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U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-QSB (MARK ONE) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 2004 [  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM  TO COMMISSION FILE NUMBER 000-24803 VESTIN GROUP, INC. (EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
 DELAWARE
    
    52-2102142(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
    
    (I.R.S. EMPLOYER
IDENTIFICATION NO.)
 2901 EL CAMINO AVENUE, SUITE 206, LAS VEGAS, NEVADA 89102 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (702) 227-0965 (ISSUERS TELEPHONE NUMBER) Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [  ] Number of shares outstanding of each of the issuers classes of common equity,
as of March 31, 2004: 5,328,340 Shares of Common Stock Transitional Small Business Disclosure Format (Check one): Yes [  ] No [X]




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VESTIN GROUP, INC. AND SUBSIDIARIES
 INDEX PagePART I
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsConsolidated Balance Sheet (unaudited)
    
    
    3Consolidated
Statements of Operations (unaudited)
    
    
    4Consolidated Statement of Changes in Stockholders Equity (unaudited)
    
    
    5Consolidated Statements of Cash Flows (unaudited)
    
    
    6Condensed Notes to Consolidated Financial Statements (unaudited)
    
    
    8Item 2.
    
    Managements Discussion and Analysis
    
    
    16Item 3.
    
    Controls and Procedures
    
    
    24PART II
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    25Item 2.
    
    Changes in Securities and Use of Proceeds
    
    
    25Item 3.
    
    Defaults Upon Senior Securities
    
    
    25Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    25Item 5.
    
    Other Information
    
    
    25Item 6.
    
    Exhibits and Reports on Form 8-K
    
    
    26SIGNATURES
    
    
    
    
    29EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32
  2




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Vestin Group, Inc. and Subsidiaries 
 CONSOLIDATED BALANCE SHEET March 31, 2004 (Unaudited) ASSETSCash
    
    $
    4,272,238Accounts receivable
    
    
    4,344,346Interest receivable
    
    
    10,199Due from related parties
    
    
    2,804,469Note receivable
    
    
    400,000Notes receivable  related party
    
    
    87,964Investments in real estate held for sale
    
    
    8,024,614Investments in mortgage loans on real estate,
net of allowance of $110,000
    
    
    473,035Other investments  related parties
    
    
    3,316,173Deferred tax asset
    
    
    1,262,771Property and equipment, net
    
    
    865,707Other assets
    
    
    154,678Total assets
    
    $
    26,016,194LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable and accrued expenses
    
    $
    2,080,348Due to related parties
    
    
    280,782Dividend payable
    
    
    74,817Deferred income
    
    
    2,443,750Income taxes payable
    
    
    2,067,401Notes payable  related party
    
    
    2,335,518Notes payable
    
    
    374,654Capital leases payable
    
    
    143,835Total liabilities
    
    $
    9,801,105Commitments and contingencies
    
    
    Stockholders equityPreferred stock, $.0001 par value; 20 million shares
authorized; 897,800 shares issued and outstanding
    
    
    90Common stock, $.0001 par value; 100 million shares
authorized 5,328,340 shares issued and outstanding
    
    
    532Additional paid-in capital
    
    
    11,623,791Treasury stock
    
    
    (544,305
    )Retained earnings
    
    
    5,134,981Total stockholders equity
    
    
    16,215,089Total liabilities and stockholders equity
    
    $
    26,016,194
 The accompanying notes are an integral part of these statements. 3




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Vestin Group, Inc. and Subsidiaries 
 CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the Three Months EndedMarch 31, 2004
    
    March 31, 2003RevenuesLoan placement and related fees
    
    $
    8,168,748
    
    
    $
    7,142,996Interest income
    
    
    43,488
    
    
    
    183,862Gain from
settlement of lawsuit
    
    
    5,850,000
    
    
    
    Other revenues
    
    
    392,477
    
    
    
    426,119Total revenues
    
    
    14,454,713
    
    
    
    7,752,977EXPENSESSales and marketing expenses
    
    
    2,868,338
    
    
    
    4,202,789General and administrative expenses
    
    
    3,867,710
    
    
    
    5,157,484Valuation losses on real estate held for sale
    
    
    600,000
    
    
    
    Interest expense
    
    
    12,925
    
    
    
    95,358Total expenses
    
    
    7,348,973
    
    
    
    9,455,631Income
(loss) from operations before
provision (benefit) for income taxes
    
    
    7,105,740
    
    
    
    (1,702,654
    )Provision (benefit) for income taxes
    
    
    2,425,264
    
    
    
    (578,902
    )NET INCOME (LOSS)
    
    
    4,680,476
    
    
    
    (1,123,752
    )Preferred stock dividends
    
    
    224,450
    
    
    
    226,950Net income (loss) applicable to common shareholders
    
    $
    4,456,026
    
    
    $
    (1,350,702
    )Earnings (loss) per common share  Basic
    
    $
    0.87
    
    
    $
    (0.25
    )Earnings (loss) per common share  Diluted
    
    $
    0.60
    
    
    $
    (0.25
    )Weighted average number of common shares
outstanding  Basic
    
    
    5,150,340
    
    
    
    5,327,718Weighted average number of common shares
outstanding  Diluted
    
    
    7,422,882
    
    
    
    5,327,718
 The accompanying notes are an integral part of these statements. 4




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Vestin Group, Inc. and Subsidiaries 
 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY For the Three Months Ended March 31, 2004 (Unaudited) Preferred Stock
    
    Common Stock
    
    Treasury Stock
    
    AdditionalPaid-in
    
    RetainedShares
    
    Amount
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    Capital
    
    Earnings
    
    TotalBalance at January 1, 2004
    
    
    897,800
    
    
    $
    90
    
    
    
    5,328,340
    
    
    $
    532
    
    
    
    (178,000
    )
    
    $
    (544,305
    )
    
    $
    9,767,187
    
    
    $
    678,955
    
    
    $
    9,902,459Expenses related to issuance of
warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,856,604
    
    
    
    
    
    
    
    1,856,604Dividends paid on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (224,450
    )
    
    
    (224,450
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,680,476
    
    
    
    4,680,476Balance at March 31, 2004
    
    
    897,800
    
    
    $
    90
    
    
    
    5,328,340
    
    
    $
    532
    
    
    
    (178,000
    )
    
    $
    (544,305
    )
    
    $
    11,623,791
    
    
    $
    5,134,981
    
    
    $
    16,215,089
 The accompanying notes are an integral part of these statements. 5




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Vestin Group, Inc. and Subsidiaries 
 CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Three Months EndedMarch 31, 2004
    
    March 31, 2003Cash flow from operating activities:Net income (loss)
    
    $
    4,680,476
    
    
    $
    (1,123,752
    )Adjustments to reconcile net income (loss) from operations
to net cash provided (used) by operating activities:Depreciation
    
    
    67,026
    
    
    
    40,866Stock based compensation
    
    
    1,856,604
    
    
    
    232,076Capital contribution to Fund I
    
    
    
    
    
    
    1,600,000Gain from settlement of lawsuit
    
    
    (3,600,000
    )
    
    
    Provision for loan losses
    
    
    
    
    
    
    50,000Valuation loss on real estate held for sale
    
    
    600,000
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (200,074
    )
    
    
    (1,626,936
    )Interest receivable
    
    
    450
    
    
    
    67,477Due from related parties
    
    
    (638,414
    )
    
    
    (855,931
    )Other assets
    
    
    (10,473
    )
    
    
    20,028Deferred tax asset
    
    
    616,757
    
    
    
    Accounts payable and accrued expenses
    
    
    (1,953,229
    )
    
    
    1,534,229Due to related party
    
    
    280,782
    
    
    
    Deferred income
    
    
    (431,250
    )
    
    
    Income taxes payable
    
    
    1,808,507
    
    
    
    (578,902
    )Net cash provided (used) by operating activities
    
    
    3,077,162
    
    
    
    (640,845
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    (35,513
    )
    
    
    (61,625
    )Purchase of investment in real estate held for sale
    
    
    
    
    
    
    (1,100,000
    )Proceeds from sale of investment in real estate held for sale
    
    
    250,000
    
    
    
    Purchase of other investments  related party
    
    
    (179,411
    )
    
    
    Proceeds from the sale of investments in mortgage loans
on real estate to Fund II
    
    
    
    
    
    
    2,297,925Proceeds from the sale of investments in mortgage loans
on real estate from other related party
    
    
    295,000
    
    
    
    Purchase of investments in mortgage loans on real estate
    
    
    
    
    
    
    (394,170
    )Proceeds from sale of investments in mortgage loans
on real estate
    
    
    75,000
    
    
    
    539,745Net cash provided by investing activities
    
    
    405,076
    
    
    
    1,281,875
 The accompanying notes are an integral part of these statements. 6




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Vestin Group, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS  CONTINUED (Unaudited) For the Three Months EndedMarch 31, 2004
    
    March 31, 2003Cash flows from financing activities:Payments on lines of credit
    
    $
    
    
    
    $
    (2,000,000
    )Proceeds from notes payable
    
    
    
    
    
    
    1,100,000Payments on notes payable
    
    
    (1,100,000
    )
    
    
    Payments on capital leases
    
    
    (16,605
    )
    
    
    Common stock options exercised
    
    
    
    
    
    
    16,000Payment of dividend on preferred stock
    
    
    (224,450
    )
    
    
    (226,950
    )Payment of dividend on common stock
    
    
    
    
    
    
    (639,372
    )Net cash used in financing activities
    
    
    (1,341,055
    )
    
    
    (1,750,322
    )NET CHANGE IN CASH
    
    
    2,141,183
    
    
    
    (1,109,292
    )Cash at beginning of period
    
    
    2,131,055
    
    
    
    2,523,017Cash at end of period
    
    $
    4,272,238
    
    
    $
    1,413,725Supplemental cash flow information:Cash paid for federal income taxes
    
    $
    
    
    
    $
    Cash paid for interest
    
    $
    12,925
    
    
    $
    95,358Non-cash investing and financing activities:Sale of investment in real estate held for sale for which proceeds
not
received until April 2004
    
    $
    1,761,589
    
    
    $
    Dividends declared on preferred stock
    
    $
    74,817
    
    
    $
    75,650Notes payable assumed through foreclosure
    
    $
    
    
    
    $
    244,654Notes payable  related parties assumed through foreclosure
    
    $
    
    
    
    $
    802,363Note payable related to capital contribution to Fund I
    
    $
    
    
    
    $
    723,763In substance receipt of amounts due from Fund I related to
capital contribution in Fund I
    
    $
    
    
    
    $
    876,237Investments in real estate held for sale acquired through
foreclosure and judgments
    
    $
    3,600,000
    
    
    $
    1,094,914Investment in real estate held for sale acquired for
investments in mortgage loans on real estate
    
    $
    
    
    
    $
    478,829
 The accompanying notes are an integral part of these statements. 7




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VESTIN GROUP, INC.
AND SUBSIDIARIES 
 CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 NOTE 1  BASIS OF PRESENTATION Vestin Group, Inc. (Vestin or the Company) conducts its operations
primarily through Vestin Mortgage, Inc., a wholly owned subsidiary (Vestin
Mortgage). Vestin Mortgage operates as a mortgage broker licensed in the state
of Nevada. Vestin Mortgage is engaged in the brokerage and placement of
commercial loans secured by real property. Vestin Mortgages primary operations
consist of the brokerage and placement of commercial, construction, acquisition
and development, land, and residential mortgage loans secured by real property
as well as managing three publicly held funds, Vestin Fund I, LLC (Fund I),
Vestin Fund II, LLC (Fund II), Vestin Fund III, LLC (Fund III),
collectively referred to as (the Funds) and an entity owned by the Companys
Chief Executive Officer, inVestin Nevada, Inc. (inVestin Nevada), which
invest in mortgage loans. Fund III will also invest in real estate. Vestin
Mortgage, as manager of the Funds and inVestin Nevada will be referred to as
Manager. Vestin Capital, Inc., a wholly owned subsidiary of the Company, serves as the
lead broker dealer on the sale of units for the Funds and also provides
administrative services. Vestin Capital does not receive any commissions from
the sale of units for the Funds. Rather, Vestin Capital receives an
administrative fee from Vestin Mortgage related to the maintenance of investor
files and general investor services. Vestin Advisors, Inc., a wholly owned subsidiary of the Company, is a licensed
trust company in the state of Nevada that serves as a custodian for individual
retirement accounts of investors in Vestin products. JLS Advertising, a wholly owned subsidiary of the Company, is an advertising
company formed solely for the purposes of providing advertising buying power
for the Companys marketing efforts. There was no specific operating activity
in this company during the three months ended March 31, 2004 and 2003. The Company operates in one business segment. The interim consolidated financial statements present the balance sheet,
statements of income, stockholders equity and cash flows of Vestin Group, Inc.
and its subsidiaries. The interim consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. All significant
inter-company transactions and balances have been eliminated in consolidation. The interim consolidated financial information is unaudited. In the opinion of
management, all adjustments necessary to present fairly the financial position
as of March 31, 2004 and the results of operations and cash flows presented
herein have been included in the consolidated financial statements. Interim
results are not necessarily indicative of results of operations for the full
year. The accompanying consolidated financial statements have been prepared in
accordance with Securities and Exchange Commission requirements for interim
financial statements. Therefore, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements. The financial statements should be
read in conjunction with the Form 10-KSB/A for the year ended December 31, 2003
of the Company. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates. Significant estimates include expected useful lives of
property and equipment, allowance for accounts receivable, allowances for
investments in mortgage loans on real estate, and valuations of real estate
held for sale. Changes in facts and circumstances may result in revised
estimates, which are recorded in the period in which they become known. 8




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NOTE 2  SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition The Company recognizes revenue primarily from loan placement fees, loan
servicing fees and extension fees. Loan placement fees are generally recorded
as revenue at the close of escrow and reduced by direct loan placement costs on
loans which the Company has not recorded as investments in mortgage loans on
its financial statements. Typically, deeds of trust related to loans placed are initially in the
Companys name to facilitate the loan placement process. Upon arranging a
funding source for such loans, the deeds of trust are assigned to the
respective investor (i.e., the Funds). Loan servicing fees are recorded as
revenue when such services are rendered. Servicing fees represent the interest
spread between what is paid to the investor and what the borrower pays for the
use of the money, which can vary from loan to loan. Servicing costs approximate
servicing fees and therefore, the Company has not recognized a servicing asset
or liability. Extension fees are generally recorded as revenue at the extension
grant date. Interest income on investments in mortgage loans on real estate is recorded
when earned. The Company does not recognize 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 the Company 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. Investments in Real Estate Held for Sale Real estate held for sale includes real estate acquired through foreclosure and
is carried at the lower of cost or the propertys estimated fair value, less
estimated costs to sell. The Company seeks to sell properties acquired through
foreclosure as quickly as circumstances permit. Investments in Mortgage Loans Investments in mortgage loans are secured by trust deeds and mortgages.
Generally, the Companys mortgage loans require interest only payments, either
through payments or decrease of an interest reserve, with a balloon payment of
the principal at maturity. The Company has both the intent and ability to hold
mortgage loans until maturity and therefore, mortgage loans are classified and
accounted for as held for investment and are carried at cost. 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, which may
be commissioned by the borrower, are generally dated within 12 months of 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 drastically exceed the immediate sales value and
may include anticipated zoning changes, selection by a purchaser against
multiple alternatives, 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 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, the Company may not recover the
full amount of the loan. Allowance for Loan Losses The Company maintains an allowance for loan losses on its investment in
mortgage loans for estimated credit impairment in the Companys investment in
mortgage loans portfolio. The Company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 including, but not limited to, 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. 9




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Income taxes The Company accounts for its income taxes using the liability method, which
requires recognition of deferred tax assets and liabilities for the future tax
consequences attributable to differences between carrying amounts of existing
assets and liabilities and their respective tax bases and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. NOTE 3  STOCK-BASED COMPENSATION The Company has stock-based compensation plans covering the majority of its
employees, a plan covering the Companys Board of Directors, and plans related
to employment contracts with certain Executive Officers of the Company. The
Company accounts for stock-based compensation utilizing the intrinsic value
method in accordance with the provisions of Accounting Principles Board Opinion
No. 25 (APB 25), Accounting for Stock Issued to Employees and related
Interpretations. Accordingly, no compensation expense is recognized for fixed
option plans because the exercise prices of employee stock options equal or
exceed the market prices of the underlying stock on the dates of grant. Under APB 25, compensation cost is recognized for stock options granted to
employees when the option is less than the market price of the underlying
common stock on the date of grant. SFAS No. 123 (SFAS 123), Accounting for
Stock-Based Compensation and SFAS No. 148 (SFAS 148), Accounting for
Stock-Based Compensation  Transition and Disclosure  an amendment of FASB
Statement No. 123 require disclosures as if the Company had applied the fair
value method to employee awards rather than the intrinsic value method. The
Company has determined that it will not adopt SFAS No. 123 to account for
employee stock options using the fair value method. The fair value of
stock-based awards to employees is calculated through the use of option pricing
models, even though such models were developed to estimate the fair value of
freely tradable, fully transferable options without vesting restrictions, which
differ significantly from the Companys stock option awards. These models also
require subjective assumptions, including future stock price volatility and
expected time to exercise, which greatly affect the calculated values. The
Companys fair value calculations for awards from stock option plans were made
using the Black-Scholes option pricing model. The following table represents the effect on net loss and loss per share if the
Company had applied the fair value based method and recognition provisions SFAS
123 to stock-based employee compensation: For the three months endedMarch 31,
    
    March 31,2004
    
    2003Net income (loss), as reported
    
    $
    4,680,476
    
    
    $
    (1,123,752
    )Add: Stock-based compensation
expense included in reported income (loss),
net of related tax effects
    
    
    
    
    
    
    Deduct: Total stock-based
compensation expense determined under
fair value based methods for all awards,
net of related tax effects
    
    
    (150,802
    )
    
    
    (324,845
    )Pro forma net income (loss)
    
    $
    4,529,674
    
    
    $
    (1,448,597
    )Net income (loss) per common shareBasic income (loss), as reported
    
    $
    0.87
    
    
    $
    (0.25
    )Basic income (loss), pro forma
    
    $
    0.88
    
    
    $
    (0.31
    )Diluted income (loss), as reported
    
    $
    0.60
    
    
    $
    (0.25
    )Diluted income (loss), pro forma
    
    $
    0.61
    
    
    $
    (0.31
    )
 10




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As required, the pro forma disclosures above include options granted since
January 1, 1995. Consequently, the effects of applying SFAS 123 for providing
pro forma disclosures may not be representative of the effects on reported net
income for future years until all options outstanding are included in the pro
forma disclosures. For purposes of pro forma disclosures, the estimated fair
value of stock-based compensation plans and other options is amortized to
expense primarily over the vesting period. NOTE 4  RELATED PARTY TRANSACTIONS Notes receivable  In 2000, we loaned a former employee approximately $251,000
to enable him to operate, develop and grow a California real estate loan fund.
The Company does not have any affiliations with the California real estate loan
fund. The loan is unsecured but is a full recourse loan. The interest rate of
10% is payable on a semi-annual basis and originally matured on April 19, 2004.
During April 2004, the Company received a payoff of $30,000 and a six month
extension was granted on the new principal balance of $57,964. The loan now
matures on September 30, 2004. Due from related parties totaling $2,804,469 as of March 31, 2004 are comprised
of the following:  Amounts due from Fund I totaling $528,042 relate to management fees, earnings
on units in Fund I, and reimbursable expenses. Amounts due from Fund I bear
no interest and are due on demand.Amounts due from Fund II totaling $1,983,522 relate to management fees,
earnings on units in Fund II, and reimbursable expenses. Amounts due from
Fund II bear no interest and are due on demand.Advances to C-5, LLC totaling $208,237 relate to various expenses paid for
travel related to an aircraft usage agreement as discussed below.Amounts due from the majority stockholder and Chief Executive Officer of the
Company totaling $65,261 related to various advances and legal costs paid by
Vestin Mortgage on his behalf.Amounts due from inVestin Nevada, Inc. (inVestin Nevada) totaling $19,407
related to management fees earned by Vestin Mortgage. Such amounts bear no
interest and are due on demand. In October 2002, inVestin Nevada, a
corporation wholly-owned by the Chief Executive Officer of the Company was
created as an additional funding source for the Company that will seek to
raise $100,000,000 through the sale of subordinated notes to Nevada
residents. Vestin Mortgage has entered into an agreement to provide
management services to inVestin Nevada whereby Vestin Mortgage will receive a
monthly management fee equal to the first four percent (4%) of revenues
earned by the Company above the average aggregate interest paid to the
debenture holders. For the three months ended March 31, 2004, Vestin Mortgage
earned $19,407 related to the agreement. Other investments  related parties totaling $3,136,173 of March 31, 2004 of
the following:  The Companys investments in units of the Funds totaling $2,881,798.Investments in collateralized mortgage obligations which are controlled by a
company wholly owned by the Companys Chief Executive Officer totaling
$434,375. During the three-month periods ended March 31, 2004 and 2003, the Company paid
$306,436 and $245,761, respectively, for legal fees to a law firm in which the
Secretary of the Company has an equity ownership interest. The Companys Chief Financial Officer and Tax Manager are equity owners in L.L.
Bradford & Company, LLC, a Certified Public Accounting firm (L.L. Bradford).
For the three-month periods ended March 31, 2004 and 2003, approximately
$72,545 and $37,500, respectively, was paid to L.L. Bradford for accounting and
consulting services provided to the Company. For the three-month periods ended March 31, 2004 and 2003, the Company recorded
revenues of approximately $13,000 and $27,000, respectively, from its
investment in Fund I as a result of distributions declared during those 11




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##### Table of Contents



periods. Vestin Mortgage, as the manager, is entitled to a monthly management
fee of up to 0.25% of the aggregate capital contributions to Fund I. During the
three month periods ended March 31, 2004 and 2003, Vestin Mortgage recorded
management fees from Fund I of approximately $64,000 and $63,000, respectively. For the three month periods ended March 31, 2004 and 2003, the Company recorded
revenues of approximately $18,000 and $31,000, respectively, from its
investment in Fund II as a result of distributions declared during those
periods. Vestin Mortgage as the manager is entitled to a monthly management fee
of up to 0.25% of the aggregate capital contributions to Fund II. During the
three month periods ended March 31, 2004 and 2003, Vestin Mortgage recorded
management fees from Fund II approximating $258,000 and $209,000, respectively. Vestin Mortgage as the Manager of Fund III is entitled to a monthly management
fee of up to 0.25% of the aggregate capital contributions to Fund III. During
the three months ended March 31, 2004, Vestin Mortgage recorded management fees
from Fund III approximating $2,500. During the three month periods ended March 31, 2004, the Company sold $0.3
million in loans to an entity wholly owned by the Companys Chief Executive
Officer. The Company relies primarily on Fund I and Fund II as funding sources for
mortgage loans brokered. The Company placed approximately $142.3 million and
$55.4 million in mortgage loans in the three month periods ended March 31,
2004, and 2003, respectively. These loans were primarily funded by Fund I and
Fund II. During the three months ended March 31, 2004, the Company paid approximately
$204,300 to C5, LLC, a company wholly owned by the Companys Chief Executive
Officer pursuant to an Aircraft Usage Agreement. The agreement allows the
Company to use an airplane on a preferred basis over any other proposed user.
The Company used the airplane primarily for marketing and lending activities.
The Company is required to pay a monthly fee based on an hourly rate of $3,000
per hour for the first 10 hours and $2,500 per hour for each hour thereafter.
The Company is required to make a minimum monthly payment equivalent to 16
hours of usage ($45,000). The terms of the agreement were approved by the
Companys Board of Directors. The Company believes based upon a review of
aircraft rental rates that the terms of the Aircraft Usage Agreement are fair
and reasonable to the Company. NOTE 5  INVESTMENTS IN MORTGAGE LOANS ON REAL ESTATE As of March 31, 2004, all outstanding mortgage loans were current and
performing according to their terms. No outstanding mortgage loans were past
due with respect to payment of interest at March 31, 2004. See Note 6 for
information with respect to properties acquired through foreclosure on certain
defaulted mortgage loans. Management has evaluated the collectibility of the
loans in foreclosure in light of the category and dollar amounts of such loans,
adverse situations that may affect the borrowers ability to repay, prevailing
economic conditions and the underlying collateral securing the loan. Due to
economic uncertainties and historical loss experience, the Companys management
has established a reserve for inherent losses in the portfolio totaling
$110,000 based on the Companys policies and procedures regarding the valuation
of its investments in mortgage loans on real estate as a long-term investment. 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. 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, selection by a purchaser against multiple alternatives, 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 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, the Company may not recover the full amount of the loan. NOTE 6  INVESTMENTS IN REAL ESTATE HELD FOR SALE 12




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At March 31, 2004, the Company had various properties with a carrying value
totaling $8,024,614, which were acquired through foreclosure and recorded as
investments in real estate held for sale and secure specific payables as
discussed in Notes 7 and 8. Such investments in real estate held for sale are
accounted for at the lower of cost or fair value less costs to sell, based on
appraisals and knowledge of local market conditions. It is not the Companys
intent to invest in or own real estate acquired through foreclosure. The
Company seeks to sell properties acquired through foreclosure as quickly as
circumstances permit. % of
    
    AdjustedDescription
    
    ownership
    
    Carrying valueRaw land in Utah*
    
    
    100
    %
    
    $
    2,400,000Raw land in Las Vegas, Nevada
    
    
    100
    %
    
    
    595,860Raw land in Las Vegas, Nevada
    
    
    100
    %
    
    
    343,84030-unit condominium project in Las Vegas, Nevada
    
    
    83
    %
    
    
    1,084,914Raw land in Mesquite, Nevada
    
    
    100
    %
    
    
    3,600,000Total
    
    
    
    
    
    $
    8,024,614
 * This property is subject to a lien related to a Special Improvement District
(SID) which is not due and payable until such time as the Company sells the
property to a third party. If the Company begins development on the property,
the costs related to the SID will be assessed to the buyers of each individual
parcel resulting in no gain or loss to the Company. Below is a rollforward of investments in real estate held for sale for the
three months ended March 31, 2004: Balance at
    
    
    
    
    
    
    
    
    
    
    
    

    
    Balance atJanuary 1,
    
    
    
    
    
    
    
    
    
    Valuation
    
    March 31,Description
    
    2004
    
    Acquisitions
    
    Sales
    
    Adjustments
    
    2004Raw land in Utah
    
    $
    3,000,000
    
    
    $
    
    
    
    $
    
    
    
    $
    (600,000
    )
    
    $
    2,400,000Raw land in Las Vegas, Nevada
    
    
    595,860
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    595,860Raw land in Las Vegas, Nevada
    
    
    593,840
    
    
    
    
    
    
    
    (250,000
    )
    
    
    
    
    
    
    343,84030-unit condominium project
in Las Vegas, Nevada
    
    
    1,084,914
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,084,914Raw land in Mesquite, Nevada
    
    
    
    
    
    
    3,600,000
    
    
    
    
    
    
    
    
    
    
    
    3,600,000Residence in Las Vegas, Nevada
    
    
    1,761,589
    
    
    
    
    
    
    
    (1,761,589
    )
    
    
    
    
    
    
    Total
    
    $
    7,036,203
    
    
    $
    3,600,000
    
    
    $
    (2,011,589
    )
    
    $
    (600,000
    )
    
    $
    8,024,614NOTE 7  NOTES PAYABLE
 Notes payable as of March 31, 2004, consists of promissory notes totaling
$374,654 to various parties related to foreclosed real estate properties.
Since the Company acquired the properties through foreclosure, it is not
required and does not intend to pay interest on these notes. NOTE 8  NOTES PAYABLE  RELATED PARTY Notes payable  related party totaling $2,335,518 as of March 31, 2004,
consists of the following:  Note payable to a company solely owned by the Companys Chief Executive
Officer totaling $158,000 related to developed parcels of land. Since the
Company acquired the properties through foreclosure, it is not required and
does not intend to pay interest on this note.Note payable to an entity controlled by the Companys Chief Executive Officer
totaling $569,061 related to vacant land. Since the Company acquired the
properties through foreclosure, it is not required and does not intend to pay
interest on this note. 13




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##### Table of Contents



Note payable to entities controlled by the Companys Chief Executive Officer
totaling $806,094 related to vacant land. Since the Company acquired the
properties through foreclosure, it is not required and does not intend to pay
interest on this note.Notes payable to entities controlled by the Companys Chief Executive Officer
totaling $541,901 related to an apartment complex. Since the Company acquired
the properties through foreclosure, it is not required and does not intend to
pay interest on this note.Notes payable to entities controlled by the Companys Chief Financial Officer
totaling $260,462 related to an apartment complex. Since the Company acquired
the properties through foreclosure, it is not required and does not intend to
pay interest on this note. NOTE 9  DIVIDENDS PAYABLE In March 2004, the Company declared a cash dividend to preferred stockholders
of approximately $0.08 per share that was paid in April 2004. NOTE 10  EARNINGS (LOSS) PER SHARE Basic earnings (loss) per share exclude the effects of dilution and are
computed by dividing net income (loss) available to common shareholders
adjusted for dividends to preferred shareholders by the weighted average amount
of common stock outstanding for the periods. Diluted earnings (loss) per share
reflect the potential dilution that may occur if options, convertible preferred
stock or other contracts to issue stock were exercised or converted into common
stock. During the three months ended March 31, 2004 and 2003, basic and diluted
earnings per share included adjustments for dividends to preferred shareholders
of $224,450 and $226,950, respectively. For the three months ended March 31,
2004, options and warrants to purchase 3,541,663 and 2,841,672 shares,
respectively, of common stock were excluded from the computation of diluted
earnings per share because their effect would be antidilutive. NOTE 11  RECENT ACCOUNTING PRONOUNCEMENTS In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities(FIN 46), which addresses consolidation by
business enterprises of variable interest entities (VIEs). The accounting
provisions and expanded disclosure requirements for VIEs are effective at
inception for VIEs created after January 31, 2003, and are effective for
reporting periods beginning after June 15, 2003 for VIEs created prior to
February 1, 2003. An entity is subject to consolidation according to the
provisions of FIN 46 if, by design, either (i) the total equity investment at
risk is not sufficient to permit the entity to finance its activities without
additional subordinated financial support from other parties, or (ii) as a
group, the holders of the equity investment at risk lack: (a) direct or
indirect ability to make decisions about an entitys activities (b) the
obligation to absorb the expected losses of the entity if they occur; or (c)
the right to receive the expected residual returns of the entity if they occur.
In general, FIN 46 will require a VIE to be consolidated when an enterprise
has a variable interest that will absorb a majority of the VIEs expected
losses or receive a majority of the VIEs expected residual return. The
Company continues to evaluate its relationships and interest in entities that
may be considered VIEs. The impact of adopting FIN 46 on the Consolidated
Financial Statements is still being reviewed. In October 2003, the AICPA issued SOP 03-3 Accounting for Loans or Certain Debt
Securities Acquired in a Transfer. SOP 03-3 applies to a loan with the evidence
of deterioration of credit quality since origination acquired by completion of
a transfer for which it is probable at acquisition, that the Partnership will
be unable to collect all contractually required payments receivable. SOP 03-3
is effective for loans acquired in fiscal years beginning after December 31,
2004. The Company does not expect SOP 03-3 to have a material impact on its
consolidated financial position or results of operations. NOTE 12  LEGAL PROCEEDINGS Vestin Group, Vestin Mortgage, and Del Mar Mortgage, Inc., a company wholly
owned by Michael Shustek, the largest stockholder and CEO of Vestin Group are
defendants in a civil action entitled Desert Land, L.L.C. et al. v. 14




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##### Table of Contents



Owens Financial Group, Inc. et al (the Action). The Action was initiated by
Desert Land, L.L.C. (Desert Land) on various loans arranged by Del Mar
Mortgage, Inc. and/or Vestin Mortgage. On April 10, 2003, the United States
District Court for the District of Nevada (the Court) entered judgment
jointly and severally in favor of Desert Land against Vestin Group, Vestin
Mortgage and Del Mar Mortgage, Inc. Judgment was predicated upon the Courts
finding that Del Mar Mortgage, Inc. received an unlawful penalty fee from the
plaintiffs. Defendants subsequently filed a motion for reconsideration. The Court denied
the motion and, on August 13, 2003, held that Vestin Group, Vestin Mortgage,
and Del Mar Mortgage, Inc. are jointly and severally liable for the judgment in
the amount of $5,683,312 (which amount includes prejudgment interest and
attorney fees). On August 27, 2003, the Court stayed execution of the judgment
against Vestin Group and Vestin Mortgage based upon the posting of a bond in
the amount of $5,830,000. Mr. Shustek personally posted a cash bond without any
cost or obligation to Vestin Group and Vestin Mortgage. 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 with his cash bond. On September 12, 2003, all of the
defendants held liable to Desert Land appealed the judgment to the United
States Court of Appeals for the Ninth Circuit. The staff of the Pacific Regional Office of the Securities and Exchange
Commission (SEC) has been conducting an informal inquiry into certain matters
related to the Company, Fund I, Fund II and Fund III. The staff of the SEC has
not identified the reasons for its inquiry, which remains ongoing as
of May 17,
2004. We believe that we have fully complied with SEC disclosure requirements
and are fully cooperating with the inquiry. We cannot at this time predict the
outcome of the inquiry. On May 30, 2003, Vestin Mortgage filed a civil action against First American
Title Company in the Utah Third District Court (Case No. 030912242) for various
causes of action in connection with First American Title Companys alleged
failure to note in its title report a bond assessment on certain foreclosed
land in Utah. First American Title Company subsequently filed for dismissal and
the case was dismissed on November 5, 2003. On March 2, 2004, Vestin Mortgage
appealed the judgment to the Utah Court of Appeals. The Company and its subsidiaries are involved in a number of legal proceedings
concerning matters arising in connection with the conduct of their business
activities. The Company believes it has meritorious defenses to each of these
actions and intends to defend them vigorously. The Company believes that it is
not a party to, nor are any of its subsidiaries the subject of, any pending
legal or arbitration proceedings that would have a material adverse effect on
the Company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 Companys net income in any particular period. 15




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS The following financial review and analysis concerns the financial condition
and results of operations of the Company for the three months ended March 31,
2004 and 2003. This information should be read in conjunction with the
Companys unaudited Consolidated Financial Statements and accompanying notes
and other detailed information regarding the Company appearing elsewhere in
this Form 10-QSB and in the Companys annual report on Form 10-KSB/A for the
year ended December 31, 2003. BACKGROUND Vestin Group, Inc. (Vestin Group) was incorporated in Delaware on June 2,
1998 under the name Sunderland Acquisition Corporation. Vestin Group is a
holding company that conducts all of its operations through its wholly owned
subsidiaries. Vestin Groups common stock is traded on the Nasdaq National
Market under the ticker symbol VSTN. Vestin Group has received notice from
Nasdaq that it no longer meets the minimum value of publicly held shares and
shareholders equity required for its inclusion on the Nasdaq National Market.
Vestin Group has applied for transfer to the Nasdaq Small Cap Market. OVERVIEW The Company is primarily engaged in the commercial mortgage brokerage business.
The Company arranges loans to owners and developers of real property whose
financing needs are not being met by traditional mortgage lenders. The
underwriting standards and length of time required by traditional mortgage
lenders, such as commercial banks, result in certain potential borrowers who
are unable to or unwilling to go through the process required by traditional
lenders. As a non-conventional lender, the Company focuses on the needs of
borrowers unable or unwilling to meet the more restrictive requirements of
traditional lenders. When evaluating prospective borrowers, the Company
typically focuses on the value of the collateral, which reduces the paperwork
and time needed to evaluate other factors. Vestin Mortgage, our wholly-owned subsidiary, operates as a mortgage broker
licensed in the state of Nevada. Vestin Mortgages primary operations consist
of the brokerage and placement of commercial, construction, acquisition and
development, land and residential mortgage loans secured by real property as
well as managing Vestin Fund I, LLC (Fund I), Vestin Fund II, LLC (Fund
II), Vestin Fund III (Fund III, collectively, the Funds) and inVestin
Nevada, Inc. (inVestin Nevada), a company wholly-owned by the Companys Chief
Executive Officer. The Funds and inVestin Nevada invest in mortgage loans. Fund
III also intends on investing in real property. The Funds are the main funding sources for Vestin Mortgages commercial
mortgage brokerage activities. As manager of the Funds, Vestin Mortgage
evaluates prospective investments, selects the mortgages in which the Funds
will invest and makes all investment decisions for the Funds. Additionally,
Vestin Mortgage is responsible for all administrative matters such as
accounting, tax and legal requirements for the Funds. RESULTS OF OPERATIONS COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003 Revenue The Company reported total revenues of approximately $14.5 million for the
three months ended March 31, 2004, an increase of $1.7 million or 86% from
approximately $7.8 million for the three months ended March 31, 2003. The
increase in revenue is primarily attributable to a legal settlement with the
guarantors of a defaulted loan as more fully discussed herein. For the three months ended March 31, 2004 and 2003, loan placement and related
fees were $6.0 million compared to $4.5 million, an increase of $1.5 million or
33%. The loan placement and related fees revenues are approximately 57% and
91%, of the Companys revenue for the three months ended March 31, 2004 and
2003, respectively. The total dollar amount of loans placed for the three
months ended March 31, 2004 increased by $86.9 million or 157% 16




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##### Table of Contents



to $142.3 million from $55.4 million for the same period in 2003. Loan
placement fees as a percentage of loans placed averaged 4.2% for the first
quarter of 2004 compared to 7.6% for the same quarter in the prior year, The
7.6% average placement fee in the first quarter of 2003 resulted from above
average loan charges for that period and was not indicative of a trend. Extension fees for the three months ended March 31, 2004 totaled $1.3 million
compared to $1.1 million for the same period in 2003, an increase of $0.2
million or 13%. Other fees related to loan placement and servicing totaled $0.9 million for the
three months ended March 31, 2004, compared to $1.5 million for the same period
in 2003. The decrease of $0.6 million is primarily related to a decrease in
the dollar amount of loans being serviced during the first quarter of 2004
compared to the prior year. Other Income was approximately $6.2 million for the three months ended March
31, 2004 compared to $0.4 million for the same period in 2003, an increase of
$5.8 million. The increase is primarily related to the Companys legal
settlement with the guarantors of a loan to recover shortfalls resulting from
the sale of the related real estate acquired through foreclosure. The
settlement resulted in revenue of approximately $5.9 million which came in the
form of cash totaling $2.3 million and land valued at $3.6 million. Geographical Expansion Although the Company has historically focused its operations in certain Western
states, the Company has commenced expansion of its operations throughout the
U.S. The Company has developed a significant degree of knowledge with respect
to the real estate markets in the Western states. Such knowledge is critical to
the Companys business as it enables the Company to process loan applications
more quickly than many conventional lenders. The Company is able to rapidly
process loan applications in large part because the Companys underwriting
standards focus heavily on the value of the underlying property rather than the
creditworthiness of the borrower. The Companys ability to quickly assess the
underlying value of real estate when it arranges the terms of a mortgage loan
is therefore essential to its strategy of providing fast turnaround for loan
applications. Real estate markets are significantly influenced by local conditions as well as
by national economic conditions. Thus, real estate markets vary greatly from
place to place and local knowledge of a real estate market is essential to
prudent lending. In order to obtain such local knowledge, the Company intends
to engage the services of local real estate brokers and real estate lawyers who
are believed to be familiar with the markets into which the Company may expand.
No assurances can be given that the Company will be successful in any
geographical expansion of its operations or that it will be able to mitigate
the risk of such expansion by working with local brokers and lawyers. Any
difficulties encountered by the Company in this regard could adversely affect
the Companys results of operations, slow down its expansion plans or result in
a reduction of loan placement fees. Sales and Marketing Expenses Sales and marketing expenses primarily consist of advertising costs, public
relations expenses, commissions and travel expenses. Sales and marketing
expenses for the three months ended March 31, 2004 were approximately $2.9
million compared to $4.2 million for the same period in 2003 or 20% and 54% of
total revenues, respectively. The decrease is primarily related to the
following:  
    
    Commissions expense decreased by $2.3 million as the majority of
loans placed during the three months ended March 31, 2004 were not
referred to the Company by brokers or other outside sources. The
decrease is not indicative of a trend as the Company is actively
pursuing outside sources such a brokers as sources of loans to be
originated.
    
    Public relations expenses increased by approximately $1.4 million
to $1.9 million compared to $0.5 million for the three months ended
March 31, 2004 and 2003, respectively. On March 15, 2004, the Company
notified Planned Licensing, Inc., the public relations firm for Joe
Namath, that it is terminating its License Agreement with Mr. Namath.
As a result, the Company fully expensed the remaining portion of the
compensatory stock warrants issued to Mr. Namath which were being
amortized over the term of his 17




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##### Table of Contents



contract. The unamortized portion of the stock warrant compensation
totaled approximately $1.9 million were fully expensed to public
relations expense during the three months ended March 31, 2004.
    
    As part of the Companys program of rightsizing and strategic cost
controls, advertising expenses decreased by $0.3 million to $0.7
million for the three months ended March 31, 2004, from $1.0 million
for the same period in 2003. General and Administrative Expenses General and administrative expenses included payroll and related expenses,
consultation fees, professional fees, and general corporate expenses. General
and administrative expenses of the Company were $3.9 million or 27% of total
revenues for the first quarter of 2004, and $5.2 million or 67% of revenues for
the first quarter of 2003, a decrease of $1.3 million which is primarily
related to a $1.6 million expense related to the capital contribution to Fund I
which occurred during the three months ended March 31, 2003. The Company did
not incur any such expenses during the first quarter of 2004. During February 2004, the Company performed an extensive review of the economic
environment and business landscape and has concluded that in order to provide
the best possible opportunity for success in meeting its strategic and
financial objectives, a change in operating strategy is required. To that end
the Company has initiated a program of rightsizing and strategic cost controls
which include the reduction of various costs including payroll, marketing and
sales expenses to a level that is more suitable to its current business
strategy. As a result, the Company expects general and administrative expenses
to significantly decrease for the remaining part of 2004, specifically as it
relates to payroll and related expenses. Other Expenses The Company periodically assesses the value of real estate held for sale
acquired through foreclosure by various methods including obtaining updated
appraisals when deemed necessary, reviewing recent market activity or any other
method available to properly assess such values. As a result of such
assessments, the Company recorded valuation losses of $0.6 million for the
three months ended March 31, 2004. The following is a rollforward of the
carrying value of real estate held for sale for the quarter ended March 31,
2004: Carrying ValueBefore
    
    Valuation
    
    AdjustedAdjustment
    
    Loss
    
    Carrying valueRaw land in Utah
    
    $
    3,000,000
    
    
    $
    600,000
    
    
    $
    2,400,000Raw land in Las Vegas, Nevada
    
    
    595,860
    
    
    
    
    
    
    
    595,860Raw land in Las Vegas, Nevada
    
    
    343,840
    
    
    
    
    
    
    
    343,84030-unit condominium project in
Las Vegas, Nevada
    
    
    1,084,914
    
    
    
    
    
    
    
    1,084,914Raw land in Mesquite, Nevada
    
    
    3,600,000
    
    
    
    
    
    
    
    3,600,000Total
    
    $
    8,624,614
    
    
    $
    600,000
    
    
    $
    8,024,614
 Income (Loss) Before Income Taxes As a result of the foregoing factors, results from operations before provision
(benefit) for income taxes generated income of $7.1 million and losses of $1.7
million, respectively, for the three months ended March 31, 2004 and 2003. Net Income (Loss) 18




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##### Table of Contents



For the three months ended March 31, 2004, the net income was approximately
$4.7 million compared to a net loss of $1.1 million for the same quarter in
2003. Earnings (Loss) Per Share For the three months ended March 31, 2004, earnings per share were $0.87 and
$0.60 per basic and diluted share, respectively. For the three months ended
March 31, 2003, loss per share was $0.25 per basic and diluted share. Earnings
per diluted share considers the dilutive effect of stock options and warrants. CRITICAL ACCOUNTING ESTIMATES Revenue Recognition The Company recognizes revenue primarily from loan placement fees, loan
servicing fees and extension fees. Loan placement fees are generally recorded
as revenue at the close of escrow and reduced by direct loan placement costs on
loans which the Company has not recorded as investments in mortgage loans on
its financial statements. Typically, deeds of trust related to loans placed are initially in the
Companys name to facilitate the loan placement process. Upon arranging a
funding source for such loans, the deeds of trust are assigned to the
respective investor (i.e., the Funds). Loan servicing fees are recorded as
revenue when such services are rendered. Servicing fees represent the interest
spread between what is paid to the investor and what the borrower pays for the
use of the money, which can vary from loan to loan. Servicing costs approximate
servicing fees and therefore, the Company has not recognized a servicing asset
or liability. Extension fees are generally recorded as revenue at the extension
grant date. Interest income on investments in mortgage loans on real estate is recorded
when earned. The Company does not recognize 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 the Company 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. Investments in Real Estate Held for Sale Real estate held for sale includes real estate acquired through foreclosure and
is carried at the lower of cost or the propertys estimated fair value, less
estimated costs to sell. The Company seeks to sell properties acquired through
foreclosure as quickly as circumstances permit. Investments in Mortgage Loans Investments in mortgage loans are secured by trust deeds and mortgages.
Generally, the Companys mortgage loans require interest only payments, either
through payments or decrease of an interest reserve, with a balloon payment of
the principal at maturity. The Company has both the intent and ability to hold
mortgage loans until maturity and therefore, mortgage loans are classified and
accounted for as held for investment and are carried at cost. 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, which may
be commissioned by the borrower, are generally dated within 12 months of 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 drastically exceed the immediate sales value and
may include anticipated zoning changes, selection by a purchaser against
multiple alternatives, 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 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, the Company may not recover the
full amount of the loan. Allowance for Loan Losses 19




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The Company maintains an allowance for loan losses on its investment in
mortgage loans for estimated credit impairment in the Companys investment in
mortgage loans portfolio. The Company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 including, but not limited to, 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. Income taxes The Company accounts for its income taxes using the liability method, which
requires recognition of deferred tax assets and liabilities for the future tax
consequences attributable to differences between carrying amounts of existing
assets and liabilities and their respective tax bases and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. LIQUIDITY AND CAPITAL RESOURCES Liquidity is a measure of the Companys ability to meet potential cash
requirements, including ongoing commitments to fund lending activities. The
Company has historically met its capital requirements through cash flows from
operations and its ability to access individual investors, as well as the
Funds, who acquire interests in mortgage loans. For the three months ended March 31, 2004, the cash flows provided by operating
activities of the Company approximated $3.1 million, compared to cash used by
operating activities of $0.6 million during the three months ended March 31,
2003. Cash provided by investing activities approximated $0.4 million during
the three months ended March 31, 2004, compared to $1.3 million during the same
period of the prior year. Financing activities used $1.3 million for the three
months ended March 31, 2004 compared to $1.8 million for the same three month
period in 2003. The Company has historically relied upon cash flow from operations to provide
for its capital requirements. During the three months ended March 31, 2004, the
Company generated positive cash flow of $0.4 million from investing activities
and believes that cash generated from operations will be sufficient to provide
for its capital requirements to sustain currently expected loan volumes for at
least the next 12 months. The Company is also exploring additional sources of financing including new
and/or expanded credit facilities. There can be no assurance that the Company
will be able to obtain any additional financing. Funding Sources In order to maintain and expand its business, the Company must have access to
funding sources that are prepared to invest in mortgage loans which it brokers.
Historically, the Company has relied primarily upon individual investors and
participating lenders for this purpose. However, in order to expand its
business, the Company organized Fund I and Fund II upon which it now depends as
its principal funding sources. Fund I raised $100 million in a public offering
of its units which was completed in June 2001. Fund II has raised approximately
$412 million through a public offering of its units. The Companys wholly-owned
subsidiary, Vestin Mortgage, is the manager of both Funds. On November 7, 2003, the SEC declared the registration statement (Form S-11) of
Fund III to be effective and the marketing of $100 million of Fund III units
commenced. Fund III will invest in and operate multifamily, assisted living,
office, industrial and retail property, and other income producing properties
as well as invest in mortgage loans where the collateral is real property.
Vestin Mortgage is the manager of Fund III. Vestin Mortgage will earn real
estate commissions, advisory fees, and property management fees as well as loan
brokerage, evaluation, administration and extension, or modification fees.
Vestin Capital, Inc., the Companys wholly-owned subsidiary, is 20




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##### Table of Contents



the
dealer-manager for the sale of Fund III units. As of February 12, 2004, Fund
III had raised more than $10,000,000 to break escrow and commence operations.
As of March 31, 2004 Fund III has raised approximately $11.6 million. The Companys ability to attract investors to acquire interests in mortgage
loans, either directly or through the Funds or other means, depends upon a
number of factors, some of which are beyond its control. The key factors in
this regard include general economic conditions, the condition of real estate
markets, the availability of alternative investment opportunities, and the
Companys business reputation. The yields generated by loans the Company
originates may prove more attractive in the near term if equity markets are
perceived as being risky or volatile and if most fixed rate investments do not
offer comparable yields. On the other hand, when equity markets are doing well,
it is generally harder to attract investors to the Funds. Notwithstanding the high historical yields generated by the Companys mortgage
loans compared to conventional mortgage lenders, the Company believes its
ability to attract investors may be impaired by its small size and limited
operating history. In addition, the mortgage loan investments the Company
offers are not federally insured as are certain bank deposits and the mortgage
loan interests are generally illiquid as compared to government or corporate
bonds. Thus, the Companys ability to place loans with high yields is critical
to offsetting some of the disadvantages of investments in mortgage loans. The
Companys ability to attract investors has suffered because the rate of return
paid to members of the Funds has declined over the past year. If this decline
continues, the Company will find it increasingly difficult to attract investors
and the Funds may shrink as members exercise their redemption rights. Any significant level of redemptions by the Funds members would reduce the
capital available by the Funds for investment, and accordingly, reduce the fees
paid to Vestin Mortgage. In order to comply with the operating agreements of
the Funds and the Internal Revenue Code, the Funds may redeem no more than 10%
of the members capital in any calendar year. As of March 31, 2004, the total
of redemptions made from inception was $21.8 million for Fund I and $63.1
million for Fund II. Beginning capital of Fund I as of January 1, 2004 was
$85.4 million, which would limit redemptions to $8.5 million for calendar 2004.
Beginning capital for Fund II as of January 1, 2004 was $384.4 million, which
would limit redemptions to $38.4 million for calendar 2004. As of March 31,
2004, remaining requests to redeem approximately $1.8 million in 2004, $5.6
million in 2005, $6.4 million in 2006, $5.7 million in 2007, $3.1 million in
2008, and $0.2 million in 2009 had been logged for Fund I. As of March 31,
2004, remaining requests to redeem approximately $3.8 million in 2004, $34.0
million in 2005, $23.3 million in 2006, $19.3 million in 2007, $3.4 million in
2008, and $0.2 million in 2009 had been logged for Fund II. The Funds do not
accept the maximum amount of redemptions for each year to allow for the
redemption of reinvested distributions as well as those who must take required
distributions from IRA account in accordance with the Internal Revenue Code. Intercreditor agreements provide the Company additional funding sources for
mortgage loans whereby a third party investor (the Investor) may participate
in certain mortgage loans with the Company and/or the Funds (collectively the
Lead Lenders). In the event of borrower non-performance, the intercreditor
agreements may 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 participated loan amount from the
Investor for the outstanding balance plus accrued interest. As of March 31,
2004, funds being used under intercreditor agreements totaled $60.7 million. FACTORS AFFECTING THE COMPANYS OPERATING RESULTS This quarterly report and other written reports and oral statements made from
time to time by the Company may contain forward looking statements. Such
forward looking statements may be identified by the use of such words as
expects, plans, estimates, forecasts, projects, anticipates,
believes and words of similar meaning. Forward looking statements are likely
to address such matters as the Companys business strategy, future operating
results, future sources of funding for mortgage loans brokered by the Company,
future economic conditions and pending litigation involving the Company. As a
result, investors should carefully consider any forward looking statements in
light of the various factors which could affect future results. Some of these
factors are discussed below. The Companys business is subject to numerous factors affecting its operating
results. In addition to the factors discussed above, the Companys operating
results may be affected by: 21




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##### Table of Contents



Limited Experience in Certain Real Estate Markets Currently, the Company brokers mortgage loans or works with mortgage brokers
primarily in areas in which the Company and Vestin Mortgage have substantial
experience such as Arizona, California, Nevada, Texas, and Hawaii. Depending on
the market and on the Companys performance, the Company plans to expand its
operations throughout the United States. However, the Company has limited
experience outside of certain Western States. Real estate markets vary greatly
from location to location. The Companys limited experience in most U.S. real
estate markets may impact its ability to make prudent investment decisions and
may delay the loan approval process. This delay could have a material impact on
the Companys competitive advantage of providing fast loan approvals.
Accordingly, the Company plans to utilize independent real estate advisors
located in markets where the Company lacks experience for consultation prior to
making investment decisions. No assurance can be given that such advisors will
provide the Company effective assistance. Dependence on Key Personnel The Companys success depends upon the continued contributions of certain key
personnel, including Michael V. Shustek and Lance Bradford, each of whom would
be difficult to replace because of his extensive experience in his field,
extensive market contacts and familiarity with the Companys activities. If any
of these key employees were to cease employment, the Companys operating
results could suffer. The Companys future success also depends in large part
upon its ability to hire and retain additional highly skilled managerial,
operational and marketing personnel. Should the Company be unable to attract
and retain skilled personnel, the Companys performance may suffer. Risks of Underwriting Standards and Procedures The Companys underwriting standards and procedures are more lenient than
conventional lenders in that it will invest in loans to borrowers who will not
be required to meet the credit standards of conventional mortgage lenders. The Company approves mortgage loans more quickly than other mortgage lenders.
Due to the nature of loan approvals, there may be a risk that the credit
inquiry the Company performs may not reveal all material facts pertaining to
the borrower and the security. As a result, loans the Company arranges and
loans in which the Company may invest may suffer from a higher rate of defaults
as compared to loans arranged by more conventional lenders. The Company
attempts to mitigate this risk by insisting upon lower loan-to-value ratios.
Nonetheless, the Companys future results of operations may be adversely
affected by defaulting borrowers and the attendant risk and expense of
foreclosure proceedings. Additionally, loan-to-value ratios on some
construction and development loans may be calculated using an as-if completed
appraisal, the values of which can dramatically change. Risks of Interest Rate Changes The Companys 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, the Company expects 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. This could result in a slowdown in real
estate lending which may mean the Company will have fewer loans to acquire,
thus reducing its revenues and the distributions to stockholders. One of the results of interest rate fluctuations is that borrowers may seek to
extend their low-interest-rate mortgage loans after market interest rates have
increased. Generally, the Companys loan documents permit it to raise the
interest rate it charges on extended loans anywhere from between 3/4% to 3%
from the then-current rate on the loan. This creates three risks for the
Company: (i) There can be no assurance that this permitted rate increase will be
adequate if interest rates have increased beyond the range contemplated by the
Companys loan documents. (ii) 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 22




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##### Table of Contents



this happens, there is a higher risk that the borrower may default on the
extended loan, and the increase in the interest rate on the loan may not be
adequate compensation for the increased risk. Distributions on mortgage loans
the Company places may decline if lenders are unable to reinvest at higher
rates or if an increasing number of borrowers default on their loans. (iii) If, at a time of relatively low interest rates, a borrower prepays
obligations that have a higher interest rate from an earlier period, investors
will likely not be able to reinvest the funds in mortgage loans earning that
higher rate of interest. In the absence of a prepayment fee, the investors will
receive neither the anticipated revenue stream at the higher rate nor
compensation for their loss. This in turn could harm the Companys business
reputation and may make it more difficult for the Company to attract investors
willing to acquire interests in mortgage loans. Competition For Funds The Companys ability to access funds for mortgage loans depends upon the
perceived attractiveness of yields on loans the Company places, the safety of
the underlying investment, the Companys business reputation, general economic
conditions and real estate market conditions. The Companys principal advantage
in attracting investors is the high historical yields generated by loans the
Company brokers. The Company is at a disadvantage compared to alternative
investment vehicles to the extent that an investment in mortgage loans lacks
liquidity and is not guaranteed or insured by a governmental agency. In
addition, the fact that the Company is smaller than many of the full service
financial firms offering alternative investment vehicles and has a more limited
operating history may be disadvantages in seeking to attract investors.
Furthermore, the increase in non-performing loans in the Funds has adversely
affected the Companys ability to compete for new investors. Competition For Borrowers The Company considers its competitors for borrowers to be the providers of
non-conventional mortgage loans, that is, lenders who offer short-term,
equity-based loans on an expedited basis for slightly higher fees and rates
than those charged by conventional lenders. To a lesser extent, the Company
also competes with conventional mortgage lenders and mortgage loan investors,
such as commercial banks, thrifts, conduit lenders, insurance companies,
mortgage brokers, pension funds and other financial institutions that offer
conventional mortgage loans. Many of the companies against which the Company
competes have substantially greater financial, technical and other resources
than it does. Competition in the Companys 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. 23




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##### Table of Contents



ITEM 3. CONTROLS AND PROCEDURES. The Company has evaluated the effectiveness of the design and operation of its
disclosure controls and procedures as of a date within 90 days prior to the
filing of this report on Form 10-QSB (the Evaluation Date). Such evaluation
was conducted under the supervision and with the participation of the Companys
Chief Executive Officer (CEO) and the Chief Financial Officer (CFO). Based
upon such evaluation, the Companys CEO and CFO have concluded that, as of the
Evaluation Date, the Companys disclosure controls and procedures were
effective. There have been no significant changes in the Companys internal
controls or other factors that could significantly affect these controls
subsequent to the date of their most recent evaluation. 24




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##### Table of Contents



PART II. OTHER INFORMATION 
 ITEM 1. LEGAL PROCEEDINGS Vestin Group, Vestin Mortgage, and Del Mar Mortgage, Inc., a company wholly
owned by Michael Shustek, the largest stockholder and CEO of Vestin Group are
defendants in a civil action entitled Desert Land, L.L.C. et al. v. Owens
Financial Group, Inc. et al (the Action). The Action was initiated by Desert
Land, L.L.C. (Desert Land) on various loans arranged by Del Mar Mortgage,
Inc. and/or Vestin Mortgage. On April 10, 2003, the United States District
Court for the District of Nevada (the Court) entered judgment jointly and
severally in favor of Desert Land against Vestin Group, Vestin Mortgage and Del
Mar Mortgage, Inc. Judgment was predicated upon the Courts finding that Del
Mar Mortgage, Inc. received an unlawful penalty fee from the plaintiffs. Defendants subsequently filed a motion for reconsideration. The Court denied
the motion and, on August 13, 2003, held that Vestin Group, Vestin Mortgage,
and Del Mar Mortgage, Inc. are jointly and severally liable for the judgment in
the amount of $5,683,312 (which amount includes prejudgment interest and
attorney fees). On August 27, 2003, the Court stayed execution of the judgment
against Vestin Group and Vestin Mortgage based upon the posting of a bond in
the amount of $5,830,000. Mr. Shustek personally posted a cash bond without any
cost or obligation to Vestin Group and Vestin Mortgage. 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 with his cash bond. On September 12, 2003, all of the
defendants held liable to Desert Land appealed the judgment to the United
States Court of Appeals for the Ninth Circuit. The staff of the Pacific Regional Office of the Securities and Exchange
Commission (SEC) has been conducting an informal inquiry into certain matters
related to the Company, Fund I, Fund II and Fund III. The staff of the SEC has
not identified the reasons for its inquiry, which remains ongoing as of May 17,
2004. We believe that we have fully complied with SEC disclosure requirements
and are fully cooperating with the inquiry. We cannot at this time predict the
outcome of the inquiry. On May 30, 2003, Vestin Mortgage filed a civil action against First American
Title Company in the Utah Third District Court (Case No. 030912242) for various
causes of action in connection with First American Title Companys alleged
failure to note in its title report a bond assessment on certain foreclosed
land in Utah. First American Title Company subsequently filed for dismissal and
the case was dismissed on November 5, 2003. On March 2, 2004, Vestin Mortgage
appealed the judgment to the Utah Court of Appeals. The Company and its subsidiaries are involved in a number of legal proceedings
concerning matters arising in connection with the conduct of their business
activities. The Company believes it has meritorious defenses to each of these
actions and intends to defend them vigorously. The Company believes that it is
not a party to, nor are any of its subsidiaries the subject of, any pending
legal or arbitration proceedings that would have a material adverse effect on
the Company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 Companys net income in any particular period. 
 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Not applicable 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable 
 ITEM 5. OTHER INFORMATION Not applicable 25




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##### Table of Contents



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits PageExhibit
    
    
    
    Number/Number
    
    Description
    
    Filing Method2.1
    
    Agreement and Plan of Reorganization among the Company, Capsource, Inc.
and Stephen J. Byrne, dated as of April 9, 1999
    
    
    (1
    )2.2
    
    Asset Acquisition Agreement between the Company and Del Mar Holdings,
Inc., dated as of April 9, 1999
    
    
    (1
    )2.3
    
    Asset Acquisition Agreement between the Company and Del Mar Mortgage,
Inc., dated as of April 9, 1999
    
    
    (1
    )2.4
    
    Agreement and Plan of Reorganization among the Company, L. L. Bradford
& Company and the Shareholders of L. L. Bradford & Company, dated June
30, 2000
    
    
    (2
    )3.1
    
    Certificate of Incorporation
    
    
    (3
    )3.2
    
    By-laws
    
    
    (3
    )10.1
    
    Employment Agreement between Del Mar Mortgage, Inc. and Steve Byrne,
dated November 3, 1998
    
    
    (4
    )10.2
    
    Transition Agreement between Del Mar Mortgage, Inc. and Capsource,
Inc., dated April 27, 1999 and First Amendment thereto, dated April 27,
1999
    
    
    (4
    )10.3
    
    Employment Agreement between Del Mar Mortgage and Mike Whiteaker, dated
May 3, 1999
    
    
    (4
    )10.4
    
    The 2000 Stock Option Plan of Sunderland Corporation
    
    
    (4
    )10.5
    
    Employment Agreement between the Company and Michael V. Shustek, dated
December 1, 1999
    
    
    (4
    )10.6
    
    Third Amended and Restated Operating Agreement of DM Mortgage
Investors, LLC, dated as of November 2, 2000
    
    
    (5
    )10.7
    
    Certificate of Designations authorizing the issuance of Series A
Convertible Preferred Stock
    
    
    (6
    )10.8
    
    Operating Agreement of Vestin Fund II, LLC, dated as of December 7, 2001
    
    
    (7
    )10.9
    
    License Agreement by and between the Company and Planned Licensing,
Inc., dated as of January 2001
    
    
    (8
    )10.10
    
    Amended and Restated Intercreditor Agreement by and among Vestin
Mortgage, Inc., Vestin Fund I, LLC, Vestin Fund II, LLC, Owens
Financial Group, Inc., and Owens Mortgage Investment Fund, dated April
18, 2003
    
    
    (9
    )10.11
    
    Aircraft Usage Agreement by and between the Company and C5, LLC, dated
September 1, 2002
    
    
    (9
    )10.12
    
    Indemnity Agreement by and between the Company and Del Mar Mortgage,
Inc., dated April 15, 2003
    
    
    (10
    )10.13
    
    Guaranty by and among the Company, Michael V. Shustek, and Del Mar
Mortgage, Inc., dated April 15, 2003
    
    
    (10
    )10.14
    
    Employment Agreement by and between the Company and Peggy May (now
known as Peggy Shustek), dated September 1, 2001
    
    
    (11
    )10.15
    
    Employment Agreement by and between the Company and Daniel Stubbs,
dated January 1, 2003
    
    
    (11
    )10.16
    
    Totally Restated and Amended Employment Agreement by and between the
Company and Lance Bradford, dated as of January 1, 2003
    
    
    (11
    )
 26




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##### Table of Contents



PageExhibit
    
    
    
    Number/Number
    
    Description
    
    Filing Method10.17
    
    Separation Agreement and Release of All Claims by and between Steve
Byrne and the Company, dated as of October 14, 2003
    
    
    (11
    )10.18
    
    Office Lease Agreement between the Company and The Wildwood Hills
Development, Corporation, dated January 5, 2001
    
    
    (11
    )10.19
    
    Office Lease by and between Luke Properties, LLC and the Company, dated
March 2004
    
    
    (11
    )10.20
    
    Amended and Restated Intercreditor Agreement by and between Vestin
Mortgage, Inc., Vestin Fund I, LLC, Vestin Fund II, LLC and Owens
Financial Group, Inc., dated as of September 25, 2002
    
    
    (11
    )10.21
    
    Office Lease Agreement by and between 2901 El Camino, Las Vegas, NV,
LLC and the Company, dated August 1, 2002
    
    
    (12
    )10.22
    
    Office Lease Agreement by and between The Wildwood Hills Development,
Corporation and the Company, dated January 5, 2001
    
    
    (12
    )10.23
    
    Office Lease by and between 2901 El Camino, Las Vegas, NV, LLC and the
Company, dated August 1, 2002
    
    
    (12
    )10.24
    
    Office Lease Agreement by and between The Wildwood Hills Development,
Corporation and the Company, dated January 5, 2001
    
    
    (12
    )31.1
    
    Section 302 Certification of Michael V. Shustek31.2
    
    Section 302 Certification of Lance K. Bradford32
    
    Certification Pursuant to 18 U.S.C. Section 1350
   (1)
    
    Previously filed on Form 8-K (File No. 000-24803) on May 4, 1999.(2)
    
    Previously filed on Form 8-K (File No. 000-24803) on April 14, 2000.(3)
    
    Previously filed on Form 10-KSB/A (File No. 000-24803) on August 13,
1998.(4)
    
    Previously filed on Form 10-KSB (File No. 000-24803) on March 31, 2000.(5)
    
    Previously filed on Form 424B5 (File No. 333-32800) on November 15, 2000.(6)
    
    Previously filed on Form 10-KSB (File No. 000-24803) on April 2, 2001.(7)
    
    Previously filed on Form S-11 (File No. 793646) on December 21, 2000.(8)
    
    Previously filed on Form 8-K (File No. 000-24803) on January 25, 2001.(9)
    
    Previously filed on Form SB-2/A (File No. 333-104109) on June 4, 2003.(10)
    
    Previously filed on Form SB-2/A (File No. 333-104109) on October 15, 2003.(11)
    
    Previously filed on Form 10-KSB (File No. 000-24803) on March 30, 2004.(12)
    
    Previously filed on Form 10-KSB/A (File No. 000-24803) on April 14, 2004. 27




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##### Table of Contents



(b)
    
    Reports on Form 8-KCurrent Report on Form 8-K filed with the Securities and Exchange Commission
(the Commission) on March 19, 2004, which reports the following item:  (i)
    
    Item 4  Change in Registrants Certifying Accountants(ii)
    
    Item 7  Financial Statements and Exhibits  Current Report on Form 8-K filed with the Commission on February 13, 2004,
which reports the following item:  (iii)
    
    Item 5  Other Events and Regulation FD Disclosure(iv)
    
    Item 7  Financial Statements and Exhibits  Current Report on Form 8-K filed with the Commission on February 4, 2004,
which reports the following item:  (v)
    
    Item 4  Change in Registrants Certifying Accountants(vi)
    
    Item 7 Financial Statements and Exhibits 28




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##### Table of Contents



SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned there unto duly
authorized. VESTIN GROUP, INC By:
    
    /s/ Michael V. ShustekMichael V. Shustek, Chief Executive OfficerDate: May 17, 2004By:
    
    /s/ Lance K. BradfordLance K. Bradford, Chief Financial OfficerDate: May 17, 2004
 29




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##### Table of Contents



EXHIBIT INDEX PageExhibit
    
    
    
    Number/Number
    
    Description
    
    Filing Method2.1
    
    Agreement and Plan of Reorganization among the Company, Capsource, Inc.
and Stephen J. Byrne, dated as of April 9, 1999
    
    
    (1
    )2.2
    
    Asset Acquisition Agreement between the Company and Del Mar Holdings,
Inc., dated as of April 9, 1999
    
    
    (1
    )2.3
    
    Asset Acquisition Agreement between the Company and Del Mar Mortgage,
Inc., dated as of April 9, 1999
    
    
    (1
    )2.4
    
    Agreement and Plan of Reorganization among the Company, L. L. Bradford
& Company and the Shareholders of L. L. Bradford & Company, dated June
30, 2000
    
    
    (2
    )3.1
    
    Certificate of Incorporation
    
    
    (3
    )3.2
    
    By-laws
    
    
    (3
    )10.1
    
    Employment Agreement between Del Mar Mortgage, Inc. and Steve Byrne,
dated November 3, 1998
    
    
    (4
    )10.2
    
    Transition Agreement between Del Mar Mortgage, Inc. and Capsource,
Inc., dated April 27, 1999 and First Amendment thereto, dated April 27,
1999
    
    
    (4
    )10.3
    
    Employment Agreement between Del Mar Mortgage and Mike Whiteaker, dated
May 3, 1999
    
    
    (4
    )10.4
    
    The 2000 Stock Option Plan of Sunderland Corporation
    
    
    (4
    )10.5
    
    Employment Agreement between the Company and Michael V. Shustek, dated
December 1, 1999
    
    
    (4
    )10.6
    
    Third Amended and Restated Operating Agreement of DM Mortgage
Investors, LLC, dated as of November 2, 2000
    
    
    (5
    )10.7
    
    Certificate of Designations authorizing the issuance of Series A
Convertible Preferred Stock
    
    
    (6
    )10.8
    
    Operating Agreement of Vestin Fund II, LLC, dated as of December 7, 2001
    
    
    (7
    )10.9
    
    License Agreement by and between the Company and Planned Licensing,
Inc., dated as of January 2001
    
    
    (8
    )10.10
    
    Amended and Restated Intercreditor Agreement by and among Vestin
Mortgage, Inc., Vestin Fund I, LLC, Vestin Fund II, LLC, Owens
Financial Group, Inc., and Owens Mortgage Investment Fund, dated April
18, 2003
    
    
    (9
    )10.11
    
    Aircraft Usage Agreement by and between the Company and C5, LLC, dated
September 1, 2002
    
    
    (9
    )10.12
    
    Indemnity Agreement by and between the Company and Del Mar Mortgage,
Inc., dated April 15, 2003
    
    
    (10
    )10.13
    
    Guaranty by and among the Company, Michael V. Shustek, and Del Mar
Mortgage, Inc., dated April 15, 2003
    
    
    (10
    )10.14
    
    Employment Agreement by and between the Company and Peggy May (now
known as Peggy Shustek), dated September 1, 2001
    
    
    (11
    )10.15
    
    Employment Agreement by and between the Company and Daniel Stubbs,
dated January 1, 2003
    
    
    (11
    )10.16
    
    Totally Restated and Amended Employment Agreement by and between the
Company and Lance Bradford, dated as of January 1, 2003
    
    
    (11
    )10.17
    
    Separation Agreement and Release of All Claims by and between Steve
Byrne and the Company, dated as of October 14, 2003
    
    
    (11
    )
 30




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##### Table of Contents



PageExhibit
    
    
    
    Number/Number
    
    Description
    
    Filing Method10.18
    
    Office Lease Agreement between the Company and The Wildwood Hills
Development, Corporation, dated January 5, 2001
    
    
    (11
    )10.19
    
    Office Lease by and between Luke Properties, LLC and the Company, dated
March 2004
    
    
    (11
    )10.20
    
    Amended and Restated Intercreditor Agreement by and between Vestin
Mortgage, Inc., Vestin Fund I, LLC, Vestin Fund II, LLC and Owens
Financial Group, Inc., dated as of September 25, 2002
    
    
    (11
    )10.21
    
    Office Lease Agreement by and between 2901 El Camino, Las Vegas, NV,
LLC and the Company, dated August 1, 2002
    
    
    (12
    )10.22
    
    Office Lease Agreement by and between The Wildwood Hills Development,
Corporation and the Company, dated January 5, 2001
    
    
    (12
    )10.23
    
    Office Lease by and between 2901 El Camino, Las Vegas, NV, LLC and the
Company, dated August 1, 2002
    
    
    (12
    )10.24
    
    Office Lease Agreement by and between The Wildwood Hills Development,
Corporation and the Company, dated January 5, 2001
    
    
    (12
    )31.1
    
    Section 302 Certification of Michael V. Shustek31.2
    
    Section 302 Certification of Lance K. Bradford32
    
    Certification Pursuant to 18 U.S.C. Section 1350
   (1)
    
    Previously filed on Form 8-K (File No. 000-24803) on May 4, 1999.(2)
    
    Previously filed on Form 8-K (File No. 000-24803) on April 14, 2000.(3)
    
    Previously filed on Form 10-KSB/A (File No. 000-24803) on August 13,
1998.(4)
    
    Previously filed on Form 10-KSB (File No. 000-24803) on March 31, 2000.(5)
    
    Previously filed on Form 424B5 (File No. 333-32800) on November 15, 2000.(6)
    
    Previously filed on Form 10-KSB (File No. 000-24803) on April 2, 2001.(7)
    
    Previously filed on Form S-11 (File No. 793646) on December 21, 2000.(8)
    
    Previously filed on Form 8-K (File No. 000-24803) on January 25, 2001.(9)
    
    Previously filed on Form SB-2/A (File No. 333-104109) on June 4, 2003.(10)
    
    Previously filed on Form SB-2/A (File No. 333-104109) on October 15, 2003.(11)
    
    Previously filed on Form 10-KSB (File No. 000-24803) on March 30, 2004.(12)
    
    Previously filed on Form 10-KSB/A (File No. 000-24803) on April 14, 2004. 31