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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
September 30, 2003

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


FOR THE TRANSITION PERIOD FROM  TO

COMMISSION FILE NUMBER 000-24803

VESTIN GROUP, INC.

(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)


DELAWARE
    
    52-2102142(STATE OR OTHER JURISDICTION OF
    
    (I.R.S. EMPLOYERINCORPORATION OR ORGANIZATION)
    
    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 o

Number of shares outstanding of each of the issuers classes of common equity,
as of October 31, 2003:

5,150,340 Shares of Common Stock

Transitional Small Business Disclosure Format (Check one): Yes o 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                    
|                           |                                                             | CONSOLIDATED STATEMENTS OF CASH FLOWS  CONTINUED        
|                           |                                                             | 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

PagePART I
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsConsolidated Balance Sheet (unaudited)
    
    
    3Consolidated Statements of Income (Loss) (unaudited)
    
    
    4Consolidated
Statement of Stockholders Equity (unaudited)
    
    
    5Consolidated Statements of Cash Flows (unaudited)
    
    
    6Notes to Consolidated Financial Statements (unaudited)
    
    
    8Item 2.
    

Managements Discussion and Analysis
    
    
    16Item 3.
    
    Controls and Procedures
    
    
    26PART II
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    27Item 2.
    
    Changes in Securities and Use of Proceeds
    
    
    27Item 3.
    
    Defaults Upon Senior Securities
    
    
    27Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    27Item 5.
    
    Other Information
    
    
    27Item 6.
    
    Exhibits and Reports on Form 8-K
    
    
    27SIGNATURES
    
    
    30


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Vestin Group, Inc. and Subsidiaries




CONSOLIDATED BALANCE SHEETSeptember 30, 2003

(Unaudited)

ASSETSCash
    
    $
    2,638,498Accounts receivable
    
    
    2,872,672Interest receivable
    
    
    9,565Due from related parties
    
    
    3,836,907Notes receivable
    
    
    400,000Note receivable  related party
    
    
    87,964Income taxes receivable
    
    
    64,781Investments in real estate held for sale
    
    
    7,274,614Investments in mortgage loans on real estate, net of allowance of $250,000
    
    
    1,569,000Other investments  related parties
    
    
    2,353,775Other assets
    
    
    589,317Property and equipment, net
    
    
    741,936Total assets
    
    $
    22,439,029LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable and accrued expenses
    
    $
    2,391,952Dividend payable
    
    
    74,817Deferred income
    
    
    3,306,250Notes payable  related party
    
    
    2,703,791Notes payable
    
    
    1,474,654Total liabilities
    
    
    9,951,464Stockholders equityPreferred stock, $.0001 par value; 20 million shares authorized;
897,800 shares issued and outstanding
    
    
    90Common stock, $.0001 par value; 100 million shares authorized
5,328,340 shares issued and 5,226,340 shares outstanding
    
    
    532Treasury stock, 102,000 shares
    
    
    (318,104
    )Additional paid-in capital
    
    
    9,535,112Retained earnings
    
    
    3,269,935Total stockholders equity
    
    
    12,487,565Total liabilities and stockholders equity
    
    $
    22,439,029


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 nine months endedSeptember 30, 2003
    
    September 30, 2002
    
    September 30, 2003
    
    September 30, 2002RevenuesLoan placement and related fees
    
    $
    3,000,850
    
    
    $
    8,378,332
    
    
    $
    15,397,362
    
    
    $
    21,726,133Interest income
    
    
    133,147
    
    
    
    149,156
    
    
    
    500,745
    
    
    
    391,656Other revenue
    
    
    385,657
    
    
    
    297,091
    
    
    
    1,184,507
    
    
    
    594,716Total revenues
    
    
    3,519,654
    
    
    
    8,824,579
    
    
    
    17,082,614
    
    
    
    22,712,505ExpensesSales and marketing expenses
    
    
    1,743,902
    
    
    
    2,192,694
    
    
    
    7,378,684
    
    
    
    6,260,396General and administrative expenses
    
    
    3,237,067
    
    
    
    3,344,235
    
    
    
    10,171,400
    
    
    
    8,621,927Valuation loss on real estate held for sale
    
    
    
    
    
    
    
    
    
    
    1,287,883
    
    
    
    Bad debt expense
    
    
    
    
    
    
    
    
    
    
    715,301
    
    
    
    Capital Contribution to Vestin Fund I
    
    
    
    
    
    
    
    
    
    
    1,600,000
    
    
    
    Interest expenses
    
    
    24,453
    
    
    
    20,479
    
    
    
    224,403
    
    
    
    461,070Total expenses
    
    
    5,005,422
    
    
    
    5,557,408
    
    
    
    21,377,671
    
    
    
    15,343,393Income (loss) from continuing operations before
provision (benefit) for income taxes
    
    
    (1,485,768
    )
    
    
    3,267,171
    
    
    
    (4,295,057
    )
    
    
    7,369,112Provision (benefit) for income taxes
    
    
    (505,161
    )
    
    
    1,110,838
    
    
    
    (1,460,319
    )
    
    
    2,505,498NET INCOME (LOSS)
    
    
    (980,607
    )
    
    
    2,156,333
    
    
    
    (2,834,738
    )
    
    
    4,863,614Preferred stock dividend
    
    
    (224,450
    )
    
    
    (234,450
    )
    
    
    (676,628
    )
    
    
    (703,350
    )Net income (loss) applicable to common shareholders
    
    $
    (1,205,057
    )
    
    $
    1,921,883
    
    
    $
    (3,511,366
    )
    
    $
    4,160,264Earnings (loss) per common share  Basic
    
    $
    (0.23
    )
    
    $
    0.36
    
    
    $
    (0.66
    )
    
    $
    0.77Earnings (loss) per common share  Diluted
    
    $
    (0.23
    )
    
    $
    0.23
    
    
    $
    (0.66
    )
    
    $
    0.48Weighted average number of common shares
outstanding  Basic
    
    
    5,309,308
    
    
    
    5,342,816
    
    
    
    5,322,132
    
    
    
    5,427,291Weighted average number of common shares
outstanding  Diluted
    
    
    5,309,308
    
    
    
    8,519,148
    
    
    
    5,322,132
    
    
    
    8,601,452


The accompanying notes are an integral part of this statement.

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Vestin Group, Inc. and Subsidiaries




CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY

For the nine months ended September 30, 2003

(Unaudited)

Preferred Stock
    
    Common Stock
    
    Treasury Stock
    
    AdditionalPaid-in
    
    RetainedShares
    
    Amount
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    Capital
    
    Earnings
    
    TotalBalance at January 1, 2003
    
    
    907,800
    
    
    $
    91
    
    
    
    5,324,340
    
    
    $
    532
    
    
    
    
    
    
    $
    
    
    
    $
    8,922,885
    
    
    $
    7,420,672
    
    
    $
    16,344,180Dividends paid on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (676,628
    )
    
    
    (676,628
    )Dividends paid on common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (639,371
    )
    
    
    (639,371
    )Expenses related to the issuance of warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    696,227
    
    
    
    
    
    
    
    696,227Treasury stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (102,000
    )
    
    
    (318,104
    )
    
    
    
    
    
    
    
    
    
    
    (318,104
    )Common stock options exercised
    
    
    
    
    
    
    
    
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,999
    
    
    
    
    
    
    
    15,999Redemption of preferred stock
    
    
    (10,000
    )
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (99,999
    )
    
    
    
    
    
    
    (100,000
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,834,738
    )
    
    
    (2,834,738
    )Balance at September 30, 2003
    
    
    897,800
    
    
    $
    90
    
    
    
    5,328,340
    
    
    $
    532
    
    
    
    (102,000
    )
    
    $
    (318,104
    )
    
    $
    9,535,112
    
    
    $
    3,269,935
    
    
    $
    12,487,565


The accompanying notes are an integral part of this statement.

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Vestin Group, Inc. and Subsidiaries




CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For the nine months endedSeptember 30, 2003
    
    September 30, 2002Cash flow from operating activities:Net income (loss)
    
    $
    (2,834,738
    )
    
    $
    4,863,614Adjustments to reconcile net income (loss) from continuing
operations to net cash provided by operating activities:Depreciation and amortization
    
    
    115,731
    
    
    
    77,420Stock based compensation
    
    
    
    
    
    
    742,033Net loss from sale of investment in real estate held for sale
    
    
    
    
    
    
    (168,889
    )Loss on investment in marketable securities
    
    
    
    
    
    
    253,427Loss on other investments
    
    
    
    
    
    
    403,500Loss related to capital contribution to Fund I
    
    
    1,600,000
    
    
    
    Expenses related to warrants granted
    
    
    696,227
    
    
    
    Provision for loan losses
    
    
    170,000
    
    
    
    Bad debt expense
    
    
    715,301
    
    
    
    Valuation loss on real estate held for sale
    
    
    1,287,883
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    1,275,770
    
    
    
    (839,386
    )Interest receivable
    
    
    103,788
    
    
    
    (9,351
    )Shareholder receivable
    
    
    
    
    
    
    351,899Other assets
    
    
    81,682
    
    
    
    31,987Income taxes receivable
    
    
    (64,781
    )
    
    
    Due from related parties
    
    
    (2,596,743
    )
    
    
    (1,038,312
    )Accounts payable and accrued expenses
    
    
    422,573
    
    
    
    58,224Deferred income
    
    
    3,306,250
    
    
    
    Dividend payable
    
    
    (833
    )
    
    
    (34,174
    )Income taxes payable
    
    
    (1,395,538
    )
    
    
    774,216Net cash provided by operating activities
    
    
    2,882,572
    
    
    
    5,466,208Cash flows from investing activities:Purchase of property and equipment
    
    
    (138,556
    )
    
    
    (140,889
    )Cash advanced on notes receivable
    
    
    
    
    
    
    (144,500
    )Principal payments received on notes receivable
    
    
    30,000
    
    
    
    1,060,499Principal payments received on notes receivable  related party
    
    
    
    
    
    
    69,999Net purchase of investment in marketable securities
    
    
    
    
    
    
    (180,551
    )Purchase of investments in mortgage loans on real
estate from Fund II
    
    
    (2,000,000
    )
    
    
    (4,700,855
    )Proceeds from sale of investments in mortgage loans
on real estate to Fund II
    
    
    9,297,925
    
    
    
    10,000,000Net sale (purchase) of other investments  related party
    
    
    (253,775
    )
    
    
    Purchase of investments in mortgage loans on real estate (net of sales)
    
    
    (239,815
    )
    
    
    (13,525,702
    )Purchase of investment in real estate held for sale
    
    
    (1,100,000
    )
    
    
    (111,371
    )Proceeds from sale of investment in mortgage loans
on real estate
    
    
    
    
    
    
    4,717,000Net cash provided by investing activities
    
    
    5,595,779
    
    
    
    (2,956,370
    )


The accompanying notes are an integral part of this statement.

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Vestin Group, Inc. and Subsidiaries




CONSOLIDATED STATEMENTS OF CASH FLOWS  CONTINUED

(Unaudited)
(Continued)

For the nine months endedSeptember 30, 2003
    
    September 30, 2002Cash flows from financing activities:Advance on line of credit
    
    $
    
    
    
    $
    4,700,000Payments on notes payable
    
    
    
    
    
    
    (5,058,982
    )Payments on lines of credit
    
    
    (7,000,000
    )
    
    
    Payment of notes payable  related party
    
    
    (723,763
    )
    
    
    Proceeds from notes payable
    
    
    1,078,997
    
    
    
    Common stock options exercised
    
    
    15,999
    
    
    
    Payment of dividend on preferred stock
    
    
    (676,628
    )
    
    
    (703,350
    )Payment of dividend on common stock
    
    
    (639,371
    )
    
    
    (1,304,649
    )Redemption of preferred stock
    
    
    (100,000
    )
    
    
    Purchase of treasury stock
    
    
    (318,104
    )
    
    
    (2,478,227
    )Net cash used in financing activities
    
    
    (8,362,870
    )
    
    
    (4,845,208
    )NET INCREASE (DECREASE) IN CASH
    
    
    115,481
    
    
    
    (2,335,370
    )Cash at beginning of period
    
    
    2,523,017
    
    
    
    3,776,682Cash at end of period
    
    $
    2,638,498
    
    
    $
    1,441,312Supplemental cash flow information:Cash paid for federal income taxes
    
    $
    
    
    
    $
    2,221,360Cash paid for interest
    
    $
    224,403
    
    
    $
    738,728Noncash investing and financing activities:Dividends declared on preferred stock
    
    $
    74,817
    
    
    $
    78,150Notes payable assumed through foreclosure
    
    $
    244,654
    
    
    $
    2,641,428Notes 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
    
    
    $
    6,470,052Investment 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 this statement.

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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 three publicly held funds, Vestin Fund I, LLC (Fund I),
Vestin Fund II, LLC (Fund II), Vestin Fund III, LLC (Fund III) 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, Fund III 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 September 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-2 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  SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

The 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.

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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 Sale

Investments 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 Loans

Investments 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.

Allowance for Loan Losses

The Company maintains an allowance for loan losses on its investment in
mortgage loans for estimated credit impairment in the Companys investment in
mortgage loans portfolio. The Companys estimate of losses is based on a number
of factors including the types and dollar amounts of loans in the portfolio,
adverse situations that may affect the borrowers ability to repay, prevailing
economic conditions and the underlying collateral securing the loan. Additions
to the allowance are provided through a charge to earnings and are based on an
assessment of certain factors including, but not limited to, estimated losses
on the loans. Actual losses on loans are recorded as a charge-off or a
reduction to the allowance for loan losses. Subsequent recoveries of amounts
previously charged off are added back to the allowance.

Income taxes

The Company accounts for its income taxes using the liability method, which
requires recognition of deferred tax assets and liabilities for the future tax
consequences attributable to differences between carrying amounts of existing
assets and liabilities and their respective tax bases and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.

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NOTE 3  STOCK-BASED COMPENSATION

The Company has stock-based compensation plans covering the majority of its
employees, a plan covering the Companys Board of Directors, and plans related
to employment contracts with certain Executive Officers of the Company. The
Company accounts for stock-based compensation utilizing the intrinsic value
method in accordance with the provisions of Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees and related Interpretations
(APB 25). 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 123, Accounting
for Stock-Based Compensation (SFAS 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 nine months ended
|                                                                                                                                    |                                    |   | September 30,             |       | September 30,
|                                                                                                                                    |                                    |   | 2003                      |       | 2002         
|                                                                                                                                    |                                    |   |                           |       |              
|Net income (loss), as reported                                                                                                      |                                    | $ | (2,834,738                | )     |               | $ | 4,863,614 |     
|Add: Stock-based compensation
expense included in reported income (loss),
net of related tax effects                                |                                    |   | 459,510                   |       |               |   | 459,509   |     
|Deduct: Total stock-based
compensation expense determined under
fair value based methods for all awards,
net of related tax effects |                                    |   | (1,176,684                | )     |               |   | (567,306  | )   
|                                                                                                                                    |                                    |   |                           |       |               |   |           |     
|Pro forma net income (loss)                                                                                                         |                                    | $ | (3,551,912                | )     |               | $ | 4,755,817 |     
|                                                                                                                                    |                                    |   |                           |       |               |   |           |     
|Net
income (loss) per common share                                                                                                  |                                    |   |                           |       |               |   |           |     
|                                                                                                                                    | Basic income (loss), as reported   |   | $                         | (0.66 | )             |   | $         | 0.77 | 
|                                                                                                                                    |                                    |   |                           |       |               |   |           |     
|                                                                                                                                    | Basic income (loss), pro forma     |   | $                         | (0.79 | )             |   | $         | 0.75 | 
|                                                                                                                                    |                                    |   |                           |       |               |   |           |     
|                                                                                                                                    | Diluted income (loss), as reported |   | $                         | (0.66 | )             |   | $         | 0.48 | 
|                                                                                                                                    |                                    |   |                           |       |               |   |           |     
|                                                                                                                                    | Diluted income (loss), pro forma   |   | $                         | (0.79 | )             |   | $         | 0.47 | 
|                                                                                                                                    |                                    |   |                           |       |               |   |           |     

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.

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NOTE 4  RELATED PARTY TRANSACTIONS

Notes receivable  In 2000, we loaned Donovan Jacobs, one of our employees,
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 a full recourse loan to
Mr. Jacobs. 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 September 30,
2003, the balance on this note was approximately $88,000.

Due from related parties approximating $3,836,907 as of September 30, 2003 are
comprised of the following:

Amounts due from Fund I totaling $493,167 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 $2,870,442 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.

Amounts due from the Companys Chief Executive Officer or Companies wholly
owned by him totaling approximately $473,298 relate to various advances made,
primarily related to litigation expenses. Such advances bear no interest and
are due on demand.

Other investments  related parties consists of the Companys investments in
units of Fund I, Fund II and Fund III totaling approximately
$1.0 million, $1.1 million and $0.3 million,
respectively, as of September 30, 2003.

During the three and nine months ended September 30, 2003, the Company incurred
expenses of approximately $141,000 and $670,000, 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 L.L. Bradford &
Company, LLC, Certified Public Accounting firm (L.L. Bradford). For the three
and nine months ended September 30, 2003, approximately $84,000 and $180,000,
respectively, was paid to L.L. Bradford for services provided to the Company.
During the three and nine months ended September 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 September 30, 2003 and 2002, the Company
recorded revenues of approximately $20,000 and $30,000, respectively, from its
investment in Fund I as a result of distributions declared during those
periods. For the nine-month periods ended September 30, 2003 and 2002, the
Company recorded revenues of approximately $72,000 and $94,000, 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 September 30, 2003 and 2002, Vestin
Mortgage recorded management fees from Fund I of approximately $64,000 and
$62,000, respectively. During the nine-month periods ended September 30, 2003
and 2002, Vestin Mortgage recorded management fees from Fund I of approximately
$190,000 and $187,000, respectively.

For the three-month periods ended September 30, 2003 and 2002, the Company
recorded revenues of approximately $25,000 and $33,000, respectively, from its
investment in Fund II as a result of distributions declared during those
periods. For the nine-month periods ended September 30, 2003 and 2002, the
Company recorded revenues of approximately $94,000 and $102,000, 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 September 30, 2003 and 2002, Vestin
Mortgage recorded management fees from Fund II approximating $253,000 and
$162,000, respectively. During the nine-month periods ended September 30, 2003
and 2002, Vestin Mortgage recorded management fees from Fund II approximating
$696,000 and $399,000, respectively.

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During the three month period ended September 30, 2003, the Company sold $0
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 nine
months ended September 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 September 30, 2003, the Company purchased $0 in loans from
Fund I or Fund II. For the nine-month period ended September 30, 2003, the
Company purchased approximately $479,000 and $2.0 million in loans from Fund I
and Fund II, respectively.

During the nine months ended September 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 $50.8 million and
$135.0 million in mortgage loans in the three-month periods ended September 30,
2003, and 2002, respectively. The Company placed approximately $203.4 million
and $370.5 million in mortgage loans in the nine-month periods ended September
30, 2003, and 2002, respectively. These loans were primarily funded by Fund I
and Fund II.

During the three and nine months ended September 30, 2003, the Company paid
approximately $182,000 and $824,000, 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 5  INVESTMENTS IN MORTGAGE LOANS ON REAL ESTATE

As of September 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 September 30, 2003. See Note 6 for
information with respect to properties acquired through foreclosure on certain
defaulted mortgage loans. Management has evaluated the collectibility of the
loans in foreclosure in light of the category and dollar amounts of such loans,
adverse situations that may affect the borrowers ability to repay, prevailing
economic conditions and the underlying collateral securing the loan. Due to
economic uncertainties and historical loss experience, the Companys management
has established a reserve for inherent losses in the portfolio totaling
$250,000 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 and may be commissioned by the borrower. The appraisals may be for the current estimate of the as-if
developed value of the property, which approximates the post-construction
value of the collateralized property assuming that such property is developed.
As-if developed values on raw land loans or acquisition and development loans
often dramatically exceed the immediate sales value and may include anticipated
zoning changes, selection by a purchaser against multiple alternatives, and
successful development by the purchaser; upon which development is dependent on
availability of financing. As most of the appraisals will be prepared on an
as-if developed basis, if a loan goes into default prior to any development of
a project, the market value of the property may be substantially less than the
appraised value. As a result, there may be less security than anticipated at
the time the loan was originally made. If there is less security and a default
occurs, the Company may not recover the full amount of the loan.

NOTE 6  INVESTMENTS IN REAL ESTATE HELD FOR SALE

At September 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

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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.

AdjustedDescription
    
    % of ownership
    
    Carrying valueRaw land in Utah
    
    
    100
    %
    
    $
    3,000,000Raw land in Las Vegas, Nevada
    
    
    100
    %
    
    
    595,860Raw land in Las Vegas, Nevada
    
    
    100
    %
    
    
    593,84072-unit condominium project in Las Vegas, Nevada
    
    
    83
    %
    
    
    1,084,914Residence in Las Vegas, Nevada
    
    
    100
    %
    
    
    2,000,000Total
    
    
    
    
    
    $
    7,274,614


NOTE 7 NOTES PAYABLE

Notes payable totaling $1,474,654 as of September 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 (4.0% at September 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 $2,703,791 as of September 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.

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NOTE 9  TREASURY STOCK

During the three months ended September 30, 2003, the Company acquired 102,000
shares of the Companys common stock for a total value of approximately
$318,000, which was held in treasury as of September 30, 2003.

NOTE 10  DIVIDENDS PAYABLE

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

NOTE 11  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 nine months ended September 30, 2003, basic and
diluted earnings per share included adjustments for dividends to preferred
shareholders of $224,450 and $676,628, respectively. For the three and nine
months ended September 30, 2003, options and warrants to
purchase 2,506,190 and
2,280,175 shares, respectively, of common stock were excluded from the
computation of diluted earnings per share because their effect would be
antidilutive.

NOTE 12  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 nine months
ended September 30, 2003, as the Company did not receive additional units for
the contribution. The note was paid in full as of September 30, 2003.

NOTE 13  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). 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 FASB has recently deferred the adoption
date for certain variable interest entities acquired prior to February 1, 2003
until interim and annual periods ending after December 15, 2003 and issued an Exposure Draft amending several of its provisions. The Company
continues to evaluate its relationships and interest in entities that may be
considered VIEs. The impact of adopting FIN 46 on the Financial Statements is
still being reviewed.

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NOTE 14  LEGAL PROCEEDINGS

Vestin Group, Vestin Mortgage, and Del Mar Mortgage, Inc., a company wholly
owned by Michael Shustek, the largest shareholder and CEO of Vestin Group,
Inc., are defendants in a civil action entitled Desert Land, L.L.C. et al. v.
Owens Financial Group, Inc. et al (the Action). The Action was initiated by
Desert Land, L.L.C. (Desert Land) on various loans arranged by Del Mar
Mortgage, Inc. and/or Vestin Mortgage. On April 10, 2003, the United States
District Court for the District of Nevada (the Court) entered judgment
jointly and severally in favor of Desert Land against Vestin Group, Vestin
Mortgage and Del Mar Mortgage, Inc. Judgment was predicated upon the Courts
finding that Del Mar Mortgage, Inc. received an unlawful penalty fee from the
plaintiffs.

Defendants subsequently filed a motion for reconsideration. The Court denied
the motion and, on August 13, 2003, held that Vestin Group, Vestin Mortgage,
and Del Mar Mortgage, Inc. are jointly and severally liable for the judgment in
the amount of $5,683,312.19 (which amount includes prejudgment interest and
attorneys fees). On August 27, 2003, the Court stayed execution of the
judgment against Vestin Group and Vestin Mortgage based upon the posting of a
bond in the amount of $5,830,000. The bond was arranged by Michael Shustek and
was posted without any cost or obligation to Vestin Group and Vestin Mortgage.
Additionally, Del Mar Mortgage, Inc. has indemnified Vestin Group and Vestin
Mortgage for any losses and expenses in connection with the Action, and Mr.
Shustek has guaranteed the indemnification. All of the defendants held liable
to Desert Land are planning to appeal the judgment.

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.

NOTE 15  REDEMPTION LIMITATIONS OF FUND I AND FUND II

In order to comply with the operating agreements of Fund I and Fund II and
Federal statutes, both Funds may redeem no more than 10% of the members
capital in any calendar year. Beginning capital as of January 1, 2003 for Fund
I and Fund II were $97.5 million and $315.0 million for calendar 2003,
respectively. On June 17, 2003, Fund I discontinued accepting requests for the
redemption of units for the 2003 calendar year. As of October 31, 2003, the
total of redemptions made and redemptions requested and awaiting payment was
$9.3 million for Fund I. All redemptions requests received after that date
have been logged for redemption beginning in January 2004. As of October 31,
2003, requests to redeem approximately 866,000 units in 2004,
approximately 554,000 units in 2005, and approximately 225,000 units
in 2006 had
been logged. On September 1, 2003, Fund II discontinued accepting requests for
the redemption of units for the 2003 calendar year. As of September 1, 2003,
the total of redemptions made and redemptions requested and awaiting payments
was $26.3 million for Fund II. All redemption requests received after that
date have been logged for redemption beginning in January 2004. As of October
31, 2003, requests to redeem approximately 3.5 million units in
2004 and 538,000 units in 2005 units had been logged.

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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 (doing business as Vestin) serves as the manager of Vestin Fund
I, LLC, a Nevada limited liability company (Fund I), which was organized to
invest in mortgage loans. As of September 30, 2003, the aggregate capital was
at $87 million for Fund I. Vestin Mortgage 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 September 30, 2003, the aggregate capital was
$391 million for Fund
II. Fund II may continue to sell units to existing members until June 2004 or
until $500 million units have been sold.

Vestin Mortgage is also the manager of Vestin Fund III, LLC (Fund III) a
Nevada limited liability company which will invest in mortgage loans and
income-producing real property. Vestin Mortgages primary criteria in
selecting properties will be the propertys potential to generate current
income while preserving the value of the principal and the propertys potential
for appreciation. Vestin Mortgage has not previously invested directly in
real property. Vestin Mortgage intents to apply its prior experience in
investing on mortgage loans to its evaluation and investment in real property.
Fund III was declared effective on November 7, 2003.

Vestin Capital has acted as the dealer manager in the sale of units for Fund I,
Fund II, and Fund III 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.

Vestin Advisors, Inc., a Nevada corporation is a passive non-bank custodian
that serves as a custodian for individual retirement accounts of investors in
Vestin products.

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 September 30, 2003, of
approximately $64,000 for Fund I and $253,000 for Fund II. For the nine months
ended September 30, 2003, the Company earned management fees, of approximately
$190,000 for Fund I and $696,000 for Fund II. As of September 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 September 30, 2003.

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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 nine months ended
September 30, 2003 and 2002. This information should be read in conjunction
with the Companys unaudited Consolidated Financial Statements and accompanying
notes and other detailed information regarding the Company appearing elsewhere
in this Form 10-QSB and in the Companys annual report on Form 10-KSB/A-2 for
the year ended December 31, 2002.

RESULTS OF OPERATIONS

COMPARISON OF THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

Revenue

The Company reported total revenues of approximately $3.5 million for the three
months ended September 30, 2003, a decrease of $5.3 million or 60.1% from
approximately $8.8 million for the three months ended September 30, 2002. For
the nine months ended September 30, 2003 and 2002, the Company reported total
revenues of approximately $17.1 million and $22.7 million, a decrease of $5.6
million or 24.8%.

For the three months ended September 30, 2003 and 2002, loan placement and
related fees were $3.0 million compared to $8.4 million, a decrease of $5.4
million or 64.2%. The loan placement and related fees revenues are
approximately 85.3% and 94.9%, respectively, of the Companys revenue for the
three months ended September 30, 2003 and 2002. The total dollar amount of
loans placed for the three months ended September 30, 2003 decreased by $84.6
million or 62.5% to $50.8 million from $135.0 million for the same period in
2002. The majority of these revenues are derived from loan origination fees
which averaged 2.6% of the approved loan for the third quarter of 2003 compared to 4.5% of the approved loan for the same
quarter in the prior year. While the loan placement fees decreased due to lower
loan demand, the extension fees increased from $0.3 million for the quarter
ended September 30, 2002 to $0.8 million for the same quarter in 2003, an
increase of $0.5 million or 224.6% as existing loans extended under their
existing terms. The decrease in the amount of loans placed is primarily
related to a slowdown in borrowing demand within our market segment. We
believe the current economic conditions are allowing banks to make loans to
borrowers that would normally be in our target market.

For the nine months ended September 30 2003, and 2002, loan placement and
related fees were $15.4 million and $22.0 million, a decrease of $6.6 million
or 29.9%. These fees are approximately 90.1% and 96.6%, respectively, of the
Companys revenue for these periods. The total dollar amount of loans placed
for the nine months ended September 30, 2003 decreased by $167.1 million or
45.1% to $203.4 million from $370.5 million for the same period in 2002. Loan
origination fees averaged 4.9% for the nine months ended September 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
to $3.3 million for the nine months ended September 30, 2003 from $1.5 million
for the same period in 2002, an increase of $1.8 million or 117.6% as existing
loans in 2002 extended under their existing terms. The decrease in the amount
of loans placed is primarily related to a slowdown preceding and during the war
in Iraq and a slowdown in borrowing demand within our market segment.

For the three months ended September 30, 2003, interest income was
approximately $133,000 compared to approximately $149,000 for the comparable
period in 2002, a decrease of $16,000 or 10.7%. For the nine months ended
September 30, 2003, approximately $501,000 was earned compared to $392,000 in
2002, an increase of $109,000 or 27.9%. The decrease for the three months
ended September 30, 2003 compared to 2002, was primarily a decrease in bank
interest income. The increase for the nine months ended September 30, 2003 as
compared to the same period in 2002 is primarily due to recovery of interest
income related to a non-performing loan of approximately $75,000.

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Other revenue increased to approximately $386,000 for the three months ended
September 30, 2003 compared to approximately $297,000 for the three months
ended September 30, 2002, an increase of $89,000 or 29.8%. Year to date
through September 30, 2003, other revenue was approximately $1,185,000 compared
to $595,000 in 2002, an increase of $590,000 or 99.2%. 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 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 $1.7 million and $2.2 million, or 49.5% and 24.8%,
respectively, of the Companys total revenues for the three-month periods ended
September 30, 2003 and 2002, respectively. The decrease in expense is primarily
related to the following:



| |  | Commissions expense related to loans placed decreased by $0.3
million to $0.4 million for the three months ended September 30, 2003
compared to $0.7 million for the same period in 2002 primarily due to
fewer commissions paid related to the lower loan volume.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Public relations expenses decreased from $0.2 million for the three
months ended September 30 2002 to approximately $26,000 for three
months ended September 30, 2003. The Company was more aggressive in
its marketing efforts in the third quarter of 2002 compared to the
third quarter of 2003.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Sales and marketing expenses were approximately $7.4 million and $6.3 million,
or 43.2% and 27.6%, respectively, of the Companys total revenues for the
nine-month periods ended September 30, 2003 and 2002, respectively. These
increases are primarily related to the following:



| |  | Commissions expense related to loans placed increased by $1.8
million to $3.7 million for the nine months ended September 30, 2003
compared to $1.9 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 nine months ended September
30, 2003.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Advertising expenses increased by $0.6 million to $2.8 million for
the nine months ended September 30, 2003 compared to $2.2 million for
the same period in 2002 due to the Companys continued marketing
efforts to expand its operations.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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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 $3.2 million or 92.% of total
revenues for the third quarter of 2003, and $3.3 million or 37.9% of revenues
for the third quarter of 2002, a decrease of $107,000 which is primarily
related to a loss on investments in the third quarter of 2002 of $0.5 million
compared to $0 loss in the third quarter of 2003, offset by other minimal increases.

General
and administrative expenses of the Company were $10.2 million or 47.6%
of total revenues for the nine months ended September 30, 2003, and $8.6
million or 38.0% of revenues for the nine months ended September 30, 2002, an
increase of $1.6 million which is primarily related to professional fees (accounting, legal, consulting and professional
fees) increased by $1.6 million to $2.5 million for the nine months
ended September 30, 2003 compared to $0.9 million for the same period
in 2002 mainly due to SEC filings.

The Company experienced losses of approximately $1.3 million related to
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 nine
months ended September 30, 2003.

The Company recorded a loss of approximately $0.7 million related to accrued
fees that will not be collectible related to real estate held for sale.

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 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. The amount of the contribution was
charged to current operating results during the three months ended March 31,
2003, as the Company did 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.

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Income (Loss) Before Income Taxes

As a result of the foregoing factors, results from operations before provision
(benefit) for income taxes generated losses of $1.5 million and
$4.3 million,
respectively, for the three and nine months ended September 30, 2003 compared
to income of $3.3 million and $7.4 for the same three and nine month periods in
2002.

Net Income (Loss)

For the three months ended September 30, 2003, the net loss was approximately
$981,000 compared to net income of $2,156,000 for the same quarter in 2002, a
decrease of $3,137,000 or 145.5%. For the nine months ended September 30,
2003, the net loss was $2,835,000 compared to net income of $4,863,000 in the
same period in 2002, a decrease of $7,698,000 or 158.3%.

Earnings (Loss) Per Share

For the three and nine months ended September 30, 2003, the loss per share was
$0.23 and $0.66, respectively. For the three and nine months ended September
30, 2002, the earnings per share  basic were $0.36 and $0.77, respectively.
Considering the dilutive effect of the stock options and warrants, the earnings
per share were $0.23 for the three months ended September 30, 2002 and $0.48
for the nine months ended September 30, 2002.

CRITICAL ACCOUNTING POLICIES

Revenue Recognition

The 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 Sale

Investments 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 Loans

Investments 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

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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.

Allowance for Loan Losses

The Company maintains an allowance for loan losses on its investment in
mortgage loans for estimated credit impairment in the Companys investment in
mortgage loans portfolio. The Companys estimate of losses is based on a number
of factors including the types and dollar amounts of loans in the portfolio,
adverse situations that may affect the borrowers ability to repay, prevailing
economic conditions and the underlying collateral securing the loan. Additions
to the allowance are provided through a charge to earnings and are based on an
assessment of certain factors including, but not limited to, estimated losses
on the loans. Actual losses on loans are recorded as a charge-off or a
reduction to the allowance for loan losses. Subsequent recoveries of amounts
previously charged off are added back to the allowance.

Income taxes

The Company accounts for its income taxes using the liability method, which
requires recognition of deferred tax assets and liabilities for the future tax
consequences attributable to differences between carrying amounts of existing
assets and liabilities and their respective tax bases and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is a measure of 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 nine months ended September 30, 2003, the cash flows provided by
operating activities of the Company approximated $2.9 million, compared to cash
provided by operating activities of $5.5 million during the nine months ended
September 30, 2002. Cash provided by investing activities approximated $5.6
million during the nine months ended September 30, 2003, compared to cash used
of $3.0 million during the same period of the prior year. Financing activities
used $8.4 million for the nine months ended September 30, 2003 compared to $4.8
million for the same nine-month period in 2002.

The Company has historically relied upon cash flow from operations to provide
for its capital requirements. During the nine months ended September 30, 2003,
the Company generated positive cash flow of $5.6 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
September 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
credit facilities. There can be no assurance that the Company will be able to
obtain any additional financing.

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Funding Sources

In order to maintain and expand its business, the Company must have access to
funding sources that are prepared to invest in mortgage loans which 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 September 30,
2003, Fund II had raised approximately $424 million through the sale of units.
The Companys wholly owned subsidiary, Vestin Mortgage, is the manager of both
Funds.

On November 7, 2003, the SEC declared the registration statement (Form S-11) of
Vestin Fund III, LLC (Fund III) to be effective and the
marketing of $120 million of Fund III
units commenced. Fund III will invest in and operate multifamily, assisted living, office, industrial and
retail property, and other income producing properties as well as investing in
mortgage loans were the collateral is real property. Vestin Mortgage, Inc. is
the Manager of Fund III. Vestin Mortgage, Inc. will earn real estate
commissions, advisory fees, and property management fees as well as loan
brokerage, evaluation, administration and extension, or modification fees
Vestin Capital, Inc. is the dealer-manager for the sale of Fund III units,
which will be sold primarily through selected dealers. Vestin Capital, Inc.
will receive a 3% commission for all unit sales and 0.5% for diligence
expenses. Investor funds will be held in escrow until the earlier of one year
or the purchase of 1,000,000 units has occurred.

In
addition, the Company is currently pursuing a public offering of
subordinated notes. These efforts, if successful, would further enhance the
Companys access to funding sources.

The Companys ability to attract investors to acquire interests in mortgage
loans, either directly or through the Funds or other means, depends
upon a number of factors, some of which are beyond 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 Vestin Fund III. 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.

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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.

Intercreditor agreements provide the Company additional funding sources for
mortgage loans whereby a third party investor (the Investor) may participate
in certain mortgage loans with the Company, 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. The Company currently has such
agreements in place with four separate entities.

In order to comply with the operating agreements of Fund I and Fund II and
Federal statutes, both Funds may redeem no more than 10% of the members
capital in any calendar year. Beginning capital as of January 1, 2003 for Fund
I and Fund II were $97.5 million and $315.0 million for calendar 2003,
respectively. On June 17, 2003, Fund I discontinued accepting requests for the
redemption of units for the 2003 calendar year. As of October 31, 2003, the
total of redemptions made and redemptions requested and awaiting payment was
$9.3 million for Fund I. All redemptions requests received after that date
have been logged for redemption beginning in January 2004. As of October 31,
2003, requests to redeem approximately 866,000 units in 2004,
approximately 554,000 units in 2005, and approximately 225,000 units
in 2006 had
been logged. On September 1, 2003, Fund II discontinued accepting requests for
the redemption of units for the 2003 calendar year. As of September 1, 2003,
the total of redemptions made and redemptions requested and awaiting payments
was $26.3 million for Fund II. All redemption requests received after that
date have been logged for redemption beginning in January 2004. As of October
31, 2003, requests to redeem approximately 3.5 million units in
2004 and 538,000 units in 2005 units had been logged.

FACTORS AFFECTING THE COMPANYS OPERATING RESULTS

This quarterly report and other written reports and oral statements made from
time to time by the Company may contain forward looking statements. Such
forward looking statements may be identified by the use of such words as
expects, plans, estimates, forecasts, projects, anticipates,
believes and words of similar meaning. Forward looking statements are likely
to address such matters as the Companys business strategy, future operating
results, future sources of funding for mortgage loans brokered by the Company,
future economic conditions and pending litigation involving the Company. As a
result, investors should carefully consider any forward looking statements in
light of the various factors which could affect future results. Some of these
factors are discussed below.

The Companys business is subject to numerous factors affecting its operating
results. In addition to the factors discussed above, the Companys operating
results may be affected by:

Limited Experience in Certain Real Estate Markets

Currently, 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.

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Dependence on Key Personnel

The 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.

Stephen J. Byrne, the Chief Operations Officer of Vestin Group since January
2001, has resigned effective November 30, 2003.

Risks of Underwriting Standards and Procedures

The 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 Changes

The Companys results of operations will vary with changes in interest rates
and with the performance of the relevant real estate markets.

If the economy is healthy, the Company expects that more people will be
borrowing money to acquire, develop or renovate real property. However, if the
economy grows too fast, interest rates may increase too much and the cost of
borrowing may become too expensive. This could result in a slowdown in real
estate lending which may mean the Company will have fewer loans to acquire,
thus reducing its revenues and the distributions to stockholders.

One of the results of interest rate fluctuations is that borrowers may seek to
extend their low-interest-rate mortgage loans after market interest rates have
increased. Generally, the Companys loan documents permit 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
| | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  |  | 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 Funds

The 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 Borrowers

The Company considers its competitors for borrowers to be the providers of
non-conventional mortgage loans, that is, lenders who offer short-term,
equity-based loans on an expedited basis for slightly higher fees and rates
than those charged by conventional lenders. To a lesser extent, the Company
also competes with conventional mortgage lenders and mortgage loan investors,
such as commercial banks, thrifts, conduit lenders, insurance companies,
mortgage brokers, pension funds and other financial institutions that offer
conventional mortgage loans. Many of the companies against which the Company
competes have substantially greater financial, technical and other resources
than 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.

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ITEM 3. CONTROLS AND PROCEDURES.

The Company has evaluated the effectiveness of the design and operation of its
disclosure controls and procedures as of September 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.

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PART II. OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

Other 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-2 for
the year ended December 31, 2002.

Vestin Group, Vestin Mortgage, and Del Mar Mortgage, Inc., a company wholly
owned by Michael Shustek, the largest shareholder and CEO of Vestin Group,
Inc., are defendants in a civil action entitled Desert Land, L.L.C. et al. v.
Owens Financial Group, Inc. et al (the Action). The Action was initiated by
Desert Land, L.L.C. (Desert Land) on various loans arranged by Del Mar
Mortgage, Inc. and/or Vestin Mortgage. On April 10, 2003, the United States
District Court for the District of Nevada (the Court) entered judgment
jointly and severally in favor of Desert Land against Vestin Group, Vestin
Mortgage and Del Mar Mortgage, Inc. Judgment was predicated upon the Courts
finding that Del Mar Mortgage, Inc. received an unlawful penalty fee from the
plaintiffs.

Defendants subsequently filed a motion for reconsideration. The Court denied
the motion and, on August 13, 2003, held that Vestin Group, Vestin Mortgage,
and Del Mar Mortgage, Inc. are jointly and severally liable for the judgment in
the amount of $5,683,312.19 (which amount includes prejudgment interest and
attorneys fees). On August 27, 2003, the Court stayed execution of the
judgment against Vestin Group and Vestin Mortgage based upon the posting of a
bond in the amount of $5,830,000. The bond was arranged by Michael Shustek and
was posted without any cost or obligation to Vestin Group and Vestin Mortgage.
Additionally, Del Mar Mortgage, Inc. has indemnified Vestin Group and Vestin
Mortgage for any losses and expenses in connection with the Action, and Mr.
Shustek has guaranteed the indemnification. All of the defendants held liable
to Desert Land are planning to appeal the judgment.




ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Not applicable




ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable




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

Not applicable




ITEM 5. OTHER INFORMATION

Not applicable

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibit
    
    
    
    Page Number/Number
    
    Description
    
    Filing Method2.1
    
    Agreement and Plan of Reorganization among the Company, Capsource, Inc.
and Stephen J. Byrne, dated as of April 9, 1999
    
    *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
    
    **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
    
    *****10.9
    
    Operating Agreement Vestin Fund II, LLC
    
    ********10.10
    
    Operating Agreement Vestin Fund III, LLC
    
    *********31.1
    
    Section 302 Certification of Michael V. Shustek31.2
    
    Section 302 Certification of John W. Alderfer32
    
    Certification Pursuant to U.S.C. 18 Section 1350




---

|*   |  | 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.

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|****     |  | 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.                                         
|        
|******** |  | Previously filed on Vestin Fund II, LLCs Post Effective Amendment No. 4 (File no. 333-52484) on October 23, 2003,

(b) Reports on Form 8-K

Current Report on Form 8-K filed with the Commission on August 18, 2003,
which reports the following item:

(i) Item 5  Other Events and Regulation FD Disclosure

Current Report on Form 8-K filed with the Commission on August 8, 2003, which
reports the following item:

(ii) Item 5  Other Events and Regulation FD Disclosure

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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, INCBy:
    
    /s/ Michael V. Shustek

Michael V. Shustek, Chief Executive Officer
Date: November 14, 2003By:
    
    /s/ John W. Alderfer

John W. Alderfer, Chief Financial Officer
Date: November 14, 2003


30