UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

             |X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2004

                |_| TRANSITION REPORT UNDER SECTION 13 OR 15(d)
                      OF THE SECURITIES EXCHANGE ACT 1934

               For the transition period from ________ to ________

                        Commission File Number: 333-98337

                         YOSEMITE MORTGAGE FUND II, LLC
--------------------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

           California                                   94-3394131
---------------------------------           ------------------------------------
  (State or other jurisdiction              (I.R.S. Employer Identification No.)
of incorporation or organization)

                  414 13th Street, Suite 400, Oakland, CA 94612
--------------------------------------------------------------------------------
                    (Address of principal executive offices)

                                 (510) 452-9144
--------------------------------------------------------------------------------
                           (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 than 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 |_|

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                     PROCEEDINGS DURING THE PAST FIVE YEARS

Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes |_| No |_|

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. _________________

Transitional Small Business Disclosure Form Format (Check one): Yes |X|; No |_|


                                       1
<PAGE>

                         YOSEMITE MORTGAGE FUND II, LLC

                                      INDEX

                                                                     PAGE NUMBER

PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)

Condensed Financial Statements                                               3
Condensed Balance Sheets
   September 30, 2004 and December 31, 2003                                  4

Condensed Statements of Income
   Three and nine months ended September 30, 2004 and September 30, 2003     5

Condensed Statements of Cash Flows
   Nine months ended September 30, 2004 and September 30, 2003               6

Notes to Condensed Financial Statements                                      7

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS                               13

ITEM 3.  CONTROLS AND PROCEDURES                                            16


PART II. OTHER INFORMATION

ITEM 2.  CHANGES IN SECURITIES                                              17

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                   17

Signature                                                                   18

Certifications


                                       2
<PAGE>

          PART 1: FINANCIAL INFORMATION - ITEM 310(b) of REGULATION S-B

ITEM 1: CONDENSED FINANCIAL STATEMENTS

      The accompanying unaudited condensed financial statements should be read
in conjunction with the registrant's registration statement on Form SB-2, as
amended by Post-Effective Amendment no. 2, dated August 13, 2004, of the
Company. These statements have been prepared in accordance with the instructions
of the Securities and Exchange Commission Form 10-QSB and do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements.

      In the opinion of the Company's management, all material adjustments of a
normal and recurring nature considered necessary for a fair presentation of
results of operations for the interim periods have been included. The results of
operations for the nine months ended September 30, 2004 are not necessarily
indicative of the results that may be expected for the year ended December 31,
2004.


                                       3
<PAGE>

                         YOSEMITE MORTGAGE FUND II, LLC
                    (A California Limited Liability Company)
                            CONDENSED BALANCE SHEETS
                                    Unaudited

<TABLE>
<CAPTION>
                                                              September 30, 2004   December 31, 2003
                                                              ------------------    ----------------
<S>                                                              <C>                   <C>
                        Assets
Assets:
   Loans receivable (Note 4)                                     $27,721,624           $28,495,649
   Cash                                                            9,398,759             4,419,769
   Interest receivable                                               200,277               271,448
   Late fee receivable                                                    --                   187
   Due from affiliate (Note 3)                                            --                    --
   Software                                                               --                36,982
   Deferred offering costs, net of
     accumulated amortization of $132,864 and
     $62,524 at September 30, 2004 and
     December 31, 2003, respectively                                 336,068               406,408
                                                                 -----------           -----------
                 Total Assets                                    $37,656,728           $33,630,443
                                                                 ===========           ===========

             Liabilities and Members' Equity
Liabilities:
   Accounts payable                                              $     9,839           $    11,523
   Distributions payable                                             431,604               264,278
   Accrued legal fees                                                 28,204                    --
   Deposits from pending members                                          --               137,000
   Service fees payable (Note 3)                                       4,617                 5,796
                                                                 -----------           -----------
                 Total Liabilities                                   474,264               418,597
                                                                 -----------           -----------
Members' Equity:
   Initial member                                                        824                   824
   Members                                                        37,181,640            33,211,022
                                                                 -----------           -----------
                 Total Members' Equity                            37,182,464            33,211,846
                                                                 -----------           -----------
                    Total Liabilities and Members' Equity        $37,656,728           $33,630,443
                                                                 ===========           ===========
</TABLE>

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


                                       4
<PAGE>

                         YOSEMITE MORTGAGE FUND II, LLC
                    (A California Limited Liability Company)
                         CONDENSED STATEMENTS OF INCOME
                                    Unaudited

<TABLE>
<CAPTION>
                                          For the three        For the three         For the nine          For the nine
                                          months ended         months ended          months ended          months ended
                                       September 30, 2004   September 30, 2003    September 30, 2004    September 30, 2003
                                       ------------------   ------------------    ------------------    ------------------
<S>                                        <C>                 <C>                   <C>                   <C>
Revenue:
   Interest on loans receivable            $   997,992         $   376,672           $ 2,365,687           $   507,935
   Late charges on loans receivable             13,881               3,172                14,402                 3,172
   Other interest                               12,024                 692                19,598                 1,076
                                           -----------         -----------           -----------           -----------
      Total Revenue                          1,023,897             380,536             2,399,687               512,183
                                           -----------         -----------           -----------           -----------

Expenses:
   Accounting                                   16,716              18,022                80,375                30,587
   Amortization                                 23,447              23,446                70,340                39,078
   California LLC fees and taxes                 2,911                 845                16,131                 1,665
   Foreclosure                                  (3,622)                 --                    --                    --
   Fund insurance                                   --                  --                   295                    --
   Legal fees                                   19,792               7,358                64,063                 9,890
   Printing                                      3,968               6,737                 5,087                 6,737
   Service fees (Note 3)                        21,201               8,407                50,358                10,953
                                           -----------         -----------           -----------           -----------
      Total Expenses                            84,413              64,815               286,649                98,910
                                           -----------         -----------           -----------           -----------
        Net Income                         $   939,484         $   315,721           $ 2,113,038           $   413,273
                                           ===========         ===========           ===========           ===========
</TABLE>

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


                                       5
<PAGE>

                         YOSEMITE MORTGAGE FUND II, LLC
                    (A California Limited Liability Company)
                       CONDENSED STATEMENTS OF CASH FLOWS
                                    Unaudited

<TABLE>
<CAPTION>
                                                                  For the nine          For the nine
                                                                  months ended          months ended
                                                               September 30, 2004     September 30, 2003
                                                               ------------------     ------------------
<S>                                                                <C>                  <C>
Cash flows from operating activities:
   Net Income                                                      $  2,113,038         $    413,273
   Amortization                                                          70,340               39,078
   Write-off of software                                                 36,982                   --
   Adjustments to reconcile net income to net cash
         provided by operations:

         Accounts payable                                                (1,684)                 (21)
         Accounts payable to pending members                                 --            1,725,800
         Deferred offering costs                                             --              (61,694)
         Due to/from affiliate                                               --             (374,775)
         Interest receivable                                             71,171             (141,174)
         Due to investor                                                     --               30,137
         Accrued legal fees                                              28,204                   --
         Late fees receivable                                               187               (1,439)
         Service fees payable                                            (1,179)               3,014
                                                                   ------------         ------------
               Net cash provided by operating activities              2,317,059            1,632,199
                                                                   ------------         ------------

Cash flows from investing activities:
   Issuance of loans receivable                                      (9,530,126)         (19,053,505)
   Purchase of loans receivable                                        (750,000)                  --
   Collection on loans receivable                                    11,054,151            3,599,305
                                                                   ------------         ------------
               Net cash provided (used) by investing activities         774,025          (15,454,200)
                                                                   ------------         ------------


Cash flows from financing activities:
   Members' contributions                                             2,817,500           21,566,620
   Members' distributions                                              (929,594)             (28,770)
                                                                   ------------         ------------

               Net cash provided by financing activities              1,887,906           21,537,850
                                                                   ------------         ------------

                    Increase in cash                                  4,978,990            7,715,849

                    Cash, beginning of period                         4,419,769                1,000
                                                                   ------------         ------------
                           Cash, end of period                     $  9,398,759         $  7,716,849
                                                                   ============         ============
</TABLE>

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


                                       6
<PAGE>

                         YOSEMITE MORTGAGE FUND II, LLC
                    (A California Limited Liability Company)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                    Unaudited

NOTE 1 - NATURE OF OPERATIONS

Yosemite Mortgage Fund II, LLC (the "Company") is a company formed on March 19,
2001 under the California Beverly-Killea Limited Liability Company Act (the
"Act"), to conduct any lawful business for which a limited liability company may
be organized under the Act, including investment of the Company's cash and the
purchase and sale of notes, mortgages and deeds of trust, secured by interests
in real estate.

The Company's operating agreement provides that the term of the Company shall
continue until December 31, 2021, unless terminated earlier.

The Manager is MFP Management LLC (a California limited liability company)
formed on May 14, 2001 under the Act and is engaged in business as an investor
in real estate secured loans. MFP Management LLC is an affiliate of Pontes
Financial Group, Ltd. a California corporation, and Steven M. Pontes, General
Manager of MFP Management LLC.

The fiscal year end of the Company is December 31.

The Profit or Loss of the Company is allocated to the Members in proportion to
their respective Percentage Interest. The Manager is required to allocate to the
Members all Profits and Losses realized by the Company during any quarter as of
the close of business on the last day of each calendar quarter, in accordance
with their respective Interests and in proportion to the number of days during
the calendar quarter that they owned the Interests.

The Manager and its Affiliates are entitled to receive fees, compensation and
expense reimbursements from the Company, such as Management Fee, Company
Expenses, Promotional Interest, Property Management Fee, and Real Estate
Brokerage Commissions.

The Manager is entitled to receive from the Company a Management Fee payable
monthly, in amounts determined by the Manager from time to time, up to a maximum
of three-quarters of one percent (0.75%) per annum of the Base Amount. For any
portion of the Capital Contributions not included in the Base Amount, the
Management Fee shall not exceed 0.5% per annum.

The Manager is entitled to receive a Promotional Interest in the Company, as an
additional Management Fee, that is equal to twenty-five percent (25%) of the
amount of Cash Available for Distributions that exceeds twelve percent (12%) of
Capital Contributions, for each and every Fiscal Year of the Partnership on a
non-cumulative basis.

If the Manager or an Affiliate performs property management services with
respect to a foreclosed residential property, the maximum Property Management
Fee, including all rent-up, leasing, and re-leasing fees and bonuses, and
leasing related services paid to any Person, shall be five percent (5%) of the
gross revenues from such property. For individual and commercial property, the
maximum Property Management Fee from such leases shall be six percent (6%) of
the gross revenues where the Manager or its Affiliates includes leasing,
re-leasing, and leasing-related services. Conversely, the maximum Property
Management Fee from such leases shall be three percent (3%) of the gross
revenues where the Manager or its Affiliates do not perform leasing, re-leasing,
and leasing-related services with respect to the property. For industrial and
commercial properties which are leased on a long-term basis, the maximum
Property Management Fee from such leases shall be one percent (1%) of the gross
revenues, except for a one-time initial leasing fee of three percent (3%) of the
gross revenues on each lease payable over the first five full years of the
original term of the lease.



                                       7
<PAGE>

                         YOSEMITE MORTGAGE FUND II, LLC
                    (A California Limited Liability Company)
               NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
                                    Unaudited

NOTE 1 - NATURE OF OPERATIONS (Continued)

The total compensation paid to all Persons for the sale of a property held by
the Company as a result of a foreclosure shall be limited to a competitive real
estate commission, not to exceed six percent (6%) of the contract price for the
sale of the property.

All capitalized items used in this Note 1 are defined in the Company's operating
agreement.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The financial statements of the Organization have been prepared on the accrual
basis of accounting and accordingly reflect all significant receivables,
payables, and other liabilities.

Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles 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.

Income (Loss) Allocation

Quarterly profits and losses are allocated to the members based upon each
member's respective interest in proportion to the number of days during the
quarter in which each member owned the interest. Net losses allocable to the
period before the admission of additional members are allocated to the initial
member. During the first quarter of 2003, the initial member was the only
member; accordingly, the first quarter's net loss of $176 was allocated to the
initial member. Terms of the Limited Liability Company Operating Agreement call
for prospective profits and losses to be allocated only to the members with no
allocation to the initial member.

Income taxes

The Company is treated as a partnership for federal and California income tax
purposes. Consequently, all tax effects of the Company's income or loss are
passed through to the members individually, and no federal or California income
taxes are provided for in the financial statements of the Company. The Company
pays an annual California tax of $800 and an annual California LLC fee based
upon its total annual income.

Revenue recognition

Interest is recognized as revenue when earned according to the terms of the
loan.


                                       8
<PAGE>

                         YOSEMITE MORTGAGE FUND II, LLC
                    (A California Limited Liability Company)
               NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
                                    Unaudited

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loans secured by trust deeds

Loans secured by trust deeds will be selected by the Manager and originated by
or through Pontes Financial Group, Ltd., a California licensed real estate
broker corporation, and will be recorded at cost. Interest income on loans will
be accrued by the simple interest method. The Company will not recognize
interest income on loans once they are determined to be impaired until the
interest is collected in cash. 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
and a specific reserve has been recorded. Cash receipts will be allocated to
interest income, except when such payments are specifically designated as
principal reduction or when management does not believe the Company's investment
in the loan is fully recoverable.

Allowance for loan losses

The Manager regularly reviews the mortgage loan portfolio to assess whether a
loan loss reserve is necessary. Borrower payment history, the value of the
property by which the loan is secured, and other economic and geographical
conditions are considered. In addition to these factors the Manager believes its
underwriting standard to fund only those loans not greater than 70% of the
collateral provides an adequate reserve against risk posed by market
deterioration and/or delinquent payments. The Manager determines, on a case by
case basis, whether or not to accrue interest income for loans delinquent or
otherwise in default. The Manager regularly reviews its portfolio, particularly
any loans that are delinquent, to determine whether a loan loss reserve is
necessary. At September 30, 2004, the Manager determined that no loan loss
reserves were required.

Deferred Offering Costs

During the Company's development stage, all costs associated with the offering
of the Company's securities were capitalized. These deferred offering costs,
totaling $468,932 are amortized using the straight-line method over five years.

Capitalized Software

Capitalized software is stated at cost. At December 31, 2003, the software was
still in the development stage. All long-lived assets are reviewed for
impairment when events or changes in circumstances indicate that the carrying
amount of the asset may not be recoverable. Impairment losses are recorded if
the asset's carrying amount is not recoverable through its undiscounted cash
flows. An impairment loss is recognized and recorded in current earnings to the
extent the carrying amount of an asset exceeds its estimated fair value. During
the first quarter of 2004, the Manager deemed the Capitalized Software to be
impaired and, hence, a loss of $36,982 was recorded.


                                       9
<PAGE>

                         YOSEMITE MORTGAGE FUND II, LLC
                    (A California Limited Liability Company)
               NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
                                    Unaudited

NOTE 3 - RELATED PARTY TRANSACTIONS

Due from Affiliate

Pontes Financial Group, Ltd., an affiliate of the Manager, offered then agreed
to reimburse the Company in the amount of $50,000 for a portion of the
organizational costs relating to a failed software development effort and
related accounting fees. During the third quarter of 2004, Pontes Financial
Group, Ltd. paid the entire amount of $50,000 to the Company.

Management Fees

Under the Operating Agreement, the Manager is entitled to receive from the
Company a Management Fee payable monthly, in amounts determined by the Manager
from time to time, up to a maximum of three-quarters of one percent (0.75%) per
annum of capital contributions committed to investment in mortgage loans.
Including the quarter ending September 30, 2004, the Manager has waived the
management fee for every quarter since the Company's inception. Had the Manager
accepted the management fee, the maximum management fee expense charged to the
Company would have been approximately $70,200 and $202,500 for the three and
nine month periods ending September 30, 2004, respectively, as compared to
$30,600 and $84,300 for the same periods ending September 30, 2003.

Service Fees

The Manager and its Affiliates are also entitled to receive monthly Mortgage
Servicing Fees on loans in which it services, in the amount of three-quarters of
one percent (0.75%) per annum of the principal outstanding in each loan.
One-quarter of one percent (0.25%) of the total fees were paid by the Company
and the remaining one-half of one percent (0.5%) of the total fees were paid by
the borrowers. Mortgage service fees expenses for the three and nine months
ending September 30, 2004 were approximately $21,200 and $50,400, respectively.
Mortgage service fees expenses were approximately $8,400 and $11,000,
respectively, for the three and nine months ending September 30, 2003. As of
September 30, 2004, the mortgage service fees payable to the Manager from the
Company was approximately $4,600.

Borrower's Costs

The Manager receives loan origination fees and other fees normally associated
with the loan placement and paid by the borrowers. These fees are paid directly
to the Manager by borrowers and are not included in the income and expenses of
the Company.

Loans Purchased from Affiliates of the Manager

The Company has purchased loans, in whole or in part, from affiliates of the
Manager and certain members of the Company. Principal balances for loans
purchased are due on the first of the following month. As of September 30, 2004,
there was no outstanding payable for loans purchased.


                                       10
<PAGE>

                         YOSEMITE MORTGAGE FUND II, LLC
                    (A California Limited Liability Company)
               NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
                                    Unaudited

NOTE 4 - LOANS RECEIVABLE

All loans receivable are secured by deeds of trust, and ownership of some loans
is partially shared with related parties (See Note 3). Loans receivable as of
September 30, 2004 and December 31, 2003 consist of the following:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                  Company
             Interest       Loan                      Maturity   Ownership
Loan Number    Rate        Status       Loan Type       Date     Percentage    September 30, 2004  December 31, 2003
--------------------------------------------------------------------------------------------------------------------
<S>           <C>         <C>         <C>              <C>         <C>             <C>               <C>
#3041         12.75%      Paid off    Interest-only    8/2003      75.56%          $        --       $   387,349
--------------------------------------------------------------------------------------------------------------------
#3053         13.00%      Current     Interest-only    9/2004      79.6%               390,126           325,000
--------------------------------------------------------------------------------------------------------------------
#3054         12.75%      Current     Amortized        7/2006      100%              1,303,192         1,370,502
--------------------------------------------------------------------------------------------------------------------
#3064         12.5%       Paid off    Amortized        2/2007      100%                     --           386,680
--------------------------------------------------------------------------------------------------------------------
#3068         12.75%      Current     Interest-only    5/2005      25%                 150,000                 -
--------------------------------------------------------------------------------------------------------------------
#3077         12.75%      Default     Interest-only    12/2005     86.96%              965,217           965,217
--------------------------------------------------------------------------------------------------------------------
#3080         12.75%      Current     Amortized        3/2006      100%                180,401           185,362
--------------------------------------------------------------------------------------------------------------------
#3081         12.75%      Current     Amortized        3/2006      100%                586,304           602,427
--------------------------------------------------------------------------------------------------------------------
#3092         12.75%      Paid off    Interest-only    5/2004      100%                     --           775,000
--------------------------------------------------------------------------------------------------------------------
#3094         12.75%      Paid off    Interest-only    8/2003      100%                     --           280,966
--------------------------------------------------------------------------------------------------------------------
#3095         12.5%       Paid off    Amortized        2/2007      100%                     --           252,327
--------------------------------------------------------------------------------------------------------------------
#3101         11.75%      Current     Amortized        9/2006      58.91%              235,617           430,000
--------------------------------------------------------------------------------------------------------------------
#3102         11.00%      Default     Amortized        3/2007      100%                435,642           444,581
--------------------------------------------------------------------------------------------------------------------
#3105         11.25%      Paid off    Interest-only    12/2006     27.97%                   --           295,664
--------------------------------------------------------------------------------------------------------------------
#3107         11.75%      Default     Interest-only    2/2008      100%                550,000           550,000
--------------------------------------------------------------------------------------------------------------------
#3108         11.75%      Paid off    Interest-only    3/2007      100%                     --           265,000
--------------------------------------------------------------------------------------------------------------------
#3110         12.75%      Current     Interest-only    9/2004      66.89%            1,505,000         1,405,000
--------------------------------------------------------------------------------------------------------------------
#3112         12.00%      Current     Interest-only    5/2007      50%               1,000,000         1,000,000
--------------------------------------------------------------------------------------------------------------------
#3115         12.68%      Paid off    Interest-only    8/2007      100%                     --           418,500
--------------------------------------------------------------------------------------------------------------------
#3116         12.75%      Paid off    Interest-only    8/2005      65.79%                   --         1,250,000
--------------------------------------------------------------------------------------------------------------------
#3118         12.25%      Current     Interest-only    9/2007      100%              1,070,000         1,070,000
--------------------------------------------------------------------------------------------------------------------
#3119         12.75%      Current     Interest-only    10/2007     71.7%                96,075            96,074
--------------------------------------------------------------------------------------------------------------------
#3121         12.00%      Current     Interest-only    10/2007     58.04%              415,000           415,000
--------------------------------------------------------------------------------------------------------------------
#3125         11.50%      Default     Interest-only    3/2005      74.56%              425,000           425,000
--------------------------------------------------------------------------------------------------------------------
#3126         11.75%      Paid off    Interest-only    2/2006      78.43%                   --         2,000,000
--------------------------------------------------------------------------------------------------------------------
#3127         11.75%      Paid off    Interest-only    3/2008      100%                     --           625,000
--------------------------------------------------------------------------------------------------------------------
#3129         9.75%       Paid off    Interest-only    4/2008      21.21%                   --           350,000
--------------------------------------------------------------------------------------------------------------------
#3131         12.00%      Paid off    Interest-only    4/2008      75.61%                   --           310,000
--------------------------------------------------------------------------------------------------------------------
#3132         12.75%      Current     Interest-only    7/2006      100%                210,000           210,000
--------------------------------------------------------------------------------------------------------------------
#3133         11.75%      Paid off    Interest-only    10/2004     54%                      --         1,350,000
--------------------------------------------------------------------------------------------------------------------
#3137         9.75%       Current     Interest-only    5/2008      100%                700,000           700,000
--------------------------------------------------------------------------------------------------------------------
#3138         12.00%      Paid off    Interest-only    12/2004     100%                     --           565,000
--------------------------------------------------------------------------------------------------------------------
#3140         12.75%      Current     Interest-only    11/2008     48%                 915,000           665,000
--------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       11
<PAGE>

                         YOSEMITE MORTGAGE FUND II, LLC
                    (A California Limited Liability Company)
               NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
                                    Unaudited

NOTE 4 - LOANS RECEIVABLE (Continued)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                  Company
             Interest       Loan                      Maturity   Ownership
Loan Number    Rate        Status       Loan Type       Date     Percentage      September 30, 2004  December 31, 2003
--------------------------------------------------------------------------------------------------------------------
<S>           <C>         <C>         <C>              <C>         <C>             <C>                  <C>
#3142         12.75%      Paid off    Interest-only    11/2004     83.33%            $        --        $ 1,000,000
--------------------------------------------------------------------------------------------------------------------
#3143         12.75%      Default     Interest-only    11/2008     61.43%              2,150,000          2,150,000
--------------------------------------------------------------------------------------------------------------------
#3144         12.75%      Default     Interest-only    5/2005      81.89%              4,975,000          4,975,000
--------------------------------------------------------------------------------------------------------------------
#3146         11.75%      Default     Amortized        4/2009      100%                  599,050                  -
--------------------------------------------------------------------------------------------------------------------
#3149         10.75%      Current     Interest-only    9/2008      57.6%               2,350,000                  -
--------------------------------------------------------------------------------------------------------------------
#3151         9.00%       Current     Interest-only    7/2009      100%                1,000,000                  -
--------------------------------------------------------------------------------------------------------------------
#3152         11.00%      Current     Interest-only    7/2007      100%                  515,000                  -
--------------------------------------------------------------------------------------------------------------------
#3153         9.00%       Current     Interest-only    7/2009      100%                1,900,000                  -
--------------------------------------------------------------------------------------------------------------------
#3155         10.00%      Current     Interest-only    8/2007      100%                2,000,000                  -
--------------------------------------------------------------------------------------------------------------------
#3156         8.75%       Current     Interest-only    8/2007      100%                1,100,000                  -
--------------------------------------------------------------------------------------------------------------------
Total Loans Receivable                                                               $27,721,624        $28,495,649
--------------------------------------------------------------------------------------------------------------------
</TABLE>

                  Weighted Average Yield of Portfolio = 11.57%


                                       12
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

Results of Operations

Three Months Ended September 30, 2004 Compared to 2003

Net income increase of approximately $624,000 was primarily due to an increase
in loan interest income of over $621,000, which resulted from an increase in the
loan portfolio over the prior year and the receipt in the third quarter of 2004
of approximately $359,000 in past due interest on Loan #3144, which due to the
default status of the loan, had not been previously accrued.

Nine Months Ended September 30, 2004 Compared to 2003

Net income increased by approximately $1,700,000 from 2003 to 2004. This
increase was primarily due to the increase in the loan portfolio over the prior
year, to the third quarter receipt of past due interest on Loan #3144 and to the
fact that the Company had no operations and was in its organizational stage
during the first quarter of 2003. Revenue, consisting primarily of loan interest
income, increased by approximately $1,888,000.

Financial Condition

During the nine months ending September 30, 2004, the Company sold, for Units at
$10.00 each, $2,954,500 in member capital contributions, as compared to
$23,322,405 in the same period of 2003. No units have been sold from April 1,
2004 to the present, as the Manager has suspended the public offering of the
Company's units, pending selection by the Manager of appropriate mortgage loans
for the Company's portfolio. Included in the $2,954,500 sold in the first nine
months of 2004 is $137,000 in deposits that were received in 2003, and accepted
as contributions in the first quarter of 2004. As such, pending deposits of
$137,000 were reserved for as of December 31, 2003. 41,840 and 103,013 Units
valued at $10.00 each were issued during the three and nine months ending
September 30, 2004, respectively, under the Distribution Reinvestment Plan. As
of September 30, 2004, a total of 3,695,864 Units were outstanding.

The Company originated and purchased loans approximating $5,600,000 and
$8,292,000 during the nine-month periods ending September 30, 2004 and September
30, 2003, respectively. The interest rates of the loans acquired in the first
nine months of 2004 and 2003 range from 8.75% to 12.75% and 9.75% to 13.75%,
respectively.


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<PAGE>

During the nine months ending September 30, 2004, borrowers paid off the
following loans:

            Loan           Principal       Interest      Payoff
            Number          Amount           Rate      Month/Year
            ------          ------           ----      ----------
            3041           $236,238         12.75%       6/2004
            3064           $193,594         12.50%       7/2004
            3092           $775,000         12.75%       8/2004
            3094           $280,966         12.75%       6/2004
            3095           $243,282         12.50%       7/2004
            3105           $295,664         11.25%       1/2004
            3108           $265,000         11.75%       6/2004
            3115           $418,500         12.68%       7/2004
            3116           $723,684         12.75%       5/2004
            3126           $2,000,000       11.75%       9/2004
            3127           $625,000         11.75%       1/2004
            3129           $350,000         9.75%        8/2004
            3131           $310,000         12.00%       3/2004
            3133           $1,350,000       11.75%       9/2004
            3138           $565,000         12.00%       6/2004
            3142           $1,250,000       12.75%       9/2004

Payoffs of loans are attributable to generally lower prevailing mortgage loan
interest rates available in the marketplace, which have resulted in increases of
cash of the Company, from approximately $4,420,000 as of December 31, 2003 to
approximately $9,399,000 as of September 30, 2004. As a result, the public
offering of the Company's units has been suspended since April 1,2004, awaiting
selection by the Manager of appropriate mortgage loans for the Company's
portfolio.

During the next 12 months, the Manager and its affiliate, Pontes Financial
Group, Ltd., will be selecting mortgage loans for the Company's investment
portfolio and will also assist by obtaining, processing and managing those loans
for the Company. The number of loans to be invested will depend upon the gross
proceeds raised, as well as the availability of suitable loans for the Company's
investment portfolio.

As of September 30, 2004, the following loans were in default:

               Loan           Principal            Interest
               Number          Amount                Rate
               ------         ---------            --------
               3077           $965,217             12.75%
               3102           $435,642             11.00%
               3107           $550,000             11.75%
               3125           $243,282             11.5%
               3143           $2,150,000           12.75%
               3144           $4,975,000           12.75%
               3146           $599,050             11.75%


                                       14
<PAGE>

The borrower of loan #3077 failed to make their payments due August 1, 2004 and
September 1, 2004. The Manager advanced both payments and since has received
repayment from the borrower for one of these advances. Because the Manager has
agreed to advance the borrower payments on an ongoing basis, the Company
continues to accrue interest on this loan.

Loan #s 3102, 3125 and 3146 are to the same borrower, but are secured by
separate properties. The Manager advanced the three most recent payments due
from the borrower. The Manager has agreed to advance the borrower payments on an
ongoing basis; therefore interest continues to be accrued on these loans.

Loan #3107 is currently not performing and was scheduled for trustee/foreclosure
sale on July 20, 2004. However, on July 16, 2004, the borrower filed for a
reorganization under Chapter 11 of the Bankruptcy Code. Since the borrower's
initial bankruptcy filing, the borrower has converted from a Chapter 11
(Reorganization) to a Chapter 7 (Liquidation) filing. Updated valuation research
confirms that a full repayment of principal, interest and expenses are likely
upon the sale of the property securing the Company's loan. Due to the loan being
in default, the Manager has not reflected any accrued interest in the financial
statements.

The borrower of Loan #3143 paid only part of the payment due June 1, 2004. The
Manager advanced the remainder of the June 1, 2004 payment, as well as the
entire payments due July 1, 2004, August 1, 2004 and September 1, 2004. As such,
the loan is in foreclosure with a scheduled sale date of December 7, 2004. The
Manager believes the borrower will either bring the payments current prior to
the sale date or the proceeds from a trustee/foreclosure sale will be sufficient
to pay all past due payments including the default interest rate, late charges,
principal and all expenses related to collection. Because the Manager has agreed
to advance the borrower payments on an ongoing basis, interest continues to be
accrued on the loan.

Loan #3144 was scheduled for a trustee/foreclosure sale during the third quarter
of 2004. Prior to the sale date, however, the borrower filed for bankruptcy. The
Manager is currently taking legal action to obtain a "Relief from Stay" motion
in order to continue with foreclosure proceedings. On September 7, 2004, the
Manager on behalf of the lenders of the loan, of which the Company represents
81.89% ownership, entered into a sixty-day renewable Option Agreement with a
junior lender secured by the same property. Under the terms of the Option
Agreement, the junior/secondary lender paid a non-refundable fee of $500,000
that was used to pay the lenders for all unpaid and accrued interest and late
fees (at the pre-default rate of 12.75% as well as all costs incurred in
connection with the foreclosure proceedings). The Option Agreement provides the
junior/secondary lender the option to purchase the loan, or the real property
acquired in the event of foreclosure, at a purchase price equaling the unpaid
principal balance of the promissory note plus accrued unpaid interest, late fees
and all costs and expenses incurred in connection with the loan documents or
real property, as the case may be, less the Option Price of $500,000. The
Manager believes that, either the sale through the Option Agreement, or the sale
through foreclosure will result in adequate equity to repay the loan including
all back payments and costs associated with the foreclosure. Due to the loan not
performing, the Manager has not reflected any accrued interest in the financial
statements.

Compensation of the Manager and Affiliates By the Registrant

The Manager, MFP Management LLC, earned compensation from the registrant for its
services during the nine month periods ending September 30, 2004 and September
30, 2003 in the amounts of $50,358 and $10,953, respectively, all of which the
Manager has assigned to its affiliate, Pontes Financial Group, Ltd. No other
amounts were received by the Manager or its Affiliates for services or
reimbursement of costs or expenses from the registrant during the period covered
by this report.


                                       15
<PAGE>

Forward-Looking Statements

Some of the information in this report on Form 10-QSB may contain
forward-looking statements. Uses of the words such as "will", "may",
"anticipate", "estimate", "continue" or other similar words discuss or refer to
future expectations, contain projections of results of operations or of
financial conditions, or state other forward-looking information. As such, this
analysis may prove to be inaccurate because of assumptions made by the Manager
or the actual development of future events. No assurance can be given that any
of these statements or predictions will ultimately prove to be correct or
substantially correct.

Item 3.  CONTROLS AND PROCEDURES

Within the 90 days prior to the date of this report, the General Manager of the
Manager of the registrant, MFP Management LLC, who performs the functions of the
registrant's principal executive and principal financial officers, carried out
an evaluation of the effectiveness of the design and operation of the
registrant's disclosure controls and procedures (as defined in Rule 13a-15(e) or
Rule 15d-15(e) under the Exchange Act). Based upon the evaluation, the General
Manager concluded that the registrant's disclosure controls and procedures are
effective. There were no significant changes in the registrant's internal
controls or in other factors that could significantly affect the registrant's
disclosure controls and procedures subsequent to the date of this evaluation.


                                       16
<PAGE>

                           PART II - OTHER INFORMATION

Item 2.  Changes in Securities

Pursuant to a Securities Act registration statement on Form SB-2, S.E.C. file
number 333-98337, effective on March 13, 2003, as amended by post-effective
amendment no.2 on August 13, 2004, the Company is engaged in a public offering
of registered units of limited liability company interest, underwritten by Rice
Pontes Capital, Inc. The number of units registered is 6,500,000, of which
5,000,000 are offered in the initial public offering and 1,500,000 have been
reserved for possible issuance under the Company's Distribution Reinvestment
Program. All units are offered at $10.00 per unit for an aggregate offering
price of $65,000,000. As of September 30, 2004, the number of units sold and
issued is 3,695,864, for an aggregate offering price of $36,958,640. There are
1,448,160 units remaining unsold in the initial public offering.

The total expenses of the offering, incurred for the account of the Company to
September 30, 2004, were approximately $527,000. These expenses were paid
directly by the Company or were reimbursed to Pontes Financial Group, Ltd., an
affiliate of the Company.

The net proceeds to the Company after deducting the expenses of the offering to
September 30, 2004, were approximately $36,432,000. The net proceeds of the
offering are either invested in real estate mortgage loans or are invested in
cash. As of September 30, 2004, approximately $43,696,000, including net
proceeds from the offering and proceeds from loan payoffs, has been invested in
real estate mortgage loans for the Company's loan portfolio. Due to payoffs and
principal pay downs, the amount invested in real estate mortgage loans as of
September 30, 2004 was approximately $27,722,000. As of September 30, 2004,
nearly $9,399,000 was invested in cash, awaiting the Manager's selection of
appropriate real estate mortgage loans for the Company's portfolio.

Item 6.  Exhibits and Reports on Form 8-K.

      (a) The Exhibits furnished with this report:

            31. Rule 13a-14a/15d-14(a) Certification

            32. Section 1350 Certification

      (b) No report on Form 8-K was filed during the quarter for which this
report is filed.


                                       17
<PAGE>

                                   SIGNATURES

      In accordance with the requirements of the Exchange Act the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized

                                        YOSEMITE MORTGAGE FUND II, LLC

                                        By:  MFP Management LLC, Manager

       Date:   October 27, 2004         By: /s/  Steven M. Pontes
                                           -------------------------------------
                                           Steven M. Pontes, General Manager


                                       18