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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
June 30, 2003

[  ] 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
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) |  | 52-2102142
(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 July 31, 2003:

5,328,340 Shares of Common Stock

Transitional Small Business Disclosure
Format (Check one): Yes [  ] No [X]





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TABLE OF CONTENTS



|                           |                                                             |                                                           |  |  |  |  |  | 
|-------------------------- | ----------------------------------------------------------- | --------------------------------------------------------- |  |  |  |  |  | 
|                           |                                                             | CONSOLIDATED BALANCE SHEET                               
|                           |                                                             | CONSOLIDATED STATEMENTS OF INCOME (LOSS)                 
|                           |                                                             | CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
|                           |                                                             | CONSOLIDATED STATEMENTS OF CASH FLOWS                    
|                           |                                                             | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS               
|                           | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS               
|                           | ITEM 3. CONTROLS AND PROCEDURES                            
|PART II. OTHER INFORMATION
|                           | ITEM 1. LEGAL PROCEEDINGS                                  
|                           | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS          
|                           | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                    
|                           | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|                           | ITEM 5. OTHER INFORMATION                                  
|                           | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                   
|SIGNATURES                
|EXHIBIT 31.1              
|EXHIBIT 31.2              
|EXHIBIT 32                



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##### Table of Contents



VESTIN GROUP, INC. AND
SUBSIDIARIES

INDEX

|           |  |                                                            |  |     
|---------- |  | ---------------------------------------------------------- |  | ----
|           |  |                                                            |  | Page
|           |  |                                                            |  |     
|PART I     |  | FINANCIAL INFORMATION                                      |  |     
|Item 1.    |  | Financial Statements                                       |  |     
|           |  | Consolidated Balance Sheet (unaudited)                     |  | 3   
|           |  | Consolidated Statements of Income (Loss) (unaudited)       |  | 4   
|           |  | Consolidated Statement of Stockholders Equity (unaudited) |  | 5   
|           |  | Consolidated Statements of Cash Flows (unaudited)          |  | 6   
|           |  | Notes to Consolidated Financial Statements (unaudited)     |  | 8   
|Item 2.    |  | Managements Discussion and Analysis                       |  | 15  
|Item 3.    |  | Controls and Procedures                                    |  | 24  
|PART II    |  | OTHER INFORMATION                                          |  |     
|Item 1.    |  | Legal Proceedings                                          |  | 25  
|Item 2.    |  | Changes in Securities and Use of Proceeds                  |  | 25  
|Item 3.    |  | Defaults Upon Senior Securities                            |  | 25  
|Item 4.    |  | Submission of Matters to a Vote of Security Holders        |  | 25  
|Item 5.    |  | Other Information                                          |  | 25  
|Item 6.    |  | Exhibits and Reports on Form 8-K                           |  | 25  
|SIGNATURES |  | 27                                                        

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##### Table of Contents






Vestin Group, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEET

June 30, 2003

(Unaudited)

|                                                                           |                                                                                                        |                                            |           |           |            | 
|-------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | ------------------------------------------ | --------- | --------- | ---------- | 
|ASSETS                                                                     |                                                                                                        |                                            |           |          
|Cash                                                                       |                                                                                                        | $                                          | 2,585,260 |          
|Accounts receivable                                                        |                                                                                                        |                                            | 4,585,701 |          
|Interest receivable                                                        |                                                                                                        |                                            | 11,515    |          
|Due from related parties                                                   |                                                                                                        |                                            | 3,292,872 |          
|Notes receivable                                                           |                                                                                                        |                                            | 400,000   |          
|Note receivable - related party                                            |                                                                                                        |                                            | 117,964   |          
|Investments in real estate held for sale                                   |                                                                                                        |                                            | 7,274,614 |          
|Investments in mortgage loans on real estate, net of allowance of $190,000 |                                                                                                        |                                            | 628,171   |          
|Other investments - related parties                                        |                                                                                                        |                                            | 2,101,449 |          
|Other assets                                                               |                                                                                                        |                                            | 568,618   |          
|Property and equipment, net                                                |                                                                                                        |                                            | 731,858   |          
|                                                                           |                                                                                                        |                                            |           |          
|                                                                           |                                                                                                        | Total assets                               |           | $         | 22,298,022 | 
|                                                                           |                                                                                                        |                                            |           |          
|LIABILITIES AND STOCKHOLDERS EQUITY                                       |                                                                                                        |                                            |           |          
|Accounts payable and accrued expenses                                      |                                                                                                        | $                                          | 3,242,383 |          
|Dividend payable                                                           |                                                                                                        |                                            | 74,817    |          
|Income taxes payable                                                       |                                                                                                        |                                            | 440,380   |          
|Notes payable  related party                                              |                                                                                                        |                                            | 3,287,138 |          
|Notes payable                                                              |                                                                                                        |                                            | 1,474,654 |          
|                                                                           |                                                                                                        |                                            |           |          
|                                                                           |                                                                                                        | Total liabilities                          |           |           | 8,519,372  | 
|                                                                           |                                                                                                        |                                            |           |          
|Commitments and contingencies                                              |                                                                                                        |                                            |          |          
|Stockholders equity                                                       |                                                                                                        |                                            |           |          
|                                                                           | Preferred stock, $.0001 par value; 20 million shares authorized;
897,800 shares issued and outstanding |                                            |           | 90        |           
|                                                                           | Common stock, $.0001 par value; 100 million shares authorized
5,328,340 shares issued and outstanding  |                                            |           | 532       |           
|                                                                           | Additional paid-in capital                                                                             |                                            |           | 9,303,036 |           
|                                                                           | Retained earnings                                                                                      |                                            |           | 4,474,992 |           
|                                                                           |                                                                                                        |                                            |           |          
|                                                                           |                                                                                                        | Total stockholders equity                 |           |           | 13,778,650 | 
|                                                                           |                                                                                                        |                                            |           |          
|                                                                           |                                                                                                        | Total liabilities and stockholders equity |           | $         | 22,298,022 | 
|                                                                           |                                                                                                        |                                            |           |          

The accompanying notes are an integral
part of this statement.

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Vestin Group, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME (LOSS)(Unaudited)

|                                                               |                                             |                                                                                      |           |                            |            |                          |           |               |           |               |            |            |            |   |           |            |            | 
|-------------------------------------------------------------- | ------------------------------------------- | ------------------------------------------------------------------------------------ | --------- | -------------------------- | ---------- | ------------------------ | --------- | ------------- | --------- | ------------- | ---------- | ---------- | ---------- | - | --------- | ---------- | ---------- | 
|                                                               |                                             |                                                                                      |           | For the three months ended |            | For the six months ended
|                                                               |                                             |                                                                                      |           |                            |            |                         
|                                                               |                                             |                                                                                      |           | June 30, 2003              |            | June 30, 2002            |           | June 30, 2003 |           | June 30, 2002
|                                                               |                                             |                                                                                      |           |                            |            |                          |           |               |           |              
|Revenues                                                       |                                             |                                                                                      |           |                            |            |                          |           |               |           |               |            |            |            |   |           |           
|                                                               | Loan placement and related fees             |                                                                                      | $         | 6,636,766                  |            |                          | $         | 8,740,203     |           |               | $          | 13,779,762 |            |   | $         | 13,347,801 |           
|                                                               | Interest income                             |                                                                                      |           | 183,737                    |            |                          |           | 63,722        |           |               |            | 367,598    |            |   |           | 242,501    |           
|                                                               | Other
revenue                               |                                                                                      |           | 372,730                    |            |                          |           | 63,097        |           |               |            | 798,850    |            |   |           | 297,625    |           
|                                                               |                                             |                                                                                      |           |                            |            |                          |           |               |           |               |            |            |            |   |           |           
|                                                               |                                             | Total revenues                                                                       |           |                            | 7,193,233  |                          |           |               | 8,867,022 |               |            |            | 14,946,210 |   |           |            | 13,887,927 | 
|                                                               |                                             |                                                                                      |           |                            |            |                          |           |               |           |               |            |            |            |   |           |           
|Expenses                                                       |                                             |                                                                                      |           |                            |            |                          |           |               |           |               |            |            |            |   |           |           
|                                                               | Sales and marketing expenses                |                                                                                      |           | 2,815,242                  |            |                          |           | 2,533,215     |           |               |            | 7,018,031  |            |   |           | 4,067,698  |           
|                                                               | General and administrative expenses         |                                                                                      |           | 3,376,849                  |            |                          |           | 2,908,906     |           |               |            | 6,934,332  |            |   |           | 5,277,695  |           
|                                                               | Valuation loss on real estate held for sale |                                                                                      |           | 1,287,883                  |            |                          |           |              |           |               |            | 1,287,883  |            |   |           |           |           
|                                                               | Bad
debt expense                            |                                                                                      |           | 715,301                    |            |                          |           |              |           |               |            | 715,301    |            |   |           |           |           
|                                                               | Capital Contribution to Vestin Fund I       |                                                                                      |           |                           |            |                          |           |              |           |               |            | 1,600,000  |            |   |           |           |           
|                                                               | Interest expenses                           |                                                                                      |           | 104,591                    |            |                          |           | 170,709       |           |               |            | 199,950    |            |   |           | 440,591    |           
|                                                               |                                             |                                                                                      |           |                            |            |                          |           |               |           |               |            |            |            |   |           |           
|                                                               |                                             | Total expenses                                                                       |           |                            | 8,299,866  |                          |           |               | 5,612,830 |               |            |            | 17,755,497 |   |           |            | 9,785,984  | 
|                                                               |                                             | Income (loss) from continuing operations before
provision (benefit) for income taxes |           |                            | (1,106,633 | )                        |           |               | 3,254,192 |               |            |            | (2,809,287 | ) |           |            | 4,101,943  | 
|Provision (benefit) for income taxes                           |                                             |                                                                                      | (376,255  | )                          |            |                          | 1,106,425 |               |           |               | (955,157   | )          |            |   | 1,394,661 |           
|                                                               |                                             |                                                                                      |           |                            |            |                          |           |               |           |               |            |            |            |   |           |           
|                                                               |                                             | NET INCOME (LOSS)                                                                    |           |                            | (730,378   | )                        |           |               | 2,147,767 |               |            |            | (1,854,130 | ) |           |            | 2,707,282  | 
|Preferred stock dividend                                       |                                             |                                                                                      | (225,228  | )                          |            |                          | (234,450  | )             |           |               | (452,178   | )          |            |   | (468,900  | )         
|                                                               |                                             |                                                                                      |           |                            |            |                          |           |               |           |               |            |            |            |   |           |           
|Net income (loss) applicable to common shareholders            |                                             | $                                                                                    | (955,606  | )                          |            | $                        | 1,913,317 |               |           | $             | (2,306,308 | )          |            | $ | 2,238,382 |           
|                                                               |                                             |                                                                                      |           |                            |            |                          |           |               |           |               |            |            |            |   |           |           
|Earnings (loss) per common share - Basic                       |                                             |                                                                                      |           |                            |            |                          |           |               |           |               |            |            |            |   |           |           
|                                                               | Net income (loss)                           |                                                                                      | $         | (0.18                      | )          |                          | $         | 0.35          |           |               | $          | (0.43      | )          |   | $         | 0.41       |           
|                                                               |                                             |                                                                                      |           |                            |            |                          |           |               |           |               |            |            |            |   |           |           
|Earnings (loss) per common share - Diluted                     |                                             |                                                                                      |           |                            |            |                          |           |               |           |               |            |            |            |   |           |           
|                                                               | Net income (loss)                           |                                                                                      | $         | (0.18                      | )          |                          | $         | 0.22          |           |               | $          | (0.43      | )          |   | $         | 0.26       |           
|                                                               |                                             |                                                                                      |           |                            |            |                          |           |               |           |               |            |            |            |   |           |           
|Weighted average number of common shares
outstanding - Basic   |                                             |                                                                                      | 5,328,340 |                            |            |                          | 5,444,883 |               |           |               | 5,328,031  |            |            |   | 5,482,952 |           
|                                                               |                                             |                                                                                      |           |                            |            |                          |           |               |           |               |            |            |            |   |           |           
|Weighted average number of common shares
outstanding - Diluted |                                             |                                                                                      | 5,328,340 |                            |            |                          | 8,738,727 |               |           |               | 5,328,031  |            |            |   | 8,662,066 |           
|                                                               |                                             |                                                                                      |           |                            |            |                          |           |               |           |               |            |            |            |   |           |           

The accompanying notes are an integral part of these statements.

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Vestin Group, Inc. and Subsidiaries

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITYFor the six months ended June 30, 2003

(Unaudited)

|                                             |  |                 |         |              |  |            |    |          |  |         |           |          |  |       |     |  |  |   |           |   |  |   |            |   |  |   |            |  
|-------------------------------------------- |  | --------------- | ------- | ------------ |  | ---------- | -- | -------- |  | ------- | --------- | -------- |  | ----- | --- |  |  | - | --------- | - |  | - | ---------- | - |  | - | ---------- | -
|                                             |  | Preferred Stock |         | Common Stock |  | Additional |    |          |  |         |           |          |  |      
|                                             |  |                 |         |              |  | Paid-in    |    | Retained |  |         |           |         
|                                             |  | Shares          |         | Amount       |  | Shares     |    | Amount   |  | Capital |           | Earnings |  | Total
|                                             |  |                 |         |              |  |            |    |          |  |         |           |          |  |      
|Balance at January 1, 2003                   |  |                 | 907,800 |              |  | $          | 91 |          |  |         | 5,324,340 |          |  | $     | 532 |  |  | $ | 8,922,885 |   |  | $ | 7,420,672  |   |  | $ | 16,344,180 |  
|Dividends paid on preferred stock            |  |                 |        |              |  |            |   |          |  |         |          |          |  |       |    |  |  |   |          |   |  |   | (452,178   | ) |  |   | (452,178   | )
|Dividends paid on common stock               |  |                 |        |              |  |            |   |          |  |         |          |          |  |       |    |  |  |   |          |   |  |   | (639,372   | ) |  |   | (639,372   | )
|Expenses related to the issuance of warrants |  |                 |        |              |  |            |   |          |  |         |          |          |  |       |    |  |  |   | 464,151   |   |  |   |           |   |  |   | 464,151    |  
|Common stock options exercised               |  |                 |        |              |  |            |   |          |  |         | 4,000     |          |  |       |    |  |  |   | 15,999    |   |  |   |           |   |  |   | 15,999     |  
|Redemption of preferred stock                |  |                 | (10,000 | )            |  |            | (1 | )        |  |         |           |          |  |       |     |  |  |   | (99,999   | ) |  |   |            |   |  |   | (100,000   | )
|Net loss                                     |  |                 |        |              |  |            |   |          |  |         |          |          |  |       |    |  |  |   |          |   |  |   | (1,854,130 | ) |  |   | (1,854,130 | )
|                                             |  |                 |         |              |  |            |    |          |  |         |           |          |  |       |     |  |  |   |           |   |  |   |            |   |  |   |            |  
|Balance at June 30, 2003                     |  |                 | 897,800 |              |  | $          | 90 |          |  |         | 5,328,340 |          |  | $     | 532 |  |  | $ | 9,303,036 |   |  | $ | 4,474,992  |   |  | $ | 13,778,650 |  
|                                             |  |                 |         |              |  |            |    |          |  |         |           |          |  |       |     |  |  |   |           |   |  |   |            |   |  |   |            |  

The accompanying notes are an integral part of these statements.

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Vestin Group, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)

|                                      |                                                                                                                               |                                                               |                                       |                                           |           |                          |           |               |         |          |           | 
|------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------- | ------------------------------------- | ----------------------------------------- | --------- | ------------------------ | --------- | ------------- | ------- | -------- | --------- | 
|                                      |                                                                                                                               |                                                               |                                       |                                           |           | For the six months ended
|                                      |                                                                                                                               |                                                               |                                       |                                           |           | June 30, 2003            |           | June 30, 2002
|                                      |                                                                                                                               |                                                               |                                       |                                           |           |                          |           |              
|Cash flow from operating activities:  |                                                                                                                               |                                                               |                                       |                                           |           |                          |           |              
|                                      | Net income (loss)                                                                                                             |                                                               | $                                     | (1,854,130                                | )         |                          | $         | 2,707,282     |        
|                                      | Adjustments to reconcile net income (loss) from continuing
operations to net cash provided by (used in) operating activities: |                                                               |                                       |                                           |           |                          |           |               |        
|                                      |                                                                                                                               | Depreciation and amortization                                 |                                       |                                           | 62,079    |                          |           |               | 50,589  |         
|                                      |                                                                                                                               | Stock based compensation                                      |                                       |                                           | 464,151   |                          |           |               | 501,959 |         
|                                      |                                                                                                                               | Net loss from sale of investment in real estate held for sale |                                       |                                           |          |                          |           |               | 198,111 |         
|                                      |                                                                                                                               | Capital contribution to Fund I                                |                                       |                                           | 1,600,000 |                          |           |               |        |         
|                                      |                                                                                                                               | Valuation
allowance for real estate held for sale             |                                       |                                           | 1,287,883 |                          |           |               |        |         
|                                      |                                                                                                                               | Provision for loan losses                                     |                                       |                                           | 110,000   |                          |           |               |        |         
|                                      |                                                                                                                               | Changes in operating assets and liabilities:                  |                                       |                                           |           |                          |           |               |         |         
|                                      |                                                                                                                               |                                                               | Accounts receivable                   |                                           |           | 278,041                  |           |               |         | 139,098  |          
|                                      |                                                                                                                               |                                                               | Interest receivable                   |                                           |           | 101,836                  |           |               |         |         |          
|                                      |                                                                                                                               |                                                               | Other assets                          |                                           |           | 102,381                  |           |               |         | (12,802  | )        
|                                      |                                                                                                                               |                                                               | Due from related parties              |                                           |           | (2,052,708               | )         |               |         | (100,077 | )        
|                                      |                                                                                                                               |                                                               | Accounts payable and accrued expenses |                                           |           | 1,273,004                |           |               |         | (122,573 | )        
|                                      |                                                                                                                               |                                                               | Dividend payable                      |                                           |           | (833                     | )         |               |         |         |          
|                                      |                                                                                                                               |                                                               | Income taxes payable                  |                                           |           | (955,158                 | )         |               |         | 549,648  |          
|                                      |                                                                                                                               |                                                               |                                       |                                           |           |                          |           |              
|                                      |                                                                                                                               |                                                               |                                       | Net cash provided by operating activities |           |                          | 416,546   |               |         |          | 3,911,235 | 
|                                      |                                                                                                                               |                                                               |                                       |                                           |           |                          |           |              
|Cash flows from investing activities: |                                                                                                                               |                                                               |                                       |                                           |           |                          |           |              
|                                      | Purchase of property and equipment                                                                                            |                                                               |                                       | (74,824                                   | )         |                          |           | (111,544      | )      
|                                      | Cash advanced on notes receivable                                                                                             |                                                               |                                       |                                          |           |                          |           | (110,000      | )      
|                                      | Principal payments received on notes receivable                                                                               |                                                               |                                       |                                          |           |                          |           | 991,499       |        
|                                      | Net purchase of investment in marketable securities                                                                           |                                                               |                                       |                                          |           |                          |           | (138,039      | )      
|                                      | Net sale of other investments                                                                                                 |                                                               |                                       |                                          |           |                          |           | 114,999       |        
|                                      | Purchase
of other investments  related party                                                                                 |                                                               |                                       | (1,449                                    | )         |                          |           |              |        
|                                      | Purchase of investments in mortgage loans on real estate (net of sales)                                                       |                                                               |                                       |                                          |           |                          |           | (2,293,341    | )      
|                                      | Proceeds
from investments in mortgage loans                                                                                   |                                                               |                                       | 8,058,939                                 |           |                          |           |              |        
|                                      | Purchase of investment in real estate held for sale                                                                           |                                                               |                                       | (1,100,000                                | )         |                          |           | (30,721       | )      
|                                      | Proceeds from sale of investment in mortgage loans
on real estate                                                             |                                                               |                                       |                                          |           |                          |           | 4,717,000     |        
|                                      |                                                                                                                               |                                                               |                                       |                                           |           |                          |           |               |        
|                                      |                                                                                                                               |                                                               |                                       | Net cash provided by investing activities |           |                          | 6,882,666 |               |         |          | 3,139,853 | 
|                                      |                                                                                                                               |                                                               |                                       |                                           |           |                          |           |               |        

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Vestin Group, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

(Unaudited)
(Continued)

|                                            |                                                                                                   |                                       |           |                          |            |               |           |            |            |  
|------------------------------------------- | ------------------------------------------------------------------------------------------------- | ------------------------------------- | --------- | ------------------------ | ---------- | ------------- | --------- | ---------- | ---------- | -
|                                            |                                                                                                   |                                       |           | For the six months ended
|                                            |                                                                                                   |                                       |           | June 30, 2003            |            | June 30, 2002
|                                            |                                                                                                   |                                       |           |                          |            |              
|Cash flows from financing activities:       |                                                                                                   |                                       |           |                          |            |               |           |           
|                                            | Payments on lines of credit                                                                       |                                       |           | (7,000,000               | )          |               |           |           |           
|                                            | Proceeds from notes payable - related party                                                       |                                       |           | (140,415                 | )          |               |           |           |           
|                                            | Payments on notes payable                                                                         |                                       |           |                         |            |               |           | 4,397,232  |           
|                                            | Proceeds from notes payable                                                                       |                                       |           | 1,078,997                |            |               |           |           |           
|                                            | Common stock options exercised                                                                    |                                       |           | 15,999                   |            |               |           |           |           
|                                            | Redemption
of preferred stock                                                                     |                                       |           | (100,000                 | )          |               |           |           |           
|                                            | Payment of dividend on preferred stock                                                            |                                       |           | (452,178                 | )          |               |           | (468,900   | )         
|                                            | Payment of dividend on common stock                                                               |                                       |           | (639,372                 | )          |               |           | (550,062   | )         
|                                            | Purchase of treasury stock                                                                        |                                       |           |                         |            |               |           | (1,885,582 | )         
|                                            |                                                                                                   |                                       |           |                          |            |               |           |           
|                                            |                                                                                                   | Net cash used in financing activities |           |                          | (7,236,969 | )             |           |            | (7,301,776 | )
|                                            |                                                                                                   |                                       |           |                          |            |               |           |           
|                                            |                                                                                                   | NET INCREASE (DECREASE) IN CASH       |           |                          | 62,243     |               |           |            | (250,688   | )
|Cash at beginning of period                 |                                                                                                   |                                       | 2,523,017 |                          |            |               | 3,776,682 |           
|                                            |                                                                                                   |                                       |           |                          |            |               |           |           
|Cash at end of period                       |                                                                                                   | $                                     | 2,585,260 |                          |            | $             | 3,525,994 |           
|                                            |                                                                                                   |                                       |           |                          |            |               |           |           
|Supplemental cash flow information:         |                                                                                                   |                                       |           |                          |            |               |           |           
|                                            | Cash paid for federal income taxes                                                                |                                       | $         |                         |            |               | $         | 1,335,091  |           
|                                            |                                                                                                   |                                       |           |                          |            |               |           |           
|                                            | Cash paid for interest                                                                            |                                       | $         | 199,950                  |            |               | $         | 325,883    |           
|                                            |                                                                                                   |                                       |           |                          |            |               |           |            |           
|Noncash investing and financing activities: |                                                                                                   |                                       |           |                          |            |               |           |           
|                                            | Dividends declared on preferred stock                                                             |                                       | $         | 75,650                   |            |               | $         | 78,150     |           
|                                            |                                                                                                   |                                       |           |                          |            |               |           |           
|                                            | Dividends declared on common stock                                                                |                                       | $         |                         |            |               | $         | 109,248    |           
|                                            |                                                                                                   |                                       |           |                          |            |               |           |           
|                                            | Notes payable assumed through foreclosure                                                         |                                       | $         | 244,654                  |            |               | $         | 158,000    |           
|                                            |                                                                                                   |                                       |           |                          |            |               |           |           
|                                            | Notes payable- related parties assumed through foreclosure                                        |                                       | $         | 802,363                  |            |               | $         |           |           
|                                            |                                                                                                   |                                       |           |                          |            |               |           |           
|                                            | Note payable related to capital contribution to Fund I                                            |                                       | $         | 723,763                  |            |               | $         |           |           
|                                            |                                                                                                   |                                       |           |                          |            |               |           |           
|                                            | In substance receipt of amounts due from Fund I related to
capital contribution in Fund I         |                                       | $         | 876,237                  |            |               | $         |           |           
|                                            |                                                                                                   |                                       |           |                          |            |               |           |           
|                                            | Investments in real estate held for sale acquired through foreclosure                             |                                       | $         | 1,094,914                |            |               | $         | 1,321,600  |           
|                                            |                                                                                                   |                                       |           |                          |            |               |           |           
|                                            | Investment 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.

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VESTIN GROUP, INC.
AND SUBSIDIARIES
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 two publicly held funds, Vestin Fund I, LLC (Fund I) and
Vestin Fund II, LLC (Fund II), and an entity owned by the Companys Chief
Executive Officer, inVestin Nevada, Inc. (inVestin) which invest in mortgage
loans. Vestin Mortgage as manager of Fund I, Fund II and inVestin will be
referred to as Manager.

The interim consolidated financial statements present the balance sheet,
statements of income, stockholders equity and cash flows of Vestin Group, Inc.
and its subsidiaries. All significant intercompany 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 June 30, 2003 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, 2002
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.

Certain reclassifications have been made to the prior years consolidated
financial statements to conform with the current year presentation.

NOTE 2  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.

The Company applies APB 25 in accounting for stock options issued to employees.
Under APB 25, employee compensation cost is recognized when estimated fair
value of the underlying stock on date of the grant exceeds exercise price of
the stock option. For stock options and warrants issued to non-employees, the
Company applies Statement of Financial Accounting Standards (SFAS) 123,
Accounting for Stock-Based Compensation (SFAS

8



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##### Table of Contents



123), which requires the recognition of compensation cost based upon the fair
value of stock options at the grant date 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 six months ended
|                                                                                                                                    |                                    |   | June 30,                 |       | June 30
|                                                                                                                                    |                                    |   | 2003                     |       | 2002   
|                                                                                                                                    |                                    |   |                          |       |        
|Net income (loss), as reported                                                                                                      |                                    | $ | (1,854,130               | )     |         | $ | 2,707,282 |     
|Add: Stock-based compensation
expense included in reported income (loss),
net of related tax effects                                |                                    |   | 464,151                  |       |         |   | 501,959   |     
|Deduct: Total stock-based compensation expense determined under
fair value based methods for all awards,
net of related tax effects |                                    |   | (1,181,661               | )     |         |   | (610,128  | )   
|                                                                                                                                    |                                    |   |                          |       |         |   |           |     
|Pro forma net income (loss)                                                                                                         |                                    | $ | (2,571,640               | )     |         | $ | 2,599,113 |     
|                                                                                                                                    |                                    |   |                          |       |         |   |           |     
|Net income (loss) per common share                                                                                                  |                                    |   |                          |       |         |   |           |     
|                                                                                                                                    | Basic income (loss), as reported   |   | $                        | (0.43 | )       |   | $         | 0.41 | 
|                                                                                                                                    |                                    |   |                          |       |         |   |           |     
|                                                                                                                                    | Basic income (loss), pro forma     |   | $                        | (0.57 | )       |   | $         | 0.39 | 
|                                                                                                                                    |                                    |   |                          |       |         |   |           |     
|                                                                                                                                    | Diluted income (loss), as reported |   | $                        | (0.43 | )       |   | $         | 0.26 | 
|                                                                                                                                    |                                    |   |                          |       |         |   |           |     
|                                                                                                                                    | Diluted income (loss), pro forma   |   | $                        | (0.57 | )       |   | $         | 0.25 | 
|                                                                                                                                    |                                    |   |                          |       |         |   |           |     

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.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure. SFAS No. 148 amends the transition
and disclosure provisions of SFAS No. 123. The Company has
determined that it will not adopt SFAS No. 123 to account for
employee stock options using the fair value method.

NOTE 3  RELATED PARTY TRANSACTIONS

Notes receivable  In 2000, we loaned a junior officer approximately $251,000
to enable him to operate, develop and grow a California real estate loan fund.
We do not have any affiliations with the California real estate loan fund. The
loan is unsecured but is backed by a personal guaranty. The interest rate of
10% is payable on a semi-annual basis and the principal is due on the maturity
date of April 19, 2004. As of June 30, 2003, the balance on this note was
approximately $118,000.

Due from related parties approximating $3,292,872 as of June 30, 2003 are
comprised of the following:



| |  | Amounts due from Fund I totaling $56,421 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 $2,735,713 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.

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| |  | Amounts due from the Companys Chief Executive Officer or Companies wholly
owned by him totaling approximately $365,831 relate to various advances made,
primarily related to litigation expenses. Such advances bear no interest and
are due on demand.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Amounts due from RE Investments
III LLC, a related entity, totaling $134,907 relate to expenses paid
on behalf of the entity for which the Company expects to receive payment.                                                                          

Other investments  related parties consists of the Companys investments in
units of Fund I and Fund II totaling $1.0 million and $1.1 million,
respectively, as of June 30, 2003.

During the three and six months ended June 30, 2003, the Company incurred
expenses of $283,102 and $528,863, respectively, for legal fees to Berkley,
Gordon, Levine, Goldstein & Garfinkel, LLP, and Levine, Garfinkel & Katz, LLP,
law firms in which the Executive Vice President of Legal and Corporate Affairs
of the Company has or had an equity ownership interest.

The Companys President and Tax Manager are equity owners in a L.L. Bradford &
Company, LLC, Certified Public Accounting firm (L.L. Bradford). For the three
and six months ended June 30, 2003, $54,955 and $92,455, respectively, was paid
to L.L. Bradford for services provided to the Company. During the three and
six months ended June 30, 2003, L.L. Bradford also assisted in the preparation
of the Companys financial reports and provided bookkeeping services at no
charge to the Company.

For the three-month periods ended June 30, 2003 and 2002, the Company recorded
revenues of approximately $25,000 and $31,000, respectively, from its
investment in Fund I as a result of distributions declared during those
periods. For the six month periods ended June 30, 2003 and 2002, the Company
recorded revenues of approximately $52,000 and $64,000, respectively, from its
investment in Fund I 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 I.
During the three month periods ended June 30, 2003 and 2002, Vestin Mortgage
recorded management fees from Fund I of approximately $64,000 and $63,000,
respectively. During the six month periods ended June 30, 2003 and 2002, Vestin
Mortgage recorded management fees from Fund I of approximately $126,000 and
$124,000, respectively.

For the three month periods ended June 30, 2003 and 2002, the Company recorded
revenues of approximately $28,000 and $34,000, respectively, from its
investment in Fund II as a result of distributions declared during those
periods. For the six month periods ended June 30, 2003 and 2002, the Company
recorded revenues of approximately $69,000 and $69,000, 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 June 30, 2003 and 2002, Vestin
Mortgage recorded management fees from Fund II approximating $234,000 and
$134,000, respectively. During the six month periods ended June 30, 2003 and
2002, Vestin Mortgage recorded management fees from Fund II approximating
$443,000 and $237,000, respectively.

During the three month periods ended June 30, 2003, the Company sold $7.0
million in loans to Fund II pursuant to the terms of the Operating Agreements
of the Funds which permits the Funds to acquire loans from the Company if the
loans were acquired to facilitate their acquisition by the Funds and provided
that the price paid by the Funds is no greater than the Companys cost. For
the six months ended June 30, 2003, the Company sold approximately $479,000 and
$9.3 million in loans to Fund I and Fund II respectively. During the three
month period ended June 30, 2003, the Company purchased $2.0 million in loans
from Fund II. For the six month period ended June 30, 2003, the Company
purchased approximately $479,000 and $2.0 million in loans from
Fund I and Fund II, respectively.

During the six months ended June 30, 2003, the Company purchased real estate
held for sale of $1.6 million from Vestin Fund I. No gain or loss was recorded
by Fund I on this sale.

The Company relies primarily on Fund I and Fund II as funding sources for
mortgage loans brokered. The Company placed approximately $97.1 million and
$151.1 million in mortgage loans in the three month periods ended June 30,
2003, and 2002, respectively. The Company placed approximately $152.6 million
and $235.2 million in mortgage loans in the six-month periods ended June 30,
2003, and 2002, respectively. These loans were primarily funded by
Fund I and Fund II.

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During the three and six months ended June 30, 2003, the Company paid $388,250
and $641,500, respectively, 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 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).

NOTE 4  INVESTMENTS IN MORTGAGE LOANS ON REAL ESTATE

As of June 30, 2003, 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 June 30, 2003. See Note 5 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 $190,000 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 5  INVESTMENTS IN REAL ESTATE HELD FOR SALE

At June 30, 2003, the Company had various properties with a carrying value
totaling $7.3 million, which were acquired through foreclosure and recorded as
investments in real estate held for sale and secure specific payables as
discussed in Note 7. 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.

|                                                 |  |                |     |                |  |          |           | 
|------------------------------------------------ |  | -------------- | --- | -------------- |  | -------- | --------- | 
|                                                 |  |                |     |                |  | Adjusted
|                                                 |  |                |     |                |  |         
|Description                                      |  | % of ownership |     | Carrying value
|                                                 |  |                |     |               
|Raw land in Utah                                 |  |                | 100 | %              |  | $        | 3,000,000 | 
|Raw land in Las Vegas, Nevada                    |  |                | 100 | %              |  |          | 595,860   | 
|Raw land in Las Vegas, Nevada                    |  |                | 100 | %              |  |          | 593,840   | 
|72-unit condominium project in Las Vegas, Nevada |  |                | 83  | %              |  |          | 1,084,914 | 
|Residence in Las Vegas, Nevada                   |  |                | 100 | %              |  |          | 2,000,000 | 
|                                                 |  |                |     |                |  |          |           | 
|Total                                            |  |                |     |                |  | $        | 7,274,614 | 
|                                                 |  |                |     |                |  |          |           | 

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NOTE 6  LINES OF CREDIT

The Company maintained two revolving lines of credit totaling $5.0 million and
$2.0 million with two financial institutions specifically for interim funding
of mortgage loans placed. Both lines of credit expired in June 2003. As of
June 30, 2003, both lines had been paid in full upon maturity. The Company
plans to negotiate the renewal of the $2.0 million line of credit within the
next three months, but has informed the lender that it does not wish to renew
the $5.0 million line of credit. These lines of credit were guaranteed by the
Companys Chief Executive Officer and were secured by the deeds of trust on the
property being advanced against. The Company was in compliance with all
covenants on these lines of credit through maturity.

NOTE 7  NOTES PAYABLE

Notes payable totaling $1,474,654 as of June 30, 2003, consist of the
following:



| |  | 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.                                                                                                                 
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Promissory note to a financial institution totaling $1,100,000 related to a
residential real estate property the Company had purchased from Fund I. The
note is collateralized by the property, at an interest rate of 1.5% over the
prime interest rate (4.25% at June 30, 2003) payable in monthly interest
installments and is due on February 1, 2004.

NOTE 8  NOTES PAYABLE  RELATED PARTY

Notes payable  related party totaling $3,287,138 as of June 30, 2003, 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.                                                                                         
|
| |  | Note payable to entities controlled by the Companys Chief Executive Officer
totaling $1,174,367 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 President 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 payable to Fund I totaling $583,347 as further discussed in Note 11.
The original value of the note was $723,763 and is unsecured, bears interest
at 6%, matures on September 30, 2003, and requires five equal monthly
payments totaling $147,668 which began on May 31, 2003. The Company made the
payment due June 30, 2003 on July 1, 2003.

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NOTE 9  DIVIDENDS PAYABLE

In June 2003, the Company declared a cash dividend to preferred stockholders of
approximately $0.08 per share that was paid in July 2003.

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 and six months ended June 30, 2003, basic and diluted
earnings per share included adjustments for dividends to preferred shareholders
of $225,228 and $452,178, respectively. For the three and six months ended June
30, 2003, options and warrants to purchase 2,487,467 and 2,277,967 shares,
respectively, of common stock were excluded from the computation of diluted
earnings per share because their effect would be antidilutive.

NOTE 11  CAPITAL CONTRIBUTION TO VESTIN FUND I

The Company elected to contribute capital of $1.6 million to Fund I in the form
of an interest-bearing amortizing note of $723,763 and the forgiveness of an
obligation due from Fund I in the amount of $876,237. The Company did not
receive any additional units in Fund I in consideration of the capital
contribution. The capital contribution increased the existing members
capital accounts in Fund I to approximately $10 per unit. The amount of the contribution was charged to
current operating results during the six months ended June 30, 2003, as the
Company did not receive additional units for the contribution.

NOTE 12  NEW 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.

NOTE 13  LEGAL PROCEEDINGS

The Company, Vestin Mortgage and Del Mar Mortgage, Inc., (Del Mar Mortgage),
a company wholly owned by Mike Shustek, the largest shareholder and CEO of the
Company, and various affiliates of the Company are defendants in a civil action
(the Action). On April 10, 2003, the United States District Court for the
District of Nevada (the Court) entered a judgment in the Action for $5.0
million, plus interest accruing from March 26, 2003, jointly and severally
against the Company, Vestin Mortgage and Del Mar Mortgage. Subsequent to April
10, 2003, the Court stayed the execution of the judgment pending the hearing
and ruling on post-trial motions and accordingly, the Court did not require the
defendants to post a bond for the judgment. The hearing was held on August 6,
2003,

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at which time the Court Denied the motion for reconsideration and held that the
Defendants are jointly and severably liable for the judgment plus interest as
well as attorneys fee in the amount of $660,000. Del Mar Mortgage has
agreed to indemnify the Company and Vestin Mortgage for any losses and expenses in
connection with the Action. Mr. Shustek has guaranteed the indemnification.
Mr. Shustek has agreed to provide a bond in the amount of the judgment. The
defendants intend to appeal the ruling to the United States Ninth Circuit 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.

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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS

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.

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, results 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 will
typically focus on the value of collateral, which reduces the paperwork and
time needed to evaluate other factors.

Vestin Mortgage serves as the manager of Vestin Fund I, LLC, a Nevada limited
liability company (Fund I), which was organized to invest in mortgage loans.
In June 2001, Fund I completed a public offering of its units, raising an
aggregate of $100 million. The Company is also the manager of Vestin Fund II, LLC
(Fund II), a Nevada limited liability company which invests in mortgage
loans. Fund II is currently conducting a public offering of its units pursuant
to a registration statement which was declared effective on June 13, 2001. As
of June 30, 2003, Fund II had raised approximately $398 million from the sale
of units. Fund II was closed to new investors on July 31, 2003; however, it
may continue to sell units to existing members until June 2004 or until $500
million units have been sold.

Vestin Capital serves as the lead broker dealer on the sale of units for Fund I
and Fund II and also provides administrative services. Vestin Capital does not
receive any commissions from the sale of units for Fund I and Fund II. Rather,
Vestin Capital receives an administrative fee from Vestin Mortgage related to
the maintenance of investor files.

Fund I and Fund II (collectively referred to as 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 they 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. Vestin Mortgage is entitled to receive a monthly management fee from
each fund of up to 0.25% of the aggregate capital contributions to each fund.
The Company may, in its sole discretion, waive its management fee. The Company
earned management fees for the three months ended June 30, 2003, of
approximately $64,000 for Fund I and $234,000 for Fund II. For the six months
ended June 30, 2003, the Company earned management fees, of approximately
$126,000 for Fund I and $443,000 for Fund II. As of June 30, 2003, the Company
owns approximately 100,000 units in Fund I and 110,000 units in Fund II as
consideration for expenses paid by the Company to unaffiliated third parties in
connection with the offering of such units. The Companys ownership interest in
Funds I and II represent approximately 1.1% and 0.3% of the outstanding amount
of units, respectively, as of June 30, 2003.

The Company is continuing to pursue the development of additional funding
sources, including, without limitation, the formation of new investment
vehicles. The Company may also seek to expand its funding capacity through the
sale of securities.

FINANCIAL REVIEW

The following financial review and analysis concerns the financial condition
and results of operations of the Company for the three and six months ended
June 30, 2003 and 2002. This information should be read in conjunction with the
Companys unaudited Consolidated Financial Statements and accompanying notes
and other

15



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##### Table of Contents



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, 2002.

RESULTS OF OPERATIONS

COMPARISON OF THE THREE AND SIX MONTHS ENDED JUNE 30, 2003 AND 2002

Revenue

The Company reported total revenues of approximately $7.2 million for the three
months ended June 30, 2003, a decrease of $1.7 million or 18.9% from
approximately $8.9 million for the three months ended June 30, 2002. For the
six months ended June 30, 2003 and 2002, the Company reported total revenues of
approximately $14.9 million and $13.9 million, an increase of $1.0 million or
7.6%.

For the three months ended June 30, 2003 and 2002, loan placement and related
fees were $6.6 million compared to $8.7 million, a decrease of $2.1 million or
24.1%. The loan placement and related fees revenues are approximately 92.3%
and 98.6%, respectively, of the Companys revenue for the three months ended
June 30, 2003 and 2002. The total dollar amount of loans placed for the three
months ended June 30, 2003 decreased by $54.0 million or 35.7% to $97.1 million
from $151.1 million for the same period in 2002. The majority of these revenues
are derived from loan origination fees which averaged 4.2% for the second
quarter of 2003 compared to 4.5% for the same quarter in the prior year. While
the loan placement fees decreased due to lower loan demand, the extension fees
increased from $0.8 million for the quarter ended June 30, 2002 to $1.4 million
for the same quarter in 2003, an increase of $0.6 million or 86.7% as existing
loans extended under their existing terms. The decrease in the amount of loans
placed is primarily related to an increase in non-performing assets held by
Fund I and Fund II, general economic conditions and a slowdown preceding and
during the war in Iraq. The increase in non-performing assets held by Funds I
and II has diminished the monies such Funds have available to invest in new
mortgage loans. Both Funds are seeking to enhance their liquidity by
foreclosing upon and selling as quickly as practicable the real estate which
secures non-performing loans. However, this process takes time and the monies
tied up on non-performing assets may be unavailable for new mortgage loans for
many months.

For the six months ended June 30 2003, and 2002, loan placement and related
fees were $13.8 million and $13.3 million, an increase of $0.5 million or 3.2%.
These fees are approximately 92.2% and 96.1%, respectively, of the Companys
revenue for these periods. The total dollar amount of loans placed for the six
months ended June 30, 2003 decreased by $82.6 million or 35.1% to $152.6
million from $235.2 million for the same period in 2002. Loan origination fees
averaged 5.7% for the six months ended June 30, 2003 compared to
4.3% for the
same period in the prior year. While the loan placement fees decreased due to
lower loan demand, the extension fees increased from $1.3 million for the six
months ended June 30, 2002 to $2.5 million for the same quarter in 2003, an
increase of $1.2 million or 95.9% as existing loans made during the second
quarter of last year extended under their existing terms. The decrease in the
amount of loans placed is primarily related to an increase in non-performing
assets held by Fund I and Fund II, general economic conditions and a slowdown
preceding and during the war in Iraq.

For the three months ended June 30, 2003, interest income was approximately
$184,000 compared to approximately $64,000 for the comparable period in 2002,
an increase of $120,000 or 188.4%. For the six months ended June 30, 2003,
approximately $368,000 was earned compared to $243,000 in 2002, an increase of
$125,000 or 51.6%. The increases are primarily due to recovery of interest
income related to a non-performing loan of approximately $75,000.

Other revenue increased to approximately $373,000 for the three months ended
June 30, 2003 compared to approximately $63,000 for the three months ended June
30, 2002, an increase of $310,000 or 490.7%. Year to date through June 30,
2003, other revenue was approximately $799,000 compared to $298,000 in 2002, an
increase of $501,000 or 168.4%. These increases are primarily from an
increase in management fees earned from the increased investment in
the Funds.

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
16Table of Contents

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 were approximately $2.8 million and $2.5 million, or 39.1% and 28.6%,
respectively, of the Companys total revenues for the three-month periods ended
June 30, 2003 and 2002, respectively. These increases are primarily related to
the following:



| |  |  | Travel expenses increased by approximately $356,000 to $424,000 for
the three months ended June 30, 2003 compared to $0.1 million for the
same period in 2002 mainly due to the Companys continued efforts to
gain nationwide awareness through seminars and trade shows.                      
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Advertising and printing costs increased by approximately $325,000
to $1.1 million compared to $0.8 million for the three months ended
June 30, 2003 and 2002, respectively. This increase primarily relates
to additional costs related to filings with the Securities and Exchange
Commission.
|
| |  |  | Public relations decreased by approximately $283,000 to $65,000
compared to $348,000 for the three months ended June 30, 2003 and 2002,
respectively.                                                                                                                                           

Sales and marketing expenses were approximately $7.0 million and $4.1 million,
or 47.0% and 29.3%, respectively, of the Companys total revenues for the
six-month periods ended June 30, 2003 and 2002, respectively. These increases
are primarily related to the following:



| |  |  | Commissions expense related to loans placed increased by $2.5
million to $3.2 million for the six months ended June 30, 2003 compared
to $0.7 million for the same period in 2002 primarily due to
commissions of 4.0% paid out on a $34.0 million loan and 3.5% paid out
an a $14.7 million loan placed during the six months ended June 30,
2003.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Advertising expenses increased by $0.5 million to $1.9 million for
the six months ended June 30, 2003 compared to $1.4 million for the
same period in 2002 due to the Companys continued marketing efforts to
expand its operations.                                                                                                              
|
| |  |  | Travel expenses increased by $0.6 million to $0.7 million for the
six months ended June 30, 2003 compared to $0.1 million for the same
period in 2002 mainly due to the Companys continued efforts to gain
nationwide awareness through seminars and trade shows.                                                                                 

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 $3.4 million or
46.9% of total
revenues for the second quarter of 2003, and $2.9 million or 32.8% of revenues
for the second quarter of 2002, an increase of $0.5 million which is primarily
related to the following:
17Table of Contents
    
    Payroll and benefits expenses increased by $0.3 million to $1.6
million for the three months ended June 30, 2003 compared to $1.3
million for the same period in 2002 due to additional employees. As
the Company grows, it may need to further increase the number of its
employees.
    
    Other general and administrative expense increases generally relate
to the overall growth of the Company.General and administrative expenses of
the Company were $6.9 million or 46.4%
of total revenues for the six months ended June 30, 2003, and $5.3 million or
38.0% of revenues for the six months ended June 30, 2002, an
increase of $1.7
million which is primarily related to the following:
    
    Legal fees increased by $0.7 million to $1.6 million for the six
months ended June 30, 2003 compared to $0.9 million for the same period
in 2002 mainly due to SEC filings and pending litigation.
    
    Payroll and benefit expenses increased by $0.5 million to $3.1
million for the six months ended June 30, 2003 compared to $2.6 million
for the same period in 2002 due primarily to additional employees. As
the Company grows, it may need to further increase the number of its
employees.
    
    Other general and administrative expense increases generally relate
to the overall growth of the Company.The Company experienced losses of
approximately $1.3 million related to accrued
fees and reductions in property values of real estate held for sale that has
been adjusted to a lower carrying value based on appraisals and offers for the
three and six months ended June 30, 2003.The Company elected to contribute capital of $1.6 million to Fund I in the form
of an interest-bearing amortizing note of $723,763 and the forgiveness of an
obligation due from Fund I in the amount of $876,237. The Company made this
capital contribution to restore member capital accounts in Fund I. These
capital accounts had been diminished by certain over-distributions to members.
The Company will not receive any additional units in Fund I in consideration of
the capital contribution. The capital contribution will increase the existing
members capital accounts in Fund I. The amount of the contribution was
charged to current operating results during the three months ended March 31,
2003, as the Company will not receive additional units for the contribution.The Company anticipates that, as the Companys operations grow, general and
administrative expenses should increase at a more moderate rate and should
generally decrease as a percentage of total revenues. The Company believes that
its current management infrastructure is largely sufficient to handle the
increasing level of lending activity resulting from the growth in the Companys
funding sources.Income (Loss) Before Income TaxesAs a result of the foregoing factors, results from operations before provision
(benefit) for income taxes generated losses of $1.1 million and $2.8 million,
respectively, for the three and six months ended June 30, 2003 compared to net
income of $3.3 million and $4.1 for the same three and six month periods in
2002.Net Income (Loss)For the three months ended June 30, 2003, the net loss was approximately
$730,000 compared to net income of $2.1 million for the same quarter in 2002, a
decrease of $2.9 million or 134.0%. For the six months ended June 30, 2003,
the net loss was $1.8 million compared to net income of $2.7 million in the
same period in 2002, a decrease of $4.6 million or 168.5%.18Table of ContentsEarnings (Loss) Per ShareFor the three and six months ended June 30, 2003, the loss per share was $0.18
and $0.43, respectively. For the three and six months ended June 30, 2002, the
earnings per share  basic were $0.35 and $0.41, respectively.
Considering the
dilutive effect of the stock options and warrants, the earnings per
share were $0.22 for
the three months ended June 30, 2002 and $0.26 for the six months ended June
30, 2002.CRITICAL ACCOUNTING POLICIESRevenue RecognitionThe Company recognizes revenue primarily from loan placement fees, loan
servicing fees and extension fees. Loan placement fees are 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., individual investors, Fund I, and Fund II). 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 accrued by
the effective interest method. 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 SaleInvestments in real estate held for sale includes real estate acquired through
foreclosure and are carried at the lower of the recorded amount, inclusive of
any senior indebtedness, or the propertys estimated fair value, less estimated
costs to sell.Investments in Mortgage LoansInvestments in mortgage loans are secured by trust deeds and mortgages.
Generally, all of 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 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.19Table of ContentsAllowance for Loan LossesThe 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 taxesThe 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 RESOURCESLiquidity is a measure of an entity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 who acquire interests
in mortgage loans.For the six months ended June 30,
2003, the cash flows provided by operating
activities of the Company approximated $0.4 million, compared to cash provided
by operating activities of $3.9 million during the six months ended June 30,
2002. Cash provided by investing activities approximated $6.9 million during
the six months ended June 30, 2003, compared to $3.1 million during the same
period of the prior year. Financing activities used $7.2 million for the six
months ended June 30, 2003 compared to $7.3 million for the same six month
period in 2002.The Company has historically relied upon cash flow from operations to provide
for its capital requirements. During the six months ended June 30, 2003, the
Company generated positive cash flow of $6.9 million from investing activities
and believes that cash generated from operations, together with cash and cash
flows from investments in mortgage loans on real estate on hand at June 30,
2003, 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 SourcesIn order to maintain and expand its business, the Company must have access to
funding sources that are prepared to invest in mortgage loans which the Company
brokers. Historically, the Company had relied primarily upon individual
investors for this purpose. However, in order to expand its business, the
Company organized Fund I and Fund II upon which the Company 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 is currently seeking to
raise $500 million through a public offering of its units. As of June 30,
2003, Fund II had raised approximately $398 million through the sale of units.
As of July 31, 2003, Fund II was closed to new investors. The Companys wholly owned subsidiary, Vestin Mortgage, is the manager of both
Funds. In addition, the Company is currently contemplating a public offering
of subordinated notes and the establishment of a new fund which would make
mortgage loans and invest in real estate. These efforts, if successful, would
further enhance the Companys access to funding sources.20Table of ContentsThe Companys ability to attract investors to acquire interests in mortgage
loans, either directly or through the Funds or through other means, depends
upon a number of factors, some of which are beyond the Companys control. The
key factors in this regard include general economic conditions, the condition
of real estate markets, the availability of alternative investment
opportunities, the Companys track record and the Companys reputation. The
Company believes that its ability to attract investors for mortgage loans has
been enhanced by the high historical yields generated by such mortgage loans.
These yields 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.Notwithstanding the high historical yields generated by its mortgage loans
compared to conventional mortgage lenders, the Company believes its ability to
attract investors may be impaired by the Companys small size and limited
operating history. In addition, the mortgage loan investments offered by the
Company 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 would suffer if the performance of
Company-brokered mortgage loans declines or if alternative investment vehicles
offering comparable rates and greater safety or liquidity become available.
The rate of return paid to members of Fund I has declined in recent months. If
this decline continues or if a similar decline is experienced by members of
Fund II, then the Companys ability to attract investors may be adversely
affected, thereby reducing the funds available to invest in loans originated by
the Company.In order to address these issues, the Company has pursued a strategy of: (i)
using great care in the selection of mortgage loans in order to maintain its
current track record, and (ii) developing additional funding sources such as
Vestin Fund I, Vestin Fund II and the sale of the Notes hereunder. In this
manner, the Company is seeking to maintain its access to funding from current
investors while broadening its funding sources, thereby enabling it to expand
the scope of its mortgage brokerage operations. No assurance can be given that
it will be successful in this effort.The Companys ability to attract investors would suffer if the performance of
Company brokered mortgage loans declines or if alternative investment vehicles
offering comparable rates and greater safety or liquidity become available.
The rate of return paid to members of Fund I and Fund II has declined in recent
months. If this decline continues, then the Companys ability to attract
investors may be adversely affected, thereby reducing the funds available to
invest in loans originated by the Company. Moreover, the increase in
non-performing assets held by Fund I and Fund II reduces the monies such Funds
have available to invest in new mortgage loans, thereby reducing the Companys
lending activity and reducing its loan placement fees.The Company maintained two revolving lines of credit totaling $5.0 million and
$2.0 million with two financial institutions specifically for interim funding
of mortgage loans placed. Both lines of credit expired in June 2003. As of
June 30, 2003, both lines had been paid in full upon maturity. The Company
plans to negotiate the renewal of the $2.0 million line of credit within the
next three months, but has informed the lender that it does not wish to renew
the $5.0 million line of credit. These lines of credit were guaranteed by the
Companys Chief Executive Officer and were secured by the deeds of trust on the
property being advanced against. The Company was in compliance with all
covenants on these lines of credit through maturity.The Company from time to time considers additional funding sources for its
mortgage brokerage operations including new and/or expanded credit facilities
and securitization arrangements. The Company has no current commitments in this
regard, and there can be no assurance that the Company will be able to obtain
any additional financing.An intercreditor agreement provides the Company an additional funding source
for mortgage loans whereby a third party investor (the Investor) may
participate in certain mortgage loans with the Company, Fund I, and Fund II
(collectively the Lead Lenders). In the event of borrower non-performance,
the intercreditor agreement gives the Lead Lenders the right to either (i)
continue to remit to the Investor the interest due on the participated loan
amount; (ii) substitute an alternative loan acceptable to the Investor; or
(iii) repurchase the participated loan amount from the Investor for the
outstanding balance plus accrued interest. These conditions effectively give
the third party investors a priority lien on the participated loans.21Table of ContentsFACTORS AFFECTING THE COMPANYS OPERATING RESULTSThis 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:Limited Experience in Certain Real Estate MarketsCurrently, the Company brokers mortgage loans or works with mortgage brokers
primarily in areas in which Vestin Mortgage has substantial experience such as
Arizona, California, Nevada, Texas, and Hawaii. Depending on the market and on
the Companys performance, it plans to expand the Companys operations
throughout the United States. However, Vestin Mortgage has limited experience
outside of certain western states. Real estate markets vary greatly from
location to location. Vestin Mortgage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, Vestin Mortgage plans to utilize independent real estate advisors
located in markets where Vestin Mortgage lacks experience for consultation
prior to making investment decisions. No assurance can be given such advisors
will provide effective assistance to the Company.Dependence on Key PersonnelThe Companys success depends upon the continued contributions of certain key
personnel, including Michael V. Shustek, Peggy S. May and Lance Bradford, each
of whom would be difficult to replace because of his/her extensive experience
in his/her 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 ProceduresThe Companys underwriting standards and procedures are more lenient than
conventional lenders in that the Company 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 arranged by the Company 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 may be calculated
using an as-if developed appraisal, the values of which can dramatically
change.Risks of Interest Rate ChangesThe Companys results of operations will vary with changes in interest rates
and with the performance of the relevant real estate markets.22Table of ContentsIf 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 the Company to raise
the interest rate it charges on extended loans anywhere from between 0.75% 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 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
placed by the Company 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 reputation
and may make it more difficult for the Company to attract investors willing to
acquire interests in mortgage loans.Competition For FundsThe ability of the Company to access funds for mortgage loans depends upon the
perceived attractiveness of yields on loans placed by the Company, the safety
of the underlying investment, the Companys 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
brokered by the Company. 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.Competition For BorrowersThe 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 the Company. 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.23Table 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 June 30, 2003 (the Evaluation Date).
Such evaluation was conducted under the supervision and with the participation
of the Companys Chief Executive Officer (CEO) and its 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 over financial reporting that occurred during the
Companys most recent fiscal quarter, that have materially affected, or are
reasonably likely to materially affect, the Companys internal controls over
financial reporting.24Table of Contents
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGSOther than as noted below, there have been no material changes in the legal
proceedings reported by the Company in its Annual Report on Form 10-KSB/A for
the year ended December 31, 2002.The Company, Vestin Mortgage and Del Mar Mortgage, Inc., (Del Mar Mortgage),
a company wholly owned by Mike Shustek, the largest shareholder and CEO of the
Company, and various affiliates of the Company are defendants in a civil action
(the Action). On April 10, 2003, the United States District Court for the
District of Nevada (the Court) entered a judgment in the Action for $5.0
million, plus interest accruing from March 26, 2003, jointly and severally
against the Company, Vestin Mortgage and Del Mar Mortgage. Subsequent to April
10, 2003, the Court stayed the execution of the judgment pending the hearing
and ruling on post-trial motions and accordingly, the Court did not require the
defendants to post a bond for the judgment. The hearing was held on August 6,
2003, at which time the Court Denied the motion for reconsideration and held
that the Defendants are jointly and severably liable for the judgment plus
interest as well as attorneys fee in the amount of $660,000. Del Mar Mortgage
has agreed to indemnify the Company and Vestin Mortgage for any losses and expenses in
connection with the Action. Mr. Shustek has guaranteed the indemnification.
Mr. Shustek has agreed to provide a bond in the amount of the judgment. The
defendants intend to appeal the ruling to the United States Ninth Circuit Court
of Appeals.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDSNot applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIESNot applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSNot applicable
ITEM 5. OTHER INFORMATIONNot applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K(a) Exhibits

|        |  |                                                                                                                                                        |  |               |  | 
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- |  | 
|        |  |                                                                                                                                                        |  | Page          |  | 
|Exhibit |  |                                                                                                                                                        |  | Number/       |  | 
|Number  |  | Description                                                                                                                                            |  | Filing Method |  | 
|        |  |                                                                                                                                                        |  |               |  | 
|2.1     |  | Agreement and Plan of Reorganization among the Company, Capsource, Inc.
and Stephen J. Byrne, dated as of April 9, 1999                                |  | *             |  | 
|        |  |                                                                                                                                                        |  |               |  | 
|2.2     |  | Asset Acquisition Agreement between the Company and Del Mar Holdings, Inc.,
dated as of April 9, 1999                                                  |  | *             |  | 
|        |  |                                                                                                                                                        |  |               |  | 
|2.3     |  | Asset Acquisition Agreement between the Company and Del Mar Mortgage, Inc.,
dated as of April 9, 1999                                                  |  | *             |  | 
|        |  |                                                                                                                                                        |  |               |  | 
|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 |  | **            |  | 

25



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##### Table of Contents



|        |  |                                                                                                                           |  |               |  | 
|------- |  | ------------------------------------------------------------------------------------------------------------------------- |  | ------------- |  | 
|        |  |                                                                                                                           |  | Page          |  | 
|Exhibit |  |                                                                                                                           |  | Number/       |  | 
|Number  |  | Description                                                                                                               |  | Filing Method |  | 
|        |  |                                                                                                                           |  |               |  | 
|3.1     |  | Certificate of Incorporation                                                                                              |  | ***           |  | 
|        |  |                                                                                                                           |  |               |  | 
|3.2     |  | By-laws                                                                                                                   |  | ***           |  | 
|        |  |                                                                                                                           |  |               |  | 
|10.1    |  | Employment Agreement between Del Mar Mortgage,
Inc. and Steve Byrne, dated November 3, 1998                               |  | ***           |  | 
|        |  |                                                                                                                           |  |               |  | 
|10.2    |  | Transition Agreement between Del Mar Mortgage,
Inc. and Capsource, Inc., dated April 27, 1999 and First Amendment thereto |  | ****          |  | 
|        |  |                                                                                                                           |  |               |  | 
|10.3    |  | Employment Agreement between Del Mar Mortgage
and Mike Whiteaker, dated May 3, 1999                                       |  | ****          |  | 
|        |  |                                                                                                                           |  |               |  | 
|10.4    |  | The 2000 Stock Option Plan of Sunderland
Corporation                                                                      |  | ****          |  | 
|        |  |                                                                                                                           |  |               |  | 
|10.5    |  | Employment Agreement between the Company and
Michael V. Shustek, dated December 1, 1999                                   |  | ****          |  | 
|        |  |                                                                                                                           |  |               |  | 
|10.6    |  | Employment Agreement between the Company and
Ira S. Levine, dated September 1, 2000                                       |  | ******        |  | 
|        |  |                                                                                                                           |  |               |  | 
|10.7    |  | Employment Agreement between the Company and
Lance K. Bradford, dated April 1, 2000                                       |  | *******       |  | 
|        |  |                                                                                                                           |  |               |  | 
|10.8    |  | Third Amended and Restated Operating Agreement
of DM Mortgage Investors, LLC, dated as of November 2, 2000                |  | *****         |  | 
|        |  |                                                                                                                           |  |               |  | 
|31.1    |  | Section 302 Certification of Michael V. Shustek                                                                           |  | 28            |  | 
|        |  |                                                                                                                           |  |               |  | 
|31.2    |  | Section 302 Certification of John Alderfer                                                                                |  | 29            |  | 
|        |  |                                                                                                                           |  |               |  | 
|32      |  | Certification Pursuant to U.S.C. 18 Section 1350                                                                          |  | 30            |  | 



---

|*       |  | Previously filed on Form 8-K (File No. 000-24803) on May 4, 1999.        
|------- |  | -------------------------------------------------------------------------
|       
|**      |  | Previously filed on Form 8-K (File No. 000-24803) on April 14, 2000.     
|       
|***     |  | Previously filed on Form 10-SB/A (File No. 000-24803) on August 13, 1998.
|       
|****    |  | Previously filed on Form 10-KSB (File No. 000-24803) on June 30, 2000.   
|       
|*****   |  | Previously filed on Form 424B5 (File No. 333-32800) on November 15, 2000.
|       
|******  |  | Previously filed on Form 10-KSB (File No. 000-24803) on April 2, 2001.   
|       
|******* |  | Previously filed on Form 10-KSB/A (File No. 000-24803) on April 30, 2001.

(b)    Reports on Form 8-K



| | Current Report on Form 8-K filed with the Commission on April 16, 2003, which
reports the following item:
| | ---------------------------------------------------------------------------------------------------------
|
| | (i)                                                                                                      
|
| | Current Report on Form 8-K filed with the Commission on May 20, 2003, which
reports the following item:  
|
| | (ii)                                                                                                     

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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. Shustek                                            | 
|    |  |                                                                   | 
|    |  | Michael V. Shustek, Chief Executive Officer
Date: August 14, 2003 | 

|    |  |                                                              | 
|--- |  | ------------------------------------------------------------ | 
|By: |  | /s/ John Alderfer                                            | 
|    |  |                                                              | 
|    |  | John Alderfer, Chief Financial Officer
Date: August 14, 2003 | 

27