead Lenders must repay the Investor’s loan amount either by (i) continuing
      to remit to the Investor the interest due on the participated loan amount;
      (ii)
      substituting an alternative loan acceptable to the Investor; or (iii)
      repurchasing the participation from the Investor for the outstanding balance
      plus accrued interest.





During
      October 2006, we, our manager, Vestin Origination, Inc., VRM I and VRM II
      entered into an intercreditor agreement with an unrelated third party related
      to
      the funding of a construction real estate loan. (See exhibit 10.10 Intercreditor
      Agreement under the Exhibit Index included in Part II - Other Information,
      Item
      6 Exhibits of this Report Form 10-Q). The secured borrowing will be recognized
      pro rata between us, VRM I and VRM II for the amount each entity has funded
      for
      the loan. As of March 31, 2007, approximately $18.8 million has been funded
      on
      this loan, of which our portion was $971,000. As of March 31, 2007, this secured
      borrowing totaled approximately $13.0 million, of which our portion was
      approximately $2.2. In the event VRM I and VRM II were unable to pay their
      pro
      rata share of the secured borrowing, we would be liable for the full outstanding
      balance. As of December 31, 2006, we had approximately $4.4 million in funds
      being used under Inter-creditor Agreements.





At
      March
      31, 2007, we had restricted cash totaling $985,000, which relates to a cash
      deposit held as collateral by a banking institution to support rent payments
      on
      the property we sold during November 2006. The requirement for the deposit
      expires in November 2007, which may be extended for an additional
      year.





We
      maintain working capital reserves of approximately 3% of aggregate members’
capital accounts in cash, cash equivalents and investments in marketable
      securities. This reserve is available to pay expenses in excess of revenues,
      satisfy obligations of underlying secured properties, expend money to satisfy
      our unforeseen obligations and for other permitted uses of the working capital.
      At March 31, 2007, we had approximately $426,000 in cash, $832,000 invested
      in
      marketable securities - related party and approximately $29.9 million in total
      assets.




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            28 -
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            of Contents*





We
      may
      seek to expand our capital resources through borrowings from institutional
      lenders or through securitization of our loan portfolio or similar arrangements.
      We currently do not have in place any commitments to borrow any funds or
      securitize any of our assets. No assurance can be given that, if we should
      seek
      to borrow funds or to securitize our assets we would be able to do so on
      commercially attractive terms. Our ability to expand our capital resources
      in
      this manner is subject to many factors, some of which are beyond our control,
      including the state of the economy, the state of the capital markets and the
      perceived quality of our loan portfolio.





**Investments
      in Real Estate Loans Secured by Real Estate Portfolio**





We
      offer
      five real estate loan products consisting of commercial, construction,
      acquisition and development, land, and residential loans. The effective interest
      rates on all product categories range from 9% to 13%. Revenue by product will
      fluctuate based upon relative balances during the period. We had investments
      in
      27 real estate loans as of March 31, 2007, with a balance of approximately
      $24.7
      million as compared to investments in 27 real estate loans as of December 31,
      2006, with a balance of approximately $27.1 million.





At
      March
      31, 2007, the following loans were non-performing (based on current information
      and events, it is probable that we will be unable to collect all amounts due
      according to the contractual terms of the loan agreement or when the payment
      of
      interest is 90 days past due); Monterrey Associates LP, Forest Development
      LLC
      and Babuski LLC. These loans are currently carried on our books at a value
      of
      approximately $1.6 million. These loans have been placed on non-accrual of
      interest status and are the subject of pending foreclosure
      proceedings.





Our
      manager periodically reviews and makes a determination as to whether the
      allowance for loan losses is adequate to cover any potential losses. Additions
      to the allowance for loan losses are made by charges to the provision for loan
      losses. Recoveries of previously charged off amounts are credited to the
      allowance for loan losses or included as income when the asset is disposed.
      As
      of March 31, 2007, we have provided a general reserve of $73,000. Our manager
      evaluated the loans and believes that the remaining underlying collateral was
      sufficient to protect us against further losses of principal or interest. Our
      manager will continue to evaluate these loans in order to determine if any
      other
      allowance for loan losses should be recorded. For additional information on
      our
      investments in real estate loans, refer to Note D - *Investments
      In Real Estate Loans* of the
      Notes to the Financial Statements included in Part I, Item 1 *Financial Statement* of
      this
      Report Form 10-Q.





**Asset
      Quality and Loan Reserves**





Losses
      may occur from investing in real estate loans. The amounts of losses will vary
      as the loan portfolio is affected by changing economic conditions and the
      financial condition of borrowers.





The
      conclusion that a real estate loan is uncollectible or that collectibility
      is
      doubtful is a matter of judgment. On a regular basis, our manager evaluates
      our
      real estate loan portfolio for impairment. The fact that a loan is temporarily
      past due does not necessarily mean that the loan is impaired. Rather, all
      relevant circumstances are considered by our manager to determine impairment
      and
      the need for specific reserves. Such evaluation, which includes a review of
      all
      loans on which full collectibility may not be reasonably assured, considers
      among other matters:





·
            Prevailing
                economic conditions;





·
            Historical
                experience;





·
            The
                nature and volume of the loan
                portfolio;





·
            The
                borrowers’ financial condition and adverse situations that may affect the
                borrowers’ ability to pay;





·
            Evaluation
                of industry trends; and





·
            Estimated
                net realizable value of any underlying collateral in relation to
                the real
                estate loan amount.




-
            29 -
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            of Contents*





Based
      upon this evaluation, a determination is made as to whether the allowance for
      loan losses is adequate to cover any potential losses. Additions to the
      allowance for loan losses are made by charges to the provision for loan losses.
      Recoveries of previously charged off amounts would be credited to the provision
      for loan losses or included in income. For
      additional information on asset quality and loan reserve, refer to Note D - *Investments
      In Real Estate Loans* of the
      Notes to the Financial Statements included in Part I, Item 1 *Financial Statement* of
      this
      Report Form 10-Q.





**Investments
      in Real Estate Held for Sale**





At
      March
      31, 2007, we
      held
      one property with a total carrying value of approximately $0.6 million, which
      was acquired through foreclosure and recorded as investments in real estate
      held
      for sale. Our
      investments in real estate held for sale are accounted for at the lower of
      cost
      or fair value less costs to sell with fair value based on appraisals and
      knowledge of local market conditions. It is not our intent to invest in or
      own
      real estate as a long-term investment. We seek to sell properties acquired
      through foreclosure as quickly as circumstances permit. During the three months
      ended March 31, 2007, there were no transactions related to our real estate
      held
      for sale.





For
      additional information on our investments in real estate held for sale, refer
      to
      Note F - *Real
      Estate Held for Sale* of the
      Notes to the Financial Statements included in Part I, Item 1 *Financial Statements* of
      this
      Report Form 10-Q.





**OFF-BALANCE
      SHEET ARRANGEMENTS**





We
      do not
      have any interests in off-balance sheet special purpose entities nor do we
      have
      any interests in non-exchange traded commodity contracts.





**CONTRACTUAL
      OBLIGATIONS**





The
      following summarizes our contractual obligations at March 31, 2007:




**Contractual
                Obligation**
            
            **Total**
            
            **Less
                Than 1 Year**
            
            **1-3
                Years**
            
            **3-5
                Years**
            
            **More
                Than**
              **5
                Years**Secured
                borrowings (1)
            
            $
            2,206,000
            
            $
            2,206,000
            
            $
            --
            
            $
            --
            
            $
            --Total
            
            $
            2,206,000
            
            $
            2,206,000
            
            $
            --
            
            $
            --
            
            $
            --





(1)
            In
                the event VRM I and VRM II were unable to pay their pro rata share
                of the
                secured borrowings, we would be liable for the full outstanding balance,
                which was approximately $13.0 million as of March 31,
                2007.





**CRITICAL
      ACCOUNTING ESTIMATES**





**Revenue
      Recognition**





Interest
      income on loans is accrued by the effective interest method. We do not accrue
      interest income from loans once they are determined to be impaired. A loan
      is
      impaired when, based on current information and events, it is probable that
      we
      will be unable to collect all amounts due according to the contractual terms
      of
      the loan agreement or when the payment of interest is 90 days past
      due.





The
      following table presents a sensitivity analysis to show the impact on our
      financial condition at March 31, 2007 from fluctuations in weighted average
      interest rate charged on loans as a percentage of the loan
      portfolio:




-
            30 -
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            of Contents*





**Changed
                Assumption**
            
            **Increase
                (Decrease) in Interest Income**Weighted
                average interest rate assumption increased by 1.0% or 100 basis
                points
            
            $
            205,000Weighted
                average interest rate assumption increased by 5.0% or 500 basis
                points
            
            $
            1,025,000Weighted
                average interest rate assumption decreased by 1.0% or 100 basis
                points
            
            $
            (205,000
            )Weighted
                average interest rate assumption decreased by 5.0% or 500 basis
                points
            
            $
            (1,025,000
            )





The
      purpose of this analysis is to provide an indication of the impact that the
      weighted average interest rate fluctuations would have on our financial results.
      It is not intended to imply our expectation of future revenues or to estimate
      earnings. We believe that the assumptions used above are appropriate to
      illustrate the possible material impact on the financial
      statements.





**Allowance
      for Loan Losses**





We
      maintain an allowance for loan losses on our investments in real estate loans
      for estimated credit impairment in our investment in real estate loans
      portfolio. Our manager’s estimate of losses is based on a number of factors
      including the types and dollar amounts of loans in the portfolio, adverse
      situations that may affect the borrower’s ability to repay, prevailing economic
      conditions and the underlying collateral securing the loan. Additions to the
      allowance are provided through a charge to earnings and are based on an
      assessment of certain factors, which may indicate estimated losses on the loans.
      Actual losses on loans are recorded as a charge-off or a reduction to the
      allowance for loan losses. Subsequent recoveries of amounts previously charged
      off are added back to the allowance or included as income.





The
      following table presents a sensitivity analysis to show the impact on our
      financial condition at March 31, 2007 from increases and decreases to our
      allowance for loan losses as a percentage of the loan portfolio:





**Changed
                Assumption**
            
            **Increase
                (Decrease) in Allowance for Loan Losses**Allowance
                for loan losses assumption increased by 1.0% of loan
                portfolio
            
            $
            247,000Allowance
                for loan losses assumption increased by 5.0% of loan
                portfolio
            
            $
            1,237,000Allowance
                for loan losses assumption decreased by 0.3% of loan
                portfolio
            
            $
            (73,000
            )





Estimating
      allowances for loan losses requires significant judgment about the underlying
      collateral, including liquidation value, condition of the collateral, competency
      and cooperation of the related borrower and specific legal issues that affect
      loan collections or taking possession of the property. As a commercial real
      estate lender willing to invest in loans to borrowers who may not meet the
      credit standards of other financial institutional lenders, the default rate
      on
      our loans could be higher than those generally experienced in the mortgage
      lending industry. We, our manager and Vestin Originations generally approves
      loans more quickly than other real estate lenders and, due to our expedited
      underwriting process, there is a risk that the credit inquiry we perform will
      not reveal all material facts pertaining to a borrower and the
      security.





We
      may
      discover additional facts and circumstances as we continue our efforts in the
      collection and foreclosure processes. This additional information often causes
      management to reassess its estimates. Circumstances that may cause significant
      changes in our estimated allowance include, but not limited to:





·
            Declines
                in real estate market conditions that can cause a decrease in expected
                market value;





·
            Discovery
                of undisclosed liens for community improvement bonds, easements and
                delinquent property taxes;




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            31 -
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·
            Lack
                of progress on real estate developments after we advance funds. We
                customarily utilize disbursement agents to monitor the progress of
                real
                estate developments and approve loan advances. After further inspection
                of
                the related property, progress on construction occasionally does
                not
                substantiate an increase in value to support the related loan
                advances;





·
            Unanticipated
                legal or business issues that may arise subsequent to loan origination
                or
                upon the sale of foreclosed upon property;
                and





·
            Appraisals,
                which are only opinions of value at the time of the appraisal, may
                not
                accurately reflect the value of the
                property.





**Real
      Estate Held For Sale**





Real
      estate held for sale includes real estate acquired through foreclosure and
      will
      be carried at the lower of the recorded amount, inclusive of any senior
      indebtedness, or the property's estimated fair value, less estimated costs
      to
      sell, with fair value based on appraisals and knowledge of local market
      conditions. While pursuing foreclosure actions, we seek to identify potential
      purchasers of such property. It is not our intent to invest in or own real
      estate as a long-term investment. In accordance with FAS 144 - *Accounting
      for the Impairment or Disposal of Long Lived Assets,* we
      seek
      to sell properties acquired through foreclosure as quickly as circumstances
      permit. The carrying values of real estate held for sale are assessed on a
      regular basis from updated appraisals, comparable sales values or purchase
      offers.





Management
      classifies real estate held for sale when the following criteria are
      met:





·
            Management
                commits to a plan to sell the
                properties;





·
            The
                property is available for immediate sale in its present condition
                subject
                only to terms that are usual and
                customary;





·
            An
                active program to locate a buyer and other actions required to complete
                a
                sale have been initiated;





·
            The
                sale of the property is probable;





·
            The
                property is being actively marketed for sale at a reasonable price;
                and





·
            Withdrawal
                or significant modification of the sale is not
                likely.





**ITEM
      3.**  **QUANTITATIVE
      AND QUALITATIVE DISCLOSURESABOUT MARKET
      RISK**





We
      are
      exposed to market risk, primarily from changes in interest rates. We do not
      deal
      in any foreign currencies and do not own any options, futures or other
      derivative instruments. We do not have a significant amount of
      debt.





Most
      of
      our assets consisted of investments in real estate loans, which from time to
      time include those that are financed under Inter-creditor Agreements. At March
      31, 2007, our aggregate investment in real estate loans was approximately $24.7
      million, net of allowance, with a weighted average effective interest rate
      of
      11.38%. We had one loan financed under an Inter-creditor Agreement at March
      31,
      2007, which was classified as assets under secured borrowing totaling
      approximately $2.2 million. Most of the real estate loans had an initial term
      of
      12 months. The weighted average term of outstanding loans, including extensions,
      at March 31, 2007, was 14 months. All but one of the outstanding real estate
      loans at March 31, 2007, was a fixed rate loan. All of the real estate loans
      are
      held for investment purposes; none are held for sale. We intend to hold such
      real estate loans to maturity. None of the real estate loans had prepayment
      penalties and 12 had an exit fee.




-
            32 -
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Market
      fluctuations in interest rates generally do not affect the carrying value of
      our
      investment in real estate loans. However, significant and sustained changes
      in
      interest rates could affect our operating results. If interest rates decline
      significantly, some of the borrowers could prepay their loans with the proceeds
      of a refinancing at lower interest rates. This would reduce our earnings and
      funds available for distribution to members. On the other hand, a significant
      increase in interest rates could result in a slowdown in real estate development
      activity that would reduce the demand for commercial real estate loans. As
      a
      result, we might encounter greater difficulty in identifying appropriate
      borrowers. We are not in a position to quantify the potential impact on our
      operating results from a material change in interest rates.





The
      following table contains information about the investment in real estate loans
      held in our portfolio as of March 31, 2007. The presentation aggregates the
      investment in real estate loans by their maturity dates for maturities occurring
      in each of the years 2007 through 2010 and thereafter and separately aggregates
      the information for all maturities arising after 2010. The carrying values
      of
      these assets approximate their fair value as of March 31, 2007.





**Interest
                Earning Assets**
              **Aggregated
                by Maturity at March 31, 2007****Interest
                Earning Assets**
            
            **2007**
            
            **2008**
            
            **2009**
            
            **2010**
            
            **Thereafter**
            
            **Total**Investments
                in real estate loans
            
            $
            23,239,000
            
            $
            1,500,000
            
            $
            --
            
            $
            --
            
            $
            --
            
            $
            24,739,000Weighted
                average interest rates
            
            
            11.30%
            
            
            12.67%
            
            
            --%
            
            
            --%
            
            
            --%
            
            
            11.38%





At
      March
      31, 2007, we also had approximately $1.3 million invested in cash, cash
      equivalents and marketable securities - related party (VRM II). Approximately
      3%
      of our aggregate members capital accounts will be held in such accounts as
      a
      cash reserve; additional deposits in such accounts will be made as funds are
      received from investors and repayment of loans pending the deployment of such
      funds in new real estate loans. We believe that these financial assets do not
      give rise to significant interest rate risk due to their short-term
      nature.





**ITEM
      4.**  **CONTROLS
      AND PROCEDURES**





**Evaluation
      of Disclosure Controls and Procedures**





We
      maintain disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in our reports under the Exchange Act
      is
      recorded, processed, summarized and reported within the time periods specified
      in the SEC's rules and forms, and that such information is accumulated and
      communicated to our management, including our manager’s Chief Executive Officer
      (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely
      decisions regarding required financial disclosure. In connection with the
      preparation of this Report on Form 10-Q, our management carried out an
      evaluation, under the supervision and with the participation of the our
      management, including our manager’s CEO and CFO, as of March 31, 2007, of the
      effectiveness of the design and operation of our disclosure controls and
      procedures, as such term is defined under Rule 13a-15(e) under the Exchange
      Act.
      Based upon this evaluation, our manager’s CEO and CFO believe that these
      controls and procedures are adequate to ensure we are able to collect, process
      and disclose within the required time periods the information we are required
      to
      disclose in the reports we file with the SEC.





The
      certifications of the our manager’s Chief Executive Officer and Chief Financial
      Officer required under Section 302 of the Sarbanes-Oxley Act have been filed
      as
      Exhibits 31.1 and 31.2 to this report.




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            33 -
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**Changes
      in Internal Control Over Financial Reporting**





Our
      management has identified the following change in our internal controls over
      financial reporting during the Quarter ended March 31, 2007. On
      March
      21, 2007, John W. Alderfer resigned as our
      manager’s Chief Financial Officer. Our manager appointed Rocio
      Revollo as their Chief Financial Officer. Ms. Revollo will also serve as the
      Chief Financial Officer of Vestin Realty Mortgage I, Inc. and Vestin Realty
      Mortgage II, Inc. During April 2007, our manager appointed a Corporate
      Controller with the requisite experience to assist and work directly with our
      Chief Financial Officer.





Because
      of the inherent limitations in all control systems, no evaluation of controls
      can provide absolute assurance that all control issues within our company have
      been or will be detected. Even effective internal control over financial
      reporting can only provide reasonable assurance with respect to financial
      statement preparation. Furthermore, because of changes in conditions, the
      effectiveness of internal control over financial reporting may vary over time.
      Our management, including our manager’s Chief Executive Officer and Chief
      Financial Officer, does not expect that our controls and procedures will prevent
      all errors.





**ITEM
      4T.**  **CONTROLS
      AND PROCEDURES**





See
      Item
      4 - *Controls
      and Procedures* above.





**PART
      II - OTHER INFORMATION**





**ITEM
      1.**  **LEGAL
      PROCEEDINGS**





Please
      refer to Note K *Legal
      Matters Involving the Manager* and Note
      L *Legal
      Matters Involving the Company* in Part
      I Item 1 *Financial
      Statements* of this
      Form 10-Q for information regarding our legal proceedings, which are
      incorporated herein by reference.





**ITEM
      1A.**  **RISK
      FACTORS**





In
      considering our future performance and any forward-looking statements made
      in
      this report, the material risks described below should be considered carefully.
      These factors should be considered in conjunction with the other information
      included elsewhere in this report.





**RISKS
      RELATED TO OUR BUSINESS**





**Defaults
      on our real estate loans will decrease our revenues and members’
distributions.**





We
      are in
      the business of investing in real estate loans and, as such, we are subject
      to
      risk of defaults by borrowers. Our performance will be directly impacted by
      any
      defaults on the loans in our portfolio. As a commercial real estate lender
      willing to invest in loans to borrowers who may not meet the credit standards
      of
      other financial institutional lenders, the rate of default on our loans could
      be
      higher than those generally experienced in the real estate lending industry.
      Any
      sustained period of increased defaults could adversely affect our business,
      financial condition, liquidity and the results of our operations. We seek to
      mitigate the risk by estimating the value of the underlying collateral and
      insisting on adequate loan-to-value ratios. However, we cannot be assured that
      these efforts will fully protect us against losses on defaulted loans. Any
      subsequent decline in real estate values on defaulted loans could result in
      less
      security than anticipated at the time the loan was originally made, which may
      result in our not recovering the full amount of the loan. Any failure of a
      borrower to repay loans or interest on loans will reduce our revenues and
      members’ distributions and the value of members’ units. Our weighted average
      loan-to-value ratio, as of March 31, 2007, was 68.09% as compared to 65.06%
      as
      of December 31, 2006. Our appraisals are generally dated within 12 months of
      the
      date of loan origination and may not reflect a decrease in the value of the
      real
      estate due to events subsequent to the date of the appraisals.




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            34 -
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As
      of
      March 31, 2007, we had in our portfolio approximately $1.6 million in delinquent
      loans and approximately $0.6 million of real estate held for sale not sold
      through seller financed for a total of approximately $2.2 million in
      non-performing assets, which represented approximately 8.15% of our members’
equity. We do not believe that a rising interest rate environment will increase
      or accelerate our delinquency rate because all of our loans are short
      term.





**Our
      underwriting standards and procedures are more lenient than other financial** **institutional** **lenders, which may result in a higher level of non-performing assets and less
      amounts available for distribution.**





Our
      underwriting standards and procedures are more lenient than other financial
      institutional lenders in that we will invest in loans to borrowers who may
      not
      be required to meet the credit standards of other financial institutional real
      estate lenders, which may lead to an increase in non-performing assets in our
      loan portfolio and create additional risks of return. We approve real estate
      loans more quickly than other lenders. We rely heavily on third-party reports
      and information such as appraisals and environmental reports. Because of our
      accelerated due diligence process, we may accept documentation that was not
      specifically prepared for us or commissioned by us. This creates a greater
      risk
      of the information contained therein being out of date or incorrect. Generally,
      we will not spend more than 20 days assessing the character and credit history
      of our borrowers. Due to the nature of loan approvals, there is a risk that
      the
      credit inquiry we perform will not reveal all material facts pertaining to
      the
      borrower and the security. There may be a greater risk of default by our
      borrowers, which may impair our ability to make timely distributions and which
      may reduce the amount we have available to distribute.





**We
      depend upon our real estate security to secure our real estate loans, and we
      may
      suffer a loss if the value of the underlying property
      declines.**





We
      depend
      upon our real estate security to protect us on the loans that we make. We depend
      upon the skill of independent appraisers to value the security underlying our
      loans. However, notwithstanding the experience of the appraisers, they may
      make
      mistakes, or the value of the real estate may decrease due to subsequent events.
      Our appraisals are generally dated within 12 months of the date of loan
      origination and may have been commissioned by the borrower. Therefore, the
      appraisals may not reflect a decrease in the value of the real estate due to
      events subsequent to the date of the appraisals. In addition, most of the
      appraisals are prepared on an as-if developed basis, which approximates the
      post-construction value of the collateralized property assuming such property
      is
      developed. As-if developed values on raw land loans or acquisition and
      development loans often dramatically exceed the immediate sales value and may
      include anticipated zoning changes and successful development by the purchaser
      upon which development is dependent on availability of financing. As most of
      the
      appraisals will be prepared on an as-if developed basis, if the loan goes into
      default prior to completion of the project, the market value of the property
      may
      be substantially less than the appraised value. As a result, there may be less
      security than anticipated at the time the loan was originally made. If there
      is
      less security and a default occurs, we may not recover the full amount of our
      loan, thus reducing the amount of funds available to distribute.





**We
      typically make “balloon payment” loans, which are riskier than loans with
      payments of principal over an extended period of time.**





The
      loans
      we invest in or purchase generally require the borrower to make a “balloon
      payment” on the principal amount upon maturity of the loan. A balloon payment is
      a large principal balance that is payable after a period of time during which
      the borrower has repaid none or only a small portion of the principal balance.
      As of March 31, 2007, all of our loans provided for payments of interest only
      with a “balloon” payment of principal payable in full at the end of the term.
      Loans with balloon payments are riskier than loans with even payments of
      principal over an extended time period such
      as 15 or 30
      years because the borrower’s repayment depends on its ability to sell the
      property profitably, obtain suitable refinancing or otherwise raise a
      substantial amount of cash when the loan comes due. There are no specific
      criteria used in evaluating the credit quality of borrowers for loans requiring
      balloon payments. Furthermore, a substantial period of time may elapse between
      the review of the financial statements of the borrower and the date when the
      balloon payment is due. As a result, there is no assurance that a borrower
      will
      have sufficient resources to make a balloon payment when due.




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**Our
      loans are not guaranteed by any governmental agency.**





Our
      loans
      are not insured or guaranteed by a federally owned or guaranteed mortgage
      agency. Consequently, our recourse, if there is a default, may be to foreclose
      upon the real property securing a loan and/or pursuing the borrower’s guarantee
      of the principal. The value of the foreclosed property may have decreased and
      may not be equal to the amount outstanding under the corresponding loan,
      resulting in a decrease of the amount available to distribute.





**Our
      real estate loans may not be marketable, and we expect no secondary market
      to
      develop.**





We
      do not
      expect our real estate loans to be marketable, and we do not expect a secondary
      market to develop for them. As a result, we will generally bear all the risk
      of
      our investment until the loans mature. This will limit our ability to hedge
      our
      risk in changing real estate markets and may result in reduced returns to our
      members.





**Any
      borrowing by us will increase members risk and may reduce the amount we have
      available to distribute.**





We
      may
      borrow funds to expand our capacity to invest in real estate loans. We may
      borrow up to 70% of the fair market value of our outstanding real estate loans
      at any time. Any such borrowings will require us to carefully manage our cost
      of
      funds. No assurance can be given that we will be successful in this effort.
      Should we be unable to repay the indebtedness and make the interest payments
      on
      the loans, the lender will likely declare us in default and require that we
      repay all amounts owing under the loan facility. Even if we are repaying the
      indebtedness in a timely manner, interest payments owing on the borrowed funds
      may reduce our income and the distributions members receive.





We
      may
      borrow funds from several sources, and the terms of any indebtedness we incur
      may vary. However, some lenders may require as a condition of making a loan
      to
      us that the lender will receive a priority on loan repayments received by us.
      As
      a result, if we do not collect 100% on our investments, the first dollars may
      go
      to our lenders and we may incur a loss that will result in a decrease of the
      amount available for distribution. In addition, we may enter into securitization
      arrangements in order to raise additional funds. Such arrangements could
      increase our leverage and adversely affect our cash flow and our ability to
      make
      distributions.





During
      October 2006, we, our manager, Vestin Origination, Inc., VRM I and VRM II
      entered into an intercreditor agreement with an unrelated third party related
      to
      the funding of a construction real estate loan. The secured borrowing will
      be
      recognized pro rata between us, VRM I and VRM II for the amount each entity
      has
      funded for the loan. As of March 31, 2007, we had secured borrowings equal
      to
      approximately 9% of our net investment in real estate loans, as compared to
      secured borrowings equal to approximately 16% or our net investment in real
      estate loans as of December 31, 2006. In the event VRM I and VRM II were unable
      to pay their pro rata share of the secured borrowing, we would be liable for
      the
      full outstanding balance of approximately $13.0 million, as of March 31,
      2007.





Lenders
      may require us to enter into restrictive covenants that may have an adverse
      effect on our operations. **** In
      connection with obtaining certain financing, a lender could impose restrictions
      on us that affect our ability to incur additional debt and our distribution
      and
      operating policies.





Increases
      in interest rates could increase the amount of our debt payments and adversely
      affect our ability to pay distributions to our members. **** In
      addition, if rising interest rates cause us to need additional capital to repay
      indebtedness in accordance with its terms or otherwise, we would be required
      to
      liquidate one or more of our investments at times, which may not permit
      realization of the maximum return on such investments.





**We
      may have difficulty protecting our rights as a secured
      lender.**





We
      believe that our loan documents will enable us to enforce our commercial
      arrangements with borrowers. However, the rights of borrowers and other secured
      lenders may limit our practical realization of those benefits. For
      example:




-
            36 -
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            of Contents*





·
            Judicial
                foreclosure is subject to the delays of protracted litigation. Although
                we
                expect non-judicial foreclosure to be quicker, our collateral may
                deteriorate and decrease in value during any delay in foreclosing
                on
                it;





·
            The
                borrower’s right of redemption during foreclosure proceedings can deter
                the sale of our collateral and can for practical purposes require
                us to
                manage the property;





·
            Unforeseen
                environmental hazards may subject us to unexpected liability and
                procedural delays in exercising our
                rights;





·
            The
                rights of senior or junior secured parties in the same property can
                create
                procedural hurdles for us when we foreclose on
                collateral;





·
            We
                may not be able to pursue deficiency judgments after we foreclose
                on
                collateral; and





·
            State
                and federal bankruptcy laws can prevent us from pursuing any actions,
                regardless of the progress in any of these suits or
                proceedings.





**By
      becoming the owner of property, we may incur additional obligations, which
      may
      reduce the amount of funds available for distribution.**





We
      intend
      to own real property only if we foreclose on a defaulted loan and purchase
      the
      property at the foreclosure sale. Acquiring a property at a foreclosure sale
      may
      involve significant costs. If we foreclose on the security property, we expect
      to obtain the services of a real estate broker and pay the broker’s commission
      in connection with the sale of the property. We may incur substantial legal
      fees
      and court costs in acquiring a property through contested foreclosure and/or
      bankruptcy proceedings. In addition, significant expenditures, including
      property taxes, maintenance costs, mortgage payments, insurance costs and
      related charges, must be made on any property we own regardless of whether
      the
      property is producing any income.





Under
      applicable environmental laws, any owner of real property may be fully liable
      for the costs involved in cleaning up any contamination by materials hazardous
      to the environment. Even though we might be entitled to indemnification from
      the
      person that caused the contamination, there is no assurance that the responsible
      person would be able to indemnify us to the full extent of our liability.
      Furthermore, we would still have court and administrative expenses for which
      we
      may not be entitled to indemnification.





**A
      prolonged economic slowdown, lengthy or severe recession or significant increase
      in interest rates could harm our business.**





The
      risks
      associated with our business are more acute during periods of economic slowdown
      or recession because these periods can be accompanied by decreased demand for
      consumer credit and declining real estate values. As a commercial real estate
      lender willing to invest in riskier loans, rates of delinquencies, foreclosures
      and losses on our loans could be higher than those generally experienced in
      the
      commercial mortgage lending industry during periods of economic slowdown or
      recession. Problems in the sub-prime residential mortgage market could adversely
      affect the general economy or the availability of funds for commercial real
      estate developers. This in turn could lead to an increase in defaults on our
      loans. Furthermore, if interest rates were to increase significantly, the costs
      of borrowing may become too expensive, which may negatively impact the refinance
      market by reducing demand for real estate lending. For the three months ended
      March 31, 2007, loan originations accounted for all loans funded during that
      period. Any sustained period of increased delinquencies, foreclosures or losses
      or a significant increase in interest rates could adversely affect our ability
      to originate, purchase and securitize loans, which could significantly harm
      our
      business, financial condition, liquidity and results of operations.





As
      of
      March 31, 2007, none of our loans had a prepayment penalty and 12 loans had
      an
      exit fee. Based on our manager’s historical experience, we expect that our loans
      will continue to not have a prepayment penalty. Should interest rates decrease,
      our borrowers may prepay their outstanding loans with us in order to receive
      a
      more favorable rate. This may reduce the amount of funds we have available
      to
      distribute.





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**Our
      results are subject to fluctuations in interest rates and other economic
      conditions.**





Our
      results of operations will vary with changes in interest rates and with the
      performance of the relevant real estate markets. If the economy is healthy,
      we
      expect that more people will be borrowing money to acquire, develop or renovate
      real property. However, if the economy grows too fast, interest rates may
      increase too much and the cost of borrowing may become too expensive.
      Alternatively, if the economy enters a recession, real estate development may
      slow. A slowdown in real estate lending may mean we will have fewer loans to
      acquire, thus reducing our revenues and the distributions.





One
      of
      the results of interest rate fluctuations is that borrowers may seek to extend
      their low-interest-rate loans after market interest rates have increased. This
      creates two risks for us:





·
            If
                interest rates rise, borrowers under loans with monthly or quarterly
                principal payments may be compelled to extend their loans to decrease
                the
                principal paid with each payment because the interest component has
                increased. If this happens, we are likely to be at a greater risk
                of the
                borrower defaulting on the extended loan, and the increase in the
                interest
                rate on our loan may not be adequate compensation for the increased
                risk.
                Additionally, any fees paid to extend the loan are paid to Vestin
                Originations, not to us. Our revenues and distributions will decline
                if we
                are unable to reinvest at higher rates or if an increasing number
                of
                borrowers default on their loans;
                and





·
            If,
                at a time of relatively low interest rates, a borrower should prepay
                obligations that have a higher interest rate from an earlier period,
                we
                will likely not be able to reinvest the funds in real estate loans
                earning
                that higher rate of interest. In the absence of a prepayment fee,
                we will
                receive neither the anticipated revenue stream at the higher rate
                nor any
                compensation for its loss. This is a risk if the loans we invest
                in do not
                have prepayment penalties or exit
                fees.





Our
      results will also reflect other economic conditions, such as a particular
      industry migrating to or from one of the states into which we make
      loans.





**We
      face competition for real estate loans that may reduce available yields and
      fees
      available.**





We
      consider our direct competitors to be the providers of real estate loans who
      offer short-term, equity-based loans on an expedited basis for higher fees
      and
      rates than those charged by other financial institutional lenders such as
      commercial banks, insurance companies, mortgage brokers and pension funds.
      Many
      of the companies against which we compete have substantially greater financial,
      technical and other resources than either our company or our manager.
      Competition in our market niche depends upon a number of factors, including
      price and interest rates of the loan, speed of loan processing, cost of capital,
      reliability, quality of service and support services. If our competition
      decreases interest rates on their loans or makes funds more easily accessible,
      yields on our loans could decrease and the costs associated with making loans
      could increase, both of which would reduce our revenues and the
      distributions.





**We
      may invest in unimproved land loans that do not generate
      income.**





We
      may
      invest up to 25%, of our total real estate loan assets in loans to purchase
      or
      develop raw, unimproved land. Generally, we will determine whether to invest
      in
      these loans based upon the appraised value of the property and the borrower’s
      actual capital investment in the property. We intend to invest in loans with
      a
      face value of up to 60% of the as-if developed appraised value of the property
      and we will usually require that the borrower have invested in the property
      actual capital expenditures of at least 25% of the property’s value; however, we
      may deviate from these guidelines under certain circumstances. As-if developed
      values on raw and unimproved land loans often dramatically exceed the immediate
      sales value and may include anticipated zoning changes, and successful
      development by the purchaser; upon which development is dependent on
      availability of financing. These loans are riskier because the property is
      not
      capable of generating any income, as compared to a commercial property. As
      of
      March 31, 2007, 34% of our loans were secured by unimproved land.




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**We
      may invest in acquisition and development loans that do not generate
      income.**





We
      may
      invest up to 25% of our total real estate loan assets in acquisition and
      development loans. These loans enable borrowers to acquire and/or complete
      the
      basic infrastructure and development of their property prior to the construction
      of buildings or structures. Such development may include installing utilities,
      sewers, water pipes, and/or streets. Generally, we may invest in loans with
      a
      face value of up to 60% of the as-if developed appraised value of the property;
      however, we may deviate from these guidelines under certain circumstances.
      Such
      appraisals have the same valuation limitations as raw and unimproved land loans,
      described above. As of March 31, 2007, 13% of our loans were acquisition and
      development loans.





**We
      may invest in construction loans that do not generate
      income.**





We
      may
      invest up to 70% of our total real estate loan assets in construction loans.
      These are loans generally made to real estate developers to fund the
      construction of one or more buildings on real property. Funds under this type
      of
      loan will generally not be forwarded to the borrower until work in the previous
      phase of the project has been completed and an independent inspector has
      verified certain aspects of the construction and its costs. We will typically
      require material and labor lien releases by the borrower per completed phase
      of
      the project. We will review the appraised value of the property and proposed
      improvements, and will arrange loans for up to 75% of the as-if developed
      appraised value; however, we may deviate from these guidelines under certain
      circumstances. Such appraisals have the same valuation limitations as raw and
      unimproved land loans, described above. These loans are riskier than loans
      secured by income producing properties because during construction the borrower
      does not receive income from the property to make payments on the loan. As
      of
      March 31, 2007, 17% of our loans were construction loans.





**Our
      investments in commercial property loans may not yield the anticipated increase
      in value and income.**





We
      expect
      to invest up to 50% of our total real estate loan assets in commercial property
      loans. These loans provide funds to allow commercial borrowers to acquire
      income-producing property or to improve or renovate property to increase the
      value or net operating income of the property so that it may qualify for
      institutional refinancing. Bridge loans are a subcategory of commercial loans
      in
      which we provide interim financing to enable commercial borrowers to qualify
      for
      permanent refinancing. We will review the appraised value of the property and
      will invest in loans for up to 75% of such appraised value; however, we may
      deviate from these guidelines under certain circumstances. To the extent such
      loans include renovations, appraisals may include as-if developed valuations
      with the limitations described above. These loans are riskier because there
      is
      no assurance that the commercial borrower will qualify for the refinancing
      or
      that the improvements will yield the anticipated increase in value and income.
      As of March 31, 2007, 34% of our loans were commercial loans.





**We
      may invest in residential loans.**





We
      may
      invest approximately 5% of our total real estate loan assets in residential
      loans. Such loans facilitate the purchase or refinance of one to four family
      residential property units provided the borrower used one of the units on the
      property as such borrower’s principal residence. We will review the appraisal of
      the value of the property and will invest in loans for up to 75% of such
      appraised value; however, we may deviate from these guidelines under certain
      circumstances. As of March 31, 2007, 2% of our loans were residential
      loans.





**Investments
      in second deeds of trust and wraparound loans are subject to the rights of
      the
      first deed of trust.**





We
      may
      also invest up to 10% of our total real estate loan assets in deeds of trust
      and, in rare instances, wraparound, or all-inclusive, real estate loans. In
      a
      second deed of trust, our rights as a lender, including our rights to receive
      payment on foreclosure, will be subject to the rights of the first deed of
      trust. In a wraparound real estate loan, our rights will be similarly subject
      to
      the rights of a first deed of trust, but the aggregate indebtedness evidenced
      by
      our loan documentation will be the first deed of trust plus the new funds we
      invest. We would receive all payments from the borrower and forward to the
      senior lender its portion of the payments we receive. Because both of these
      types of loans are subject to the first deed of trust’s right to payment on
      foreclosure, we incur a greater risk when we invest in each of these types
      of
      loans. As of March 31, 2007, 1% of our loans were secured by second deeds of
      trust.




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**Investment
      in large loans may reduce our ability to diversify our loan
      portfolio.**





We
      will
      generally invest in loans that constitute an amount equal to less than 5% of
      our
      total capital. However, we may invest in a larger loan depending on such factors
      as the performance of the Fund and the value of the collateral. These larger
      loans have greater risk because they may reduce our ability to diversify our
      loan portfolio. As of March 31, 2007, our two largest loans comprised 13% or
      our
      total loan portfolio.





**Taking
      a lease interest as collateral only provides a right to assume the borrower’s
      obligations under the lease.**





We
      may
      invest up to 20% of our total real estate loan assets in loans where the
      collateral is an interest in a lease. These loans are riskier because the only
      rights we will have are to assume the borrower’s obligations under the lease and
      to use the property for the length of time and in the limited manner permitted
      under the lease. As of March 31, 2007, none of our loans were collateralized
      by
      leases..





**As
      a result of our small size, we will not be able to build a diversified loan
      portfolio, thereby increasing our risk that defaults on one or more loans could
      have a material adverse effect upon our operating results.**





We
      are
      limited in the number of real estate loans in which we may invest and the value
      of members’ investment will fluctuate with the performance of the specific
      investments we make. As of March 31, 2007, we had approximately $26.6 million
      in
      capital and $24.6 million in outstanding loans, and we currently are not raising
      additional funds through the sale of units. Accordingly, we are a relatively
      small fund and will make a limited number of investments resulting in less
      diversification in terms of the number of investments owned, the geographic
      regions in which our investments are located and the types of investments that
      we make as compared with larger funds. As a result, our performance will be
      closely tied to the performance of each loan we invest in and a default on
      a
      loan could materially reduce the funds available for distribution. Our
      profitability may be affected by the performance of any one of our investments
      and members’ investment in our units will be subject to greater
      risk.





**Our
      loan portfolio may exhibit greater risk if it is not diversified
      geographically.**





As
      of
      March 31, 2007, our loans were in the following states: Arizona, California,
      Nevada, Oklahoma, Oregon, Texas and Washington, with nearly half of our loans
      in
      Nevada. Depending on the market and on our company’s performance, we plan to
      expand our investments throughout the United States. However, our manager has
      limited experience outside of the Western and Southern United States. Real
      estate markets vary greatly from location to location and the rights of secured
      real estate lenders vary considerably from state to state. Our manager’s limited
      experience in most U.S. real estate markets may impact its ability to make
      prudent investment decisions on our behalf. Accordingly, where our manager
      deems
      it necessary, it plans to utilize independent real estate advisors and local
      legal counsel located in markets where it lacks experience for consultation
      prior to making investment decisions. Members will not have an opportunity
      to
      evaluate the qualifications of such advisors and no assurance can be given
      that
      they will render prudent advice to our manager.





**Our
      lending operations are subject to certain regulatory
      requirements.**





As
      a
      company investing in real estate loans and having raised funds through a public
      offering, we are subject to the NASAA Guidelines promulgated by the state
      securities administrators. The NASAA Guidelines govern, among other things,
      our
      debt to equity ratio and the diversity and composition of our investments.
      For
      example, the NASAA Guidelines provide that we may not invest in or make real
      estate loans to or from any one borrower that would exceed, in the aggregate,
      an
      amount greater than 20% of the capital contributions that we have raised.
      Additionally, the NASAA Guidelines require reserves of not less than 1% of
      the
      offering proceeds. The NASAA Guidelines are intended to protect the interests
      of
      investors. However, our flexibility in making business decisions may be limited
      by our obligation to comply with the NASAA Guidelines.




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**We
      may have a lack of control over participations.**





We
      will
      consider investing in or purchasing loans jointly with other lenders and
      purchasers, some of whom might be affiliates of Vestin Mortgage. We will
      initially have, and will maintain a controlling interest as lead lender in
      participations with non-affiliates. Although it is not our intention to lose
      control, there is a risk that we will be unable to remain as the lead lender
      in
      the loans in which we participate in the future. In the event of participation
      with a publicly registered affiliate, the investment objectives of the
      participants shall be substantially identical. There shall be no duplicate
      fees.
      The compensation to the sponsors must be substantially identical, and the
      investment of each participant must be on substantially the same terms and
      conditions. Each participant shall have a right of first refusal to buy the
      other's interest if the co-participant decides to sell its interest. We will
      not
      participate in joint ventures or partnerships with affiliates that are not
      publicly registered except as permitted in the NASAA Guidelines. If our
      co-participant affiliate determines to sell its interest in the loan, there
      is
      no guarantee that we will have the resources to purchase such interest and
      we
      will have no control over a sale to a third party purchaser.





**MANAGEMENT
      AND CONFLICTS OF INTEREST RISKS**





**We
      rely on our manager to manage our day-to-day operations and select our loans
      for
      investment.**





Our
      ability to achieve our investment objectives and to make distributions depends
      upon our manager’s and its affiliate’s performance in obtaining, processing,
      making and brokering loans for us to invest in and determining the financing
      arrangements for borrowers. Members have no opportunity to evaluate the
      financial information or creditworthiness of borrowers, the terms of mortgages,
      the real property that is our collateral or other economic or financial data
      concerning our loans. Our manager is entitled to receive from us a management
      (acquisition and advisory) fee up to 2.5% of the gross offering proceeds. This
      fee is payable regardless of the performance of our loan portfolio. Our manager
      has no fiduciary obligations to our members, is not required to devote its
      employees’ full time to our business and may devote time to business interests
      competitive to our business.





**Our
      manager’s lack of experience with certain real estate markets could impact its
      ability to make prudent investments on our behalf.**





As
      of
      March 31, 2007, our loans were in the following states: Arizona, California,
      Nevada, Oklahoma, Oregon, Texas and Washington. Depending on the market and
      on
      our company’s performance, we plan to expand our investments throughout the
      United States. However, our manager has limited experience outside of the
      Western and Southern United States. Real estate markets vary greatly from
      location to location and the rights of secured real estate lenders vary
      considerably from state to state. Our manager’s limited experience in most U.S.
      real estate markets may impact its ability to make prudent investment decisions
      on our behalf. Accordingly, where our manager deems it necessary, it plans
      to
      utilize independent real estate advisors and local legal counsel located in
      markets where it lacks experience for consultation prior to making investment
      decisions. Members will not have an opportunity to evaluate the qualifications
      of such advisors and no assurance can be given that they will render prudent
      advice to our manager.




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**Our
      success depends on key personnel of our manager, the loss of whom could
      adversely affect our operating results, and on our manager’s ability to attract
      and retain qualified personnel.**





Our
      success depends in part upon the continued contributions of certain key
      personnel of our manager, including; Michael V. Shustek (Chief Executive Officer
      and President), Rocio Revollo (Chief Financial Officer), James M. Townsend
      (Chief Operating Officer) and Daniel B. Stubbs (Senior Vice President,
      Underwriting) some of whom would be difficult to replace because of their
      extensive experience in the field, extensive market contacts and familiarity
      with our company. If any of these key employees were to cease employment, our
      operating results could suffer. None of the key personnel of our manager are
      subject to an employment, non-competition or confidentiality agreement with
      our
      manager, or us and we do not maintain “key man” life insurance policies on any
      of them. Our future success also depends in large part upon our manager’s
      ability to hire and retain additional highly skilled managerial, operational
      and
      marketing personnel. Our manager may require additional operations and marketing
      people who are experienced in obtaining, processing, making and brokering loans
      and who also have contacts in the relevant markets. Competition for personnel
      is
      intense, and we cannot be assured that we will be successful in attracting
      and
      retaining skilled personnel. If our manager were unable to attract and retain
      key personnel, the ability of our manager to make prudent investment decisions
      on our behalf may be impaired.





Any
      indemnification of our manager by us will decrease the amount available for
      distribution. Pursuant to our Operating Agreement, we may be required to
      indemnify our manager or any of its affiliates, agents, or attorneys from any
      action, claim or liability arising from any act or omission made in good faith
      and in performance of its duties under the Operating Agreement. The availability
      of such indemnification may reduce the amount of funds we have available for
      distribution.





**Vestin
      Mortgage serves as our manager pursuant to our Operating Agreement. It may
      be
      difficult to terminate Vestin Mortgage and does not reflect arm’s length
      negotiations.**





Pursuant
      to the terms of our Operating Agreement, Vestin Mortgage acts as our manager.
      The term of the Operating Agreement is for the duration of our existence. Vestin
      Mortgage may only be terminated as manager upon the affirmative vote of a
      majority of members entitled to vote on the matter. Consequently, it may be
      difficult to replace our manager in the event that our performance does not
      meet
      expectations or for other reasons. The Operating Agreement was negotiated by
      related parties and may not reflect terms as favorable as those subject to
      arm’s
      length bargaining.





**Our
      manager will face conflicts of interest concerning the allocation of its
      personnel’s time.**





Our
      manager is also the manager of VRM I, VRM II and inVestin, companies with
      investment objectives similar to ours. Our manager and Mr. Shustek, who
      indirectly owns 100% of our manager, anticipate that they may also sponsor
      other
      real estate programs having investment objectives similar to ours. As a result,
      our manager and Mr. Shustek may have conflicts of interest in allocating their
      time and resources between our business and other activities. During times
      of
      intense activity in other programs and ventures, our manager and its key people
      will likely devote less time and resources to our business than they ordinarily
      would. Our Operating Agreement does not specify a minimum amount of time and
      attention that our manager and its key people are required to devote to our
      company. Thus, our manager may not spend sufficient time managing our
      operations, which could result in our not meeting our investment
      objectives.





**Our
      manager and its affiliates will face conflicts of interest arising from our
      fee
      structure.**





Vestin
      Originations, an affiliate of our manager, will receive substantial fees from
      borrowers for transactions involving real estate loans. Many of these fees
      are
      paid on an up-front basis. In some cases, Vestin Originations is entitled to
      additional fees for loan extensions or modifications and loan assumptions and
      reconveyances. Vestin Originations’ compensation is based on the volume and size
      of the real estate loans selected for us, regardless of their performance,
      which
      could create an incentive to make or extend riskier loans. Our interests may
      diverge from those of our manager, Vestin Originations and Mr. Shustek to the
      extent that Vestin Originations benefits from up-front fees that are not shared
      with us.




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Vestin
      Originations will be receiving fees from borrowers that would otherwise increase
      our returns. Because Vestin Originations receives all of these fees, our
      interests will diverge from those of our manager, Vestin Originations and Mr.
      Shustek when our manager decides whether we should charge the borrower higher
      interest rates or our manager’ affiliates should receive higher fees from
      borrowers.





We
      paid
      our manager a total of $4,000 for the three months ended March 31, 2007, for
      managing us. In
      addition, Vestin Mortgage and Vestin Originations received a total of $7,000
      and
      approximately $2.7 million, respectively in fees directly from borrowers for
      the
      three months ended March
      31,
      2007. The amounts received from borrowers represent fees earned by Vestin
      Mortgage and Vestin Originations for loans originated for all funds managed
      by
      Vestin Mortgage, including us, VRM I, VRM II and inVestin. Our assets
      represented approximately 7% of the assets managed by Vestin Mortgage as of
      March 31, 2007.





**Our
      manager will face conflicts of interest relating to other investments in real
      estate loans.**





We
      expect
      to invest in real estate loans where our manager or one or more other companies
      managed by our manager are also investing in real estate loans. There is a
      risk
      that our manager may select for us a real estate loan investment that provides
      lower returns than a real estate loan investment purchased by another program
      or
      entity managed by our manager. Our manager also serves as the manager for VRM
      I,
      VRM II and inVestin, which have similar investment objectives as our company.
      There are no restrictions or guidelines on how our manager will determine which
      loans are appropriate for us and which are appropriate for VRM I, VRM II,
      inVestin or another company that our manager manages. Moreover, our manager
      has
      no obligation to provide us with any particular opportunities or even a pro
      rata
      share of opportunities afforded to other companies it manages.





**INVESTMENT
      RISKS**





**Units
      lack liquidity and marketability.**





There
      is
      no public trading market for units, and members cannot freely sell or transfer
      units or use them as collateral for a loan. Currently, we do not intend to
      list
      the units on any national exchange or on Nasdaq. Our Operating Agreement
      restricts the transfer of units so that we may avoid being classified as a
      “publicly traded partnership” under Section 7704 of the Internal Revenue Code.
      If we were classified as a publicly traded partnership taxable as a corporation,
      the taxable income derived from our operations would be subject to the double
      tax system applicable to corporations and shareholders for federal income tax
      purposes (i.e., the taxable income would be subject to tax at the entity level
      at regular corporate tax rates and members would be subject to tax at
      distribution or capital gain rates on our share of our taxable income to the
      extent we distribute). As a result of this entity level tax, cash available
      for
      distribution to unit holders would be significantly reduced which in turn would
      result in a significant reduction in the value of members’ units. In order to
      attempt to avoid these adverse income tax consequences, members may not sell
      or
      assign their units and will not be entitled to have their units redeemed without
      the consent of our manager. Our manager will withhold its consent to any sale,
      assignment or redemption of units to the extent necessary to prohibit transfers
      that could cause us to be classified as a publicly traded partnership. Further,
      the resale of units may be restricted by state securities laws.





**Members
      have limited ability to have units redeemed** .





Members
      have a limited ability to have their units redeemed by us. Requests by members
      for redemptions are honored in the order in which they are received by the
      manager. The significant limitations on the ability to have units redeemed
      are
      the following:





·
            There
                is no reserve fund for redemptions.





**·**
            Redemption
                payments are made only to the extent we have available cash from
                proceeds
                of repayments of principal on real estate loans and capital contributions;
                and the redemption would not impair the capital or operation of the
                Fund.
                Accordingly, a significant amount of redemption requests may delay
                the
                payment of subsequent redemptions**.**




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·
            The
                total amount withdrawn by all members during any calendar year cannot
                exceed 10% of the amount of capital accounts of all the members with
                a
                yearly limit of $100,000 per member subject to the manager’s discretion to
                allow a greater amount.





·
            We
                will only make redemption payments once a
                quarter.





Because
      a
      substantial portion of our loans are made on an “interest only” basis, we will
      not receive proceeds from the repayment of principal as frequently as we would
      with loans where the principal is repaid in periodic installments. To help
      permit redemptions, we will not refinance or invest in new loans using payments
      of loan principal by borrowers or new invested capital of members unless we
      have
      sufficient funds to cover permitted withdrawals.





**ITEM
      2.**  **UNREGISTERED
      SALES OF EQUITYAND USE OF PROCEEDS**





**Market
      Information**





There
      is
      no established public trading market for the trading of Units.





**Holders**





As
      of May
      10, 2007, 676 accounts held 2,525,561 Units of interest in the
      Company.





**Distribution
      Policy**





We
      generally distribute to Unit holders on a monthly basis most of our Net Income
      Available for Distribution (as defined in our Operating Agreement). Net Income
      Available for Distribution is based upon cash flow from operations, less certain
      reserves, and may exceed net income as calculated in accordance with accounting
      principles generally accepted in the United States (“GAAP”). Our Operating
      Agreement also permits distributions of capital. We made distributions of
      approximately $618,000 (prior to reinvested distributions) during the three
      months ended March 31, 2007, all of which were paid from Net Income Available
      for Distribution. It is our intention to continue to distribute our Net Income
      Available for Distribution to our Unit holders.





**Recent
      Sales of Unregistered Securities**





None.





**Equity
      Compensation Plan Information**





None.





**Purchases
      of Equity Securities by the Issuer and Affiliated
      Purchasers**





**Period**
            
            **Total
                Number of Units Purchased (1)**
            
            **Average
                Price**
              **Paid
                per Unit**
            
            **Total
                Number of Units Purchased as Part of Publicly Announced Plans or
                Programs**
            
            **Maximum
                Number (or Approximate Dollar Value) of Units that May Yet be Purchased
                under the Plans or Programs**January
                2007
            
            
            5,292
            
            $
            11.00
            
            
            None
            
            
            NoneFebruary
                2007
            
            
            5,394
            
            $
            11.00
            
            
            None
            
            
            NoneMarch
                2007
            
            
            5,305
            
            $
            11.00
            
            
            None
            
            
            None




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(1)
            Pursuant
                to our Operating Agreement, members may request to have their units
                redeemed. However, in order to comply with our Operating Agreement
                and
                Internal Revenue Code, we may redeem no more than 10% of the aggregate
                Members’ capital in any calendar year. Balances in Members’ capital
                accounts as of January 1, 2007 were approximately $30.4 million,
                which
                limits redemptions to approximately $3.0 million for calendar year
                2007.





**ITEM
      3.**  **DEFAULTS
      UPON SENIORSECURITIES**





None.





**ITEM
      4.**  **SUBMISSION
      OF MATTERS TO A VOTE OF SECURITYHOLDERS**





For
      information regarding a Special Meeting of our Members held on March 5, 2007,
      see our Report on Form 8-K filed with the SEC on March 7, 2007.




ITEM
      5.  **OTHER
      INFORMATION**




On
      March
      21, 2007, John W. Alderfer resigned as the Chief
      Financial Officer of Vestin Group Inc. (Vestin Group), the
      parent company of our manager .
      He also
      resigned as a Director and the Chief Financial Officer of Vestin Realty Mortgage
      I, Inc. and Vestin Realty Mortgage II, Inc. Mr.
      Alderfer is a party to an employment, non-competition and confidentiality
      contract with Vestin Group through December 31, 2008.





On
      March
      21, 2007, Rocio
      Revollo was appointed as the
      Chief Financial Officer of Vestin Group. Ms. Revollo will also serve as the
      Chief Financial Officer of Vestin Realty Mortgage I, Inc. and Vestin Realty
      Mortgage II, Inc. Ms. Revollo was the Corporate Controller of Vestin Group
      from
      June 2005 to March 2007.




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ITEM 6.  **EXHIBITS**




**EXHIBIT
      INDEX**


**Exhibit****No.**
            
            **Description
                of Exhibits**3.1(1)
            
            Articles
                of Organization3.2(2)
            
            Certificate
                of Amendment to Articles of Organization3.3(3)
            
            Amended
                and Restated Operating Agreement (included as Exhibit A to the
                prospectus)4(4)
            
            Distribution
                Reinvestment Plan10.7
                (5)
            
            Purchase
                and Sale Agreement, dated August 1, 2004, by and between Luke Properties,
                LLC and Vestin Fund III, LLC10.8
                (5)
            
            Assignment
                and Assumption Agreement dated August 16, 2004 by and between Vestin
                Fund
                III, LLC and VF III HQ, LLC10.9(6)
            
            Office
                lease agreement dated March 31, 2003 by and between Luke Properties,
                LLC
                and Vestin Group, Inc.10.10(7)
            
            Intercreditor
                Agreement, dated October 13, 2006, by and between Vestin Originations,
                Inc., Vestin Mortgage, Inc. Vestin Realty Mortgage I, Inc., Vestin
                Realty
                Mortgage II, Inc., Vestin Fund III, LLC, Owens Financial Group, Inc.
                and
                Owens Mortgage Investment Fund31.1
            
            Section
                302 Certification of Michael V.
                Shustek31.2
            
            Section
                302 Certification of Rocio
                Revollo32
            
            Certification
                Pursuant to U.S.C. 18 Section
                1350





(1)
            
            Incorporated
                herein by reference to our Pre-Effective Amendment No. 3 to Form
                S-11
                Registration Statement filed on September 2, 2003, File No.
                333-105017.(2)
            
            Incorporated
                herein by reference to our Form 10-Q filed on August 16, 2004, File
                No.
                333-105017.(3)
            
            Incorporated
                herein by reference to our Post-Effective Amendment No. 1 to Form
                S-11
                Registration Statement filed on April 29, 2004, File No.
                333-105017.(4)
            
            Incorporated
                herein by reference to Exhibit 4.4 of our Post-Effective Amendment
                No. 5
                to Form S-11 Registration Statement filed on April 28, 2006, File
                No.
                333-105017.(5)
            
            Incorporated
                herein by reference to our Form 10-Q filed on November 15, 2004,
                File No.
                333-105017.(6)
            
            Incorporated
                herein by reference to our Form 10-KSB filed on March 30, 2005, File
                No.
                333-105017.(7)
            
            Incorporated
                herein by reference to the Quarterly Report on Form 10-Q for the
                three
                months ended September 30, 2006 filed on November 8, 2006 (File No.
                000-51301)




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**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the Registrant has duly caused this report to be signed on its behalf
      by
      the undersigned thereunto duly authorized.





Vestin
                Fund III, LLCBy:
            
            Vestin
                Mortgage, Inc., its sole ManagerBy:
            
            */s/
                Michael V. Shustek*Michael
                V. ShustekChief
                Executive Officer and Sole Director of the Manager(Principal
                Executive Officer of Manager)By:
            
            */s/**Rocio Revollo*Rocio
                RevolloChief
                Financial Officer of the Manager(Principal
                Financial and Accounting Officer of the
                Manager)





Dated:
      May 11, 2007




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