**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-Q**





(Mark
      One)


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







**For
      the Quarterly Period Ended March 31, 2008**





**OR**





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:  000-50893**





**Lakeside
      Mortgage Fund, LLC**


(Exact
      name of registrant as specified in its charter)





**California**
            
            **52-2387294**(State
                or other jurisdiction of incorporation
            
            (I.R.S.
                Employeror
                organization)
            
            Identification
                No.)





**1738
                Yuba Street, Redding, CA**
            **96001**(Address
                of principal executive offices)
            (Zip
                Code)





**(530)
                226-5850**


(Registrant’s
      telephone number, including area code)





**NOT
                APPLICABLE**


(Former
      name, former address and former fiscal year, if changed since last
      report)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.





Yes
            XX
            
            No





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





Large
      Accelerated Filer  o              Accelerated
      Filer  o             Non-Accelerated
      Filer  o   Smaller
      reporting company x





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





Yes
            
            
            No
            XX





-1-


**Part
      1**   **FINANCIAL
      INFORMATION**





**Item
      1**   **FINANCIAL
      STATEMENTS**





**LAKESIDE
                MORTGAGE FUND, LLC****(A
                California Limited Liability Company)****BALANCE
                SHEETS****MARCH
                31, 2008 (unaudited) AND DECEMBER 31, 2007**




**March
                31,**
              **2008**
            
            **December
                31,**
              **2007
                (1)****ASSETS**Cash
                and cash equivalents
            
            $
            182,584
            
            $
            224,016Loan
                interest reserve (restricted)
            
            
            116,838
            
            
            176,805Accrued
                interest and other receivables
            
            
            172,914
            
            
            117,690Notes
                and account receivable - related parties
            
            
            1,986,828
            
            
            2,172,261Notes
                receivable - non related parties, net of allowance forloan
                losses: $ 311,750 and $187,512
            
            
            15,515,709
            
            
            16,463,118Other
                assets - real estate owned property, net of allowancefor
                losses: $100,000
            
            
            6,039,900
            
            
            4,228,871**TOTAL
                ASSETS**
            
            **$**
            **24,014,773**
            
            **$**
            **23,382,761****LIABILITIES
                AND MEMBERS' EQUITY**LiabilitiesAccounts
                payable and other current liabilities
            
            $
            182,414
            
            $
            37,676Deferred
                interest on notes receivable
            
            
            138,974
            
            
            292,442Notes
                payable
            
            
            2,475,000
            
            
            1,675,000Sub
                total
            
            
            2,796,388
            
            
            2,005,118Uninvested
                subscriptions
            
            
            24,468
            
            
            38,360Members'
                equityMembers'
                contributions, net
            
            
            21,549,180
            
            
            21,434,879Distributions
                in excess of earnings
            
            
            (355,263
            )
            
            (95,596
            )Total
                members' equity
            
            
            21,193,917
            
            
            21,339,283**TOTAL
                LIABILITIES AND MEMBERS' EQUITY**
            
            **$**
            **24,014,773**
            
            **$**
            **23,382,761**(1)Derived
                from the Company’s audited financial statements as of December 31,
                2007





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


- -
 -2-





**LAKESIDE
                MORTGAGE FUND, LLC****(A
                California Limited Liability Company)****STATEMENTS
                OF INCOME****FOR
                THE THREE MONTHS ENDED March 31, 2008 AND 2007
                (unaudited)**





**2008**
            
            **2007****Revenues**Interest
                income
            
            $
            360,894
            
            $
            435,064Total
                revenues
            
            
            360,894
            
            
            435,064**Expenses**Professional
                fees - accounting and taxes
            
            
            32,600
            
            
            13,200Provision
                for loan losses
            
            
            124,238
            
            
            18,000Interest
                expense
            
            
            64,917
            
            
            -Other
                expenses
            
            
            74,238
            
            
            52,813Total
                expenses
            
            
            295,993
            
            
            84,013**Net
                income**
            
            **$**
            **64,901**
            
            **$**
            **351,051**


















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




-3-




**LAKESIDE
                MORTGAGE FUND, LLC****(A
                California Limited Liability Company)****STATEMENT
                OF MEMBERS’ EQUITY****FOR
                THE THREE MONTHS ENDED MARCH 31, 2008
                (unaudited)**





**Members'**
            
            **Distributions
                in****Contributions**
            
            **excess
                of earnings**
            
            **TOTAL****Balance,
                January 1, 2008**
            
            **$**
            **21,434,879**
            
            **$**
            **(95,596**
            **)**
            **$**
            **21,339,283**Contributions
            
            
            292,297
            
            
            
            
            
            292,297Costs
                incurred in raising capital
            
            
            (3,434
            )
            
            
            
            
            (3,434
            )Reinvestment
                of members' share of net income
            
            
            163,831
            
            
            
            
            
            163,831Investors'
                withdrawal
            
            
            (338,393
            )
            
            
            
            
            (338,393
            )Net
                income
            
            
            
            
            
            64,901
            
            
            64,901Distribution
            
            
            
            
            
            (324,568
            )
            
            (324,568
            )**Balance,
                March 31, 2008**
            
            **$**
            **21,549,180**
            
            **$**
            **(355,263**
            **)**
            **$**
            **21,193,917**




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






-4-




**LAKESIDE
                MORTGAGE FUND, LLC****(A
                California Limited Liability Company)****STATEMENTS
                OF CASH FLOWS****FOR
                THE THREE MONTHS ENDED MARCH 31, 2008 AND
                2007(unaudited)**




**2008**
            
            **2007****Cash
                Flows from Operating Activities:**Net
                income
            
            $
            64,901
            
            $
            351,051Provision
                for loan losses
            
            
            124,238
            
            
            18,000Change
                in:Accrued
                interest and other receivable
            
            
            (19,180
            )
            
            32,010Loan
                interest reserves (restricted)
            
            
            59,966
            
            
            234,648Accounts
                payable and other liabilities
            
            
            144,737
            
            
            (37,509
            )Deferred
                interest on notes
            
            
            (153,467
            )
            
            (234,648
            )Net
                cash provided by operating activities
            
            
            221,195
            
            
            363,552**Cash
                Flows from Investing Activities:**Notes
                receivable secured by real estate-non related parties and real estate
                owned properties:Funding
            
            
            (187,858
            )
            
            (4,107,770
            )Payoff
            
            
            -
            
            
            -Notes
                receivable secured by real estate-related partiesFunding
            
            
            (75,000
            )
            
            -Payoff
            
            
            224,390
            
            
            -Net
                cash used by investing activities
            
            
            (38,468
            )
            
            (4,107,770
            )**Cash
                Flows from Financing Activities:**Members'
                contributions, subscriptions and re investments
            
            
            442,236
            
            
            1,889,295Members'
                withdrawals
            
            
            (338,393
            )
            
            (252,139
            )Costs
                incurred in raising capital and commissions
            
            
            (3,434
            )
            
            (201,523
            )Distributions
                to members
            
            
            (324,568
            )
            
            (334,774
            )Net
                provided (used) by financing activities
            
            
            (224,159
            )
            
            1,100,859**Net
                decrease in cash during the period**
            
            
            **(41,432**
            **)**
            
            **(2,643,359**
            **)****Cash
                in bank, beginning of period**
            
            
            **224,016**
            
            
            **3,693,595****Cash
                in bank, end of period**
            
            **$**
            **182,584**
            
            **$**
            **1,050,236**Non
                cash investing and financing transactions:****Conversion
                of notes receivable to real estate owned
            
            $
            978,000
            
            
            -****Assumption
                of note payable on real estate owned
            
            $
            800,000
            
            
            -


**The
        accompanying notes are an integral part of these financial
        statements**
 -5-
 **LAKESIDE
        MORTGAGE FUND, LLC**
 **(A
        CALIFORNIA LIMITED LIABILITY COMPANY)**
 **Notes
        to Financial Statements (Unaudited)**
 **March
        31, 2008**


**Note
      1 -**  **Organization
      and Description of Business**





Lakeside
      Mortgage Fund, LLC (the “Fund”), a California limited liability company was
      formed on December 4, 2002 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
      Fund’s cash and making or investing in notes, mortgages and loans to members of
      the general public secured by deeds of trust on real estate properties located
      primarily in the State of California.





The
      accompanying unaudited condensed financial statements of the Fund have been
      prepared in accordance with accounting principles generally accepted in the
      United States of America ("U.S. GAAP") for interim financial information and
      pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X
      of
      the Securities and Exchange Commission ("SEC"). Accordingly, these statements
      do
      not include all of the information and footnotes required by U.S. GAAP for
      complete financial statements. In the opinion of the Fund’s Manager, these
      unaudited condensed financial statements reflect all adjustments (consisting
      of
      normal recurring adjustments) necessary to present fairly the financial position
      of the Fund at March 31, 2008, the results of operations for the three
      months ended March
      31, 2008 and 2007 and cash flows for the three
      months ended
      March 31, 2008 and 2007. Results of operations for the three months ended March
      31, 2008 are not necessarily indicative of results of operations expected for
      the full fiscal year ending December 31, 2008. Please refer to the Fund’s 2007
      Annual Report on Form 10-KSB for the complete financial statements for the
      period ended December 31, 2007.





**Terms**


The
      Fund’s operating plan is to continue to seek investors and use those proceeds to
      fund suitable loans consistent with the Fund’s lending criteria. Management
      believes qualified investors will continue to invest in the Fund so that the
      Fund will continue to raise capital from such investors, and invest such capital
      in commercial mortgage loans.





The
      Manager of the Fund is Lakeside Financial Group, Inc. (the “Manager” or
“Lakeside”), a California corporation formed for the purpose of managing the
      Fund. Lakeside was incorporated in August 2002 and began doing business in
      November 2002. Lakeside is not a member of the Fund, and is owned by
      shareholders who are not members of the Fund.





The
      Fund
      will continue to operate indefinitely until dissolved and terminated by vote
      of
      members holding a majority of the outstanding membership interests, with the
      concurrence of the Fund Manager.





**Profits
      and losses**


The
      profit or loss of the Fund 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 Fund during the month as of
      the
      close of business on the last day of each calendar month, in accordance with
      their respective percentage interests and in proportion to the number of days
      during the calendar month that they owned the interests.





**Distributions**


Cash
      available for distribution is the net income during the calendar month using
      the
      accrual method of accounting and in accordance with US GAAP. Monthly, the Fund
      provides statements of account to members and distributes or reinvests amounts
      equal to the members’ proportionate share of the Fund’s net income during such
      month. The Manager is required to distribute funds only to the extent that
      funds
      are available.




-6-


**LAKESIDE
        MORTGAGE FUND, LLC**
 **(A
        CALIFORNIA LIMITED LIABILITY COMPANY)**
 **Notes
        to Financial Statements (Unaudited)**
 **March
        31, 2008**


**Withdrawals**


Fund
      members are allowed to withdraw from the Fund and receive a return of the amount
      in their capital accounts only after 12 months from the date of admission into
      the Fund (“Holding Period”). Members must give a 60-day written notice prior to
      withdrawing and payments to any withdrawing member are limited to $ 25,000
      per
      quarter. After the Holding Period, members may withdraw and receive a return
      of
      their capital accounts subject to the availability of cash in the Fund, and
      subject to the following penalties for early withdrawal pursuant to the terms
      of
      the operating agreement: (i) 3% of withdrawal amount within the first year
      following the Holding Period; (ii) 2% of withdrawal amount within the second
      year following the Holding Period; and (iii) 1% of withdrawal amount within
      the
      third year following the Holding Period. Aggregate withdrawals among all members
      may not exceed 10% of the Fund’s total capital for any calendar year. The Fund
      does not maintain a reserve for withdrawing members. The Fund’s capacity to
      return a withdrawing member’s capital account is limited by the availability of
      cash on hand after payment of expenses and provision for maintaining adequate
      reserves, in the discretion of the Manager.





As
      of
      March 31, 2008 the Fund has received requests for withdrawal from forty three
      (43) investors representing $2,534,000 of membership interest which have not
      yet
      been paid, subject to the limitations of the membership agreement that does
      not
      allow for total annual fund withdrawals of more than 10% of the total capital
      account at the beginning of the year ($2,244,000). The withdrawals are expected
      to be processed and paid over the next eight (8) quarters.





**Related
      parties**


The
      Manager is entitled to receive certain fees, compensation and expense
      reimbursements from the Fund. The Manager is entitled to receive from the Fund
      an asset management fee, payable monthly, in a maximum amount of 2.75% of the
      gross assets under management per year (0.229% per month). The Manager is also
      entitled to receive a loan servicing fee, payable monthly, in a maximum amount
      of 0.25% of the total unpaid principal balances of loans serviced (0.02% per
      month). The Manager may waive these fees in order to improve the return to
      investor members. The Manager is also entitled to receive reimbursement from
      the
      Fund for organizational, syndication and other operating expenses incurred
      on
      behalf of the Fund, including out-of-pocket general and administrative expenses
      of the Fund related to the offering of membership interests, accounting and
      audit fees, legal fees and expenses, postage and other expenses related to
      the
      preparation of reports to members.





-7-
 
 **LAKESIDE
          MORTGAGE FUND, LLC**
 **(A
          CALIFORNIA LIMITED LIABILITY COMPANY)**
 **Notes
          to Financial Statements (Unaudited)**
 **March
          31, 2008**


The
      Manager receives other fees from third parties as compensation to the Manager
      for acting as broker in arranging loans from the Fund. These fees (which are
      not
      paid by the Fund, but rather by third party borrowers) are determined on a
      case-by-case basis, are generally 3% to 5% of the loan amount, and generally
      consist of brokerage, origination, renewal and/or processing fees.





The
      Fund
      receives certain operating and administrative services form the Manager, some
      of
      which may not be reimbursed to the Manager. During
      the three months ended March 31, 2008 and 2007, the Manager waived a total
      of $172,929
      and $144,570 of
      management fees, respectively. The
      Fund’s financial position and results of operations would likely be different
      without this relationship with the Manager.





**General**





In
      the
      opinion of the management of the Fund, the accompanying unaudited financial
      statements contain all adjustments, consisting of normal, recurring adjustments,
      necessary to present fairly the financial information included therein. These
      financial statements should be read in conjunction with the audited financial
      statements included in the Fund’s Form 10-KSB for the fiscal year ended December
      31, 2007 filed with the Securities and Exchange Commission. The results of
      operations for the three month period ended March 31, 2008 are not necessarily
      indicative of the operating results to be expected for the full
      year.





**Note
      2 -**  **Summary
      of Significant Accounting Policies**





**(a)**
            **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.





**(b)**
            **Management
                Estimates**




The
      preparation of financial statements in conformity with US GAAP requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities and disclosure of contingent assets and liabilities
      at
      the date of the financial statements and the reported amounts of revenues and
      expenses during the reporting period. Such estimates related principally to
      the
      determination of the allowance for loan losses, including the valuation of
      impaired loans and valuation of real estate owned properties. Actual results
      could differ from those estimates.




-8-


**LAKESIDE
        MORTGAGE FUND, LLC**
 **(A
        CALIFORNIA LIMITED LIABILITY COMPANY)**
 **Notes
        to Financial Statements (Unaudited)**
 **March
        31, 2008**


**(c)**
            **Revenue
                Recognition**




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




**(d)**
            **Income
                Taxes**




The
      Fund
      is treated as a partnership for federal and California income tax purposes.
      Consequently, all tax effects of the Fund’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 Fund. The Fund pays an annual California
      tax of $800 and an annual California LLC fee based upon its annual gross
      receipts.





**(e)**
            **Cash
                and Cash Equivalents**


For
      purposes of the statements of cash flows, cash and cash equivalents include
      interest-bearing and non interest-bearing bank deposits, money market accounts
      and commercial paper with original maturities of three months or less.
      Periodically, the Fund’s cash balances exceed federally insured limits. At March
      31, 2008, the Fund had approximately $ 57,648 of cash that exceeded this limit
      and thus was not covered by federal depository insurance.





**(f)**
            **Loans
                Secured by Trust Deeds**


Loans
      secured by trust deeds are recorded at cost. To date, no loans have been
      purchased from outside third party issuers of loans. The Fund loans will have
      varying terms at the discretion of the Manager. Construction loans will
      generally have a term of between one and five years and will provide for monthly
      payments of interest only with a “balloon payment” at the end of the term. Other
      Fund loans may have a longer amortization schedule and may be fully amortizing,
      i.e. original principal amount of the loan will be repaid in equal monthly
      installments of principal and interest over the term. The Fund will not
      recognize interest income on loans once they are determined to be impaired
      until
      the interest is collected in cash after principal is collected. A loan is
      impaired when, based on current information and events, it is probable that
      the
      Fund will be unable to collect all amounts due according to the contractual
      terms of the loan agreement. 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 Fund’s investment in the loan is fully
      recoverable. Impairment is measured on a loan by loan basis by either the
      present value of expected future cash flows discounted at the loan’s effective
      interest rate, the loan’s obtainable market price or the fair value of the
      underlying collateral.




-9-


**LAKESIDE
        MORTGAGE FUND, LLC**
 **(A
        CALIFORNIA LIMITED LIABILITY COMPANY)**
 **Notes
        to Financial Statements (Unaudited)**
 **March
        31, 2008**


**(g)**
            **Allowance
                for Loan Losses**


The
      allowance for loan losses will be established as losses are estimated to have
      occurred through a provision for loan losses that will be charged to earnings.
      Loan losses will be charged against the allowance when management believes
      the
      uncollectibility of a loan balance is confirmed. Subsequent recoveries, if
      any,
      will be credited to income. The allowance for loan losses will be evaluated
      on a
      regular basis by management and is based upon management’s periodic review of
      the collectibility of the loans in light of historical experience, the types
      and
      dollar amounts of loans in the portfolio, adverse situations that may affect
      the
      borrower’s ability to repay, estimated value of any underlying collateral and
      prevailing economic conditions. This evaluation is inherently subjective as
      it
      requires estimates that are susceptible to significant revision as more
      information becomes available.





The
      following shows the activities in the allowance for loan losses during the
      3-month period ended March 31, 2008:


Balance,
                  December 31, 2007
              
              $
              187,512Additions
              
              $
              124,238Write
                  offs
              
              $
              -_Balance,
                  March 31, 2008
              
              $
              311,750


**(h)**
            **Real
                Estate Held for Sale**


Real
      estate held for sale includes real estate acquired through foreclosure and
      is
      stated at the lower of the recorded investment in the loan, plus any senior
      indebtedness, or at the property’s estimated fair value, less estimated costs to
      sell.





**(i)**
            **Loan
                Interest Reserve**


The
      Fund
      often requires borrowers to set up interest reserve accounts from which monthly
      payments of interest are made. The interest reserve is deposited into a separate
      bank account in the name of the Fund, designated specifically as interest
      reserve on loans issued by the Fund. At the end of the month, the Fund draws
      the
      calculated monthly interest on outstanding loans from the interest reserve
      account and transfers such amount into the general operating account of the
      Fund
      as part of the distributable fund available for monthly disbursement to the
      members. The equivalent unearned amount is recorded as deferred interest in
      the
      liabilities section of the balance sheet. As of March 31, 2008, the loan
      interest reserve had a balance of $138,974.





**(j)**
                **Contra-Equity
                    Accounts: Offering Costs and Commissions Incurred in Connection
                    with
                    Raising of
                    Capital**






Syndication
                costs incurred in connection with the raising of capital by offering
                units
                of membership interest in the Fund are being treated as a reduction
                of
                paid in capital. Initial marketing fees and broker’s commissions paid to
                an outside brokerage firm are treated as contra-equity accounts.
                The fees
                paid by the Fund are currently 4.5%. The brokers are also entitled
                to
                receive “trailer commissions” equivalent to 1.0% of the average daily
                invested capital at the 1 year anniversary of the invested funds.
                The
                initial marketing/broker’s fees are capitalized in accordance with US
                GAAP, pursuant to the AICPA’s Technical Practice Aid TIS 7200.07
                (Accounting for Syndication Costs of Limited Partnerships). Subsequent
                payments of trailer commissions however are treated as period costs
                and
                charged to current earnings of the Fund. As such, the initial
                marketing/broker’s fees are included in the balance sheet under the
                caption heading “Members’ contributions, net” while the trailer
                commissions are shown in the statement of operations, when incurred.The
                Fund incurred $3,434 of syndication costs and brokers’ fees during the
                quarter ended March 31, 2008.




-10-


**LAKESIDE
        MORTGAGE FUND, LLC**
 **(A
        CALIFORNIA LIMITED LIABILITY COMPANY)**
 **Notes
        to Financial Statements (Unaudited)**
 **March
        31, 2008**


**(k)**
                **Subscription
                    Account**


Upon
      receipt of the funds from prospective investors subscribing to purchase
      membership interests, those funds are deposited into a subscription account.
      The
      funds are held, in the Manager’s discretion up to a maximum of 60 days, until
      needed by the Fund. The funds are then contributed to the capital of the Fund
      in
      exchange for a membership interest. The Manager may hold funds in the
      subscription account for longer than 60 days only upon the written consent
      of
      the subscriber.





As
      of
      March 31, 2008, the uninvested funds in the subscription account were
      $24,468.





**(l)**
            **Fair
                Value of Financial
                Instruments**




Effective
      January 1, 2008, we adopted the provisions of Statement of Financial Accounting
      Standards (“SFAS”) No. 157, “Fair Value Measurements”, for our financial assets
      and liabilities. The adoption of this portion of SFAS No. 157 did not have
      any
      effect on our financial position or results of operations and we do not expect
      the adoption of the provisions of SFAS No. 157 related to non-financial assets
      and liabilities to have an effect on our financial position or results of
      operations.





Various
      inputs are used in determining the fair value of our financial assets and
      liabilities and are summarized into three broad categories:


·
            Level
                1 - quoted price in active markets for identical
                securities;


·
            Level
                2 - other significant observable inputs, including quoted prices
                for
                similar securities, interest rates, prepayment speeds, credit risk,
                etc.;
                and


·
            Level
                3 - significant observable inputs, including our own assumptions
                in
                determining fair value.




-11-


**LAKESIDE
        MORTGAGE FUND, LLC**
 **(A
        CALIFORNIA LIMITED LIABILITY COMPANY)**
 **Notes
        to Financial Statements (Unaudited)**
 **March
        31, 2008**


The
      inputs or methodology used for valuing securities are not necessarily an
      indication of the risk associated with investing in those
      securities.




Following
      are the disclosures related to our assets and (liabilities) pursuant to SFAS
      No.
      157 (in thousands):




March
                  31, 2008Fair
                  Value
              
              Input
                  LevelNotes
                  and Accounts Receivable-related party
              
              $
              1,987
              
              
              Level
                  3Notes
                  receivable
              
              $
              15,516
              
              
              Level
                  3Real
                  estate owned
              
              $
              6,040
              
              
              Level
                  3


Valuation
      of notes receivable


The
      fair
      value of our notes receivable approximates carrying value based upon estimated
      cash flow.





Valuation
      of Real Estate owned


We
      estimate the fair value of real estate owned based upon market comparables
      less
      cost of disposal and estimated carrying costs. The fair value approximates
      carrying value at March 31, 2008.








**(m)**
            **Recent
                accounting pronouncements**





On
      September 15, 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”
(SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring
      fair value under GAAP and enhances disclosures about fair value measurements.
      SFAS 157 defines fair value as the exchange price that would be received for
      an
      asset or paid to transfer a liability (an exit price) in the principal or most
      advantageous market for the asset or liability in an orderly transaction between
      market participants on the measurement date. SFAS 157 is effective for the
      Fund’s financial statements issued for the year beginning on January 1, 2008,
      with earlier adoption permitted. The adoption of SFAS 157 did not have a
      material impact on the Fund’s financial condition and results of
      operations.




On
      February 15, 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Liabilities (SFAS 159), “The Fair Value Option for Financial Assets
      and Financial Liabilities” (SFAS 159), which allows entity the irrevocable
      option to elect fair value for the initial and subsequent measurement for
      certain financial assets and liabilities on a contract-by-contract basis.
      Subsequent changes in fair value of these financial assets and liabilities
      would
      be recognized in earnings when they occur. SFAS 159 further establishes certain
      additional disclosure requirements. SFAS 159 is effective for the Fund’s
      financial statements for the year beginning on January 1, 2008, with earlier
      adoption permitted. The adoption of SFAS 159 did not have a material impact
      on
      the Fund’s financial condition and results of operations.


-12-
 **LAKESIDE
          MORTGAGE FUND, LLC**
 **(A
          CALIFORNIA LIMITED LIABILITY COMPANY)**
 **Notes
          to Financial Statements (Unaudited)**
 **March
          31, 2008**


On
      July
      13, 2006, the FASB released FASB interpretation No. 48, “Accounting for
      Uncertainty in Income Taxes, an interpretation of FASB Statement No. 106” (FIN
      48). FIN 48 clarifies the accounting and reporting for income taxes where
      interpretation of the tax laws may be uncertain. FIN 48 prescribes a
      comprehensive model for the financial statement recognition, measurement,
      presentation and disclosure of income tax uncertainties with respect to
      positions taken or expected to be taken in income tax returns. The Fund adopted
      FIN 48 in the first quarter of 2007. The adoption of FIN 48 did not have an
      impact on the Fund’s financial condition and results of operations.





In
      December 2007, FASB issued Statement No. 141 (Revised 2007), Business
      Combinations  (“SFAS 141(R)”) and SFAS No. 160,  Accounting and
      Reporting of Non-controlling Interests in Consolidated Financial Statements
      , an
      amendment of ARB No. 51 (“SFAS 160”). These statements will significantly
      change the financial accounting and reporting of business combination
      transactions and non-controlling (or minority) interests in consolidated
      financial statements. SFAS 141(R) requires companies to: (i) recognize, with
      certain exceptions, 100% of the fair values of assets acquired, liabilities
      assumed, and non-controlling interests in acquisitions of less than a 100%
      controlling interest when the acquisition constitutes a change in control of
      the
      acquired entity; (ii) measure acquirer shares issued in consideration for a
      business combination at fair value on the acquisition date; (iii) recognize
      contingent consideration arrangements at their acquisition-date fair values,
      with subsequent changes in fair value generally reflected in earnings;
      (iv) with certain exceptions, recognize pre-acquisition loss and gain
      contingencies at their acquisition-date fair values; (v) capitalize in-process
      research and development (“IPR&D”) assets acquired; (vi) expense, as
      incurred, acquisition-related transaction costs; (vii) capitalize
      acquisition-related restructuring costs only if the criteria in SFAS No.
      146,  Accounting for Costs Associated with Exit or Disposal Activities ,
      are met as of the acquisition date; and (viii) recognize changes that
      result from a business combination transaction in an acquirer’s existing income
      tax valuation allowances and tax uncertainty accruals as adjustments to income
      tax expense. SFAS 141(R) is required to be adopted concurrently with SFAS 160
      and is effective for business combination transactions for which the acquisition
      date is on or after the beginning of the first annual reporting period beginning
      on or after December 15, 2008 (our fiscal 2009). Early adoption of these
      statements is prohibited. The Company believes the adoption of these statements
      will have a material impact on significant acquisitions completed after
      September 1, 2009.




-13-


**LAKESIDE
        MORTGAGE FUND, LLC**
 **(A
        CALIFORNIA LIMITED LIABILITY COMPANY)**
 **Notes
        to Financial Statements (Unaudited)**
 **March
        31, 2008**


In
      December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in
      Consolidated Financial Statements ("SFAS 160"), an amendment of ARB No. 51.
      SFAS
      160 will change the accounting and reporting for minority interests which will
      be recharacterized as non-controlling interests and classified as a component
      of
      equity. SFAS 160 is effective for fiscal years beginning on or after December
      15, 2008. SFAS 160 requires retroactive adoption of the presentation and
      disclosure requirements for existing minority interests. The Company is
      assessing the impact that SFAS 160 may have on its financial position,
      consolidated results of operations and consolidated cash flows.




In
      March
      2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments
      and
      Hedging Activities ("SFAS 161"). This statement will require enhanced
      disclosures about derivative instruments and hedging activities to enable
      investors to better understand their effects on an entity's financial position,
      financial performance, and cash flows. It is effective for financial statements
      issued for fiscal years and interim periods beginning after November 15, 2008,
      with early application encouraged. Management is assessing the impact of the
      adoption of SFAS 161.





**Note
      3 -**  **Notes
      Receivable**





At
      March
      31, 2008, the Fund held the following types of mortgages:


Commercial
              
              $
              4,254,828Construction
              
              
              5,445,976Unimproved
                  Land
              
              
              8,113,483Total
              
              $
              17,814,287First
                  Mortgages
              
              $
              13,921,662Second
                  Mortgages
              
              
              3,892,625Total
              
              $
              17,814,287
 -14-


**LAKESIDE
          MORTGAGE FUND, LLC**
 **(A
          CALIFORNIA LIMITED LIABILITY COMPANY)**
 **Notes
          to Financial Statements (Unaudited)**
 **March
          31, 2008**


Scheduled
      maturities of loans secured by trust deeds as of March 31, 2008 and the interest
      sensitivity of such loans are as follows:




FixedInterestRateYear
                  Ending December 31:2008
              
              $
              17,131,2872009
              
              $
              683,000Total
              
              $
              17,814,287


The
      scheduled maturities for the year ending 2008 include ten (10) loans
      ( $
      7,167,247) that
      are
      past maturity at March 31, 2008. It is the Fund’s experience that loans can be
      refinanced or repaid before or after the maturity date. Therefore, the above
      tabulation for scheduled maturities is not a forecast of future cash
      receipts.





The
      Fund
      has no variable interest rate loans at March 31, 2008.





At
      March
      31, 2008, 100% of the Fund’s loans receivable was collateralized by properties
      located in California.





At
      March 31, 2008, ten (10) loans ($7,167,247 or 40% of total loan portfolio)
      as
      mentioned above have already matured and remained unpaid at the end of the
      period. One of the loans ($470,000) was subsequently paid off in April 2008
      and
      another loan ($549,240) is scheduled to be paid off in May 2008. Accrued
      interest receivable on these loans amounted to $66,986 as of March 31, 2008;
      however these loans were classified under non accrual status at the time the
      Manager deemed that collection of interest was doubtful, therefore, interests
      had not been accrued on these loans for periods ranging from 1-13 months.
      Additionally, two (2) loans amounting to $400,000 and $683,000 that have not
      yet
      matured were delinquent in its interest payment for 3 and 6 months,
      respectively. Occasionally, the Fund allows borrowers to continue to make the
      payments on loans past maturity for periods of time. The
      loans are collateralized by the underlying real estate properties.





At
      March
      31, 2008, the Fund’s loan portfolio consisted of twenty three (23) real estate
      loans to unrelated parties totaling $15,827,459, and three (3) loans receivable
      from related parties amounting to $1,986,828.





1.
            Loan
                200409 amounting to $110,476, due in monthly installments of $1,003
                interest only at 10.90% maturing on August 31, 2008. This loan is
                secured
                by a first trust deed on the underlying
                property.




-15-


**LAKESIDE
        MORTGAGE FUND, LLC**
 **(A
        CALIFORNIA LIMITED LIABILITY COMPANY)**
 **Notes
        to Financial Statements (Unaudited)**
 **March
        31, 2008**


2.
            Loan
                200412, an investment in participation notes issued by an affiliate
                amounting to $500,000 and maturing in December 2008. Interest is
                payable
                monthly at an effective rate of approximately 11.00% per
                annum.


3.
            Loan
                200502 amounting to $470,737, due in monthly installments of$ 4,276
                interest only at 10.90%. This loan matured on January 18, 2008 and
                is
                secured by a first trust deed on the underlying
                property.


4.
            Loan
                200504 amounting to $802,800 due in monthly installments of $8,028
                interest only at 12.00%. This loan matured on September 8, 2006 and
                is
                secured by a second trust deed on the underlying
                property.


5.
            Loan
                200507 amounting to $257,375 due in monthly installments of $2,574
                interest only at 12.00%. This loan matured on June 25, 2007 and is
                secured
                by a second trust deed on the underlying
                property.


6.
            Loan
                200510 amounting to $455,042 due in monthly installments of $4,550
                interest only at 12.00%. This loan matured on August 8, 2007 and
                is
                secured by a second trust deed on the underlying
                property.


7.
            Loan
                200511 amounting to $549,240 due in monthly installments of $5,492
                interest only at 12.00%. This loan matured on March 15, 2008 and
                is
                secured by a first trust deed on the underlying
                property.


8.
            Loan
                200601 amounting to $552,000 due in monthly installments of $5,014
                interest only at 10.90%. This loan matured on January 11, 2008 and
                is
                secured by a first trust deed on the underlying
                property.


9.
            Loan
                200602 amounting to $589,473 due in monthly installments of $5,895
                interest only at 12%. This loan matured on January 30, 2007 and is
                secured
                by a first trust deed on the underlying
                property.


10.
            Loan
                200603 amounting to $2,780,000 due in monthly installments of $27,800
                interest only at 12% maturing on May 2, 2008. This loan is secured
                by a
                first trust deed on the underlying
                property.


11.
            Loan
                200608 amounting to $525,000 due in monthly installments of $4,769
                interest only at 10.90% maturing on June 7, 2008. This loan is secured
                by
                a first trust deed on the underlying
                property.


12.
            Loan
                200609 amounting to $390,580 due in monthly installments of $3,873
                interest only at 11.90%. This loan matured on June 23, 2007 and is
                secured
                by a second trust deed on the underlying
                property.


13.
            Loan
                200609.1 amounting to $345,000 due in monthly installments of $3,134
                interest only at 10.90% maturing on June 27, 2008. This loan is secured
                by
                a first trust deed on the underlying
                property.


14.
            Loan
                200612 amounting to $570,000 due in monthly installments of $5,653
                interest only at 11.90% maturing on August 30, 2008. This loan is
                secured
                by a first trust deed on the underlying
                property.




-16-


**LAKESIDE
          MORTGAGE FUND, LLC**
 **(A
          CALIFORNIA LIMITED LIABILITY COMPANY)**
 **Notes
          to Financial Statements (Unaudited)**
 **March
          31, 2008**


15.
            Loan
                200613 amounting to $400,000 due in monthly installments of $4,167
                interest only at 12.50% maturing on October 4, 2008. This loan is
                secured
                by a first trust deed on the underlying
                property.


16.
            Loan
                200614 amounting to $380,000 due in monthly installments of $3,800
                interest only at 12.00% maturing on April 17, 2008. This loan is
                secured
                by a first trust deed on the underlying
                property.


17.
            Loan
                200615 amounting to $1,100,000 due in monthly installments of $10,542
                interest only at 11.50% maturing on October 20, 2008. This loan is
                secured
                by a first trust deed on the underlying
                property.


18.
            Loan
                200701 amounting to $1,900,000 due in monthly installments of $19,792
                interest only at 12.50%. This loan matured on January 11, 2008 and
                is
                secured by a first trust deed on the underlying
                property.


19.
            Loan
                200702 amounting to $665,691 due in monthly installments of $6,601
                interest only at 11.90% maturing on September 2, 2008. This loan
                is
                secured by a first trust deed on the underlying
                property.


20.
            Loan
                200703 amounting to $1,200,000 due in monthly installments of $11,900
                interest only at 11.90% maturing on March 8, 2008. This loan is secured
                by
                a second trust deed on the underlying
                property.


21.
            Loan
                200704 amounting to $683,000 due in monthly installments of $6,773
                interest only at 11.90% maturing on June 4, 2009. This loan is secured
                by
                a first trust deed on the underlying
                property.


22.
            Loan
                200705 amounting to $119,665 due in monthly installments of $1,187
                interest only at 11.90% maturing on July 13, 2008. This loan is secured
                by
                a first trust deed on the underlying
                property.


23.
            Loan
                200706 amounting to $1,085,000 due in monthly installments of $10,760
                interest only at 11.90% maturing on August 17, 2008. This loan is
                secured
                by a first trust deed on the underlying
                property.


24.
            Loan
                200707 amounting to $952,792 due in monthly installments of $9,131
                interest only at 11.50% maturing on September 6, 2008. This loan
                is
                secured by a first trust deed on the underlying
                property.


25.
            Loan
                200708 amounting to $145,000 due in monthly installments of $1,438
                interest only at 11.90% maturing on September 21, 2008. This loan
                is
                secured by a first trust deed on the underlying
                property.


26.
            Loan
                200709 amounting to $286,828 due in monthly installments of $3,585
                interest only at 15.00% maturing on May 27, 2008. This loan is secured
                by
                a second trust deed on the underlying
                property.





**Note
      4 - Related Party Transactions**





**Notes
      Receivable**


The
      Fund
      may invest up to 20% of its total assets in loans to affiliated entities. On
      March 31, 2008, the Fund had an interest in three (3) loans issued by affiliated
      entities. One loan is a commercial loan for $411,000, of which $286,828 was
      funded through March 31, 2008. The note bears an interest rate of 15.00% and
      is
      due on May 27, 2008. The second participation loan amounting to $500,000 matures
      in December 2008 and bears a nominal interest rate of 9% per annum. Interest
      payment has been delinquent since April 2007 totaling $45,000 as of March 31,
      2008. The third loan amounting to $1,200,000 matured on March 8, 2008. Interest
      at 11.90%, has been delinquent since March 6, 2008. This loan is in the process
      of being extended by the affiliate borrower. Pursuant to a provision of the
      Operating Agreement, the Manager is obligated to purchase from the Fund any
      related-party loan with respect to which any material event of default by the
      borrower has occurred and is continuing for thirty (30) days. There are two
      such
      loans described above. The Manager is aware of the default on these two (2)
      loans and is in active discussion with the affiliated borrowers with the
      objective of curing all defaults by September 30, 2008.





-17-
 
 **LAKESIDE
            MORTGAGE FUND, LLC**
 **(A
            CALIFORNIA LIMITED LIABILITY COMPANY)**
 **Notes
            to Financial Statements (Unaudited)**
 **March
            31, 2008**


For
      the
      quarters ended March 31, 2008 and 2007, the Fund recognized interest income
      on
      loans to related parties amounting to
      $23,990 and $16,758, respectively.





As
      noted,
      the Fund is limited in its investments with affiliated entities to a maximum
      of
      20% of its total assets, as defined. As of March 31, 2008, the Fund is in
      compliance with this restriction.





**Contra
      Equity Costs**


During
      the quarter ended March 31, 2008 the Fund incurred no additional cost in
      connection with the offering of units of membership interest in the Fund. Such
      expenditures consisted primarily of the initial accounting and filing costs
      relating to the registration and have been treated as syndication costs as
      contemplated in the AICPA’s Technical Practice Aid TIS 7200.07 (Accounting for
      Syndication Costs of Limited Partnerships). Accordingly, these costs are treated
      as reduction of paid in capital.





The
      Fund
      paid commissions to securities brokers in connection with the sale of membership
      interests by the Fund. The commission rate was up to 6.5% of the gross sales
      proceeds from the sale of units of the Fund. The total amount of net brokers’
commissions paid during the quarters ended March 31, 2008 and 2007 were
      $ 3,434 and
      $ 201,523 ,
      respectively. These costs are recorded as “Costs incurred in raising capital”
and included in the balance sheet under the heading “Members’ contributions,
      net”.





**Borrower’s
      Costs**


The
      Manager acts as loan broker in the initial placement of the Fund loans and
      performs loan servicing functions as well. The Manager is compensated by the
      Fund for such loan servicing activities and is compensated by the borrower
      for
      the initial placement of the loans. The Fund does not incur “Incremental Direct
      Costs” as defined in SFAS No. 91, “ *Accounting
      for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans
      and Initial Direct Costs of Leases* .”
These
      are costs to originate loans that result directly from, and are essential to,
      the lending transaction and would not have been incurred by the Fund had the
      lending transaction not occurred. The Manager of the Fund incurs these types
      of
      costs; consequently the Manager is entitled to receive certain fees for its
      services such as loan brokerage commissions, loan processing and documentation
      fees, loan servicing and asset management fees and reimbursement of other
      expenses of the Manager. None of these fees are paid by the borrower to the
      Fund
      directly and therefore are not included in the income and expenses of the
      Fund.




-18-


**LAKESIDE
          MORTGAGE FUND, LLC**
 **(A
          CALIFORNIA LIMITED LIABILITY COMPANY)**
 **Notes
          to Financial Statements (Unaudited)**
 **March
          31, 2008**


**Broker’s
      Commissions on Invested Funds**


The
      Fund
      has retained the services of securities broker/dealers to sell units of
      membership interest in the Fund. One such broker/dealer is ePlanning Securities,
      Inc., which is affiliated with the Manager. Certain shareholders of the Manager
      (who are not members of the Fund) are also shareholders and/or directors of
      ePlanning. ePlanning sold membership units of the Fund to its client-investors
      during the quarters ended March 31, 2008 and 2007 amounting to $78,014 and
      $4,968,487 of which it realized commissions totaling $3,435 and $201,523,
      respectively. The brokers do not earn a commission until funds are transferred
      from the subscription account to members’ equity, at which time the funds become
      contributed capital of the Fund.





**Management
      and servicing fees**


The
      Manager earned $0 and $14,013 during the quarters ended March 31, 2008 and
      2007,
      respectively, representing management and servicing fees it was entitled to
      receive from the Fund.





**Note
      5 - Real Estate Owned (REOs) and Notes Payable**





The
      following schedule reflects the activities in REOs at March 31,
      2008:




Gross
                  balance, January 1, 2008
              
              $
              4,328,871Additions
                  during the quarter
              
              
              1,811,029Dispositions
                  during the quarter
              
              
              -Reserve
              
              
              (100,000
              )Net
                  balance, March 31, 2008
              
              $
              6,039,900




Five
      (5)
      loans were foreclosed during 2007 and first quarter of 2008 when the borrowers
      failed to pay off the loans at maturity. The REOs are valued at the lower of
      the
      estimated net realizable values and carrying costs of the REOs ($6,139,900).
      The
      first REO was taken over in April 2007 (loan amount: $850,000) consisting of
      a
      commercial property (vacant building and 1.39 acre parcel in Oroville, CA).
      The
      second property was taken over in May 2007 (construction loan amount: $928,200)
      consisting of two (2) newly-constructed single family homes in Marina City,
      CA.
      When the borrower defaulted, the Company took possession of the unfinished
      project and hired a general contractor to finish the construction project.
      This
      involved the infusion of additional funds to finish the project amounting to
      approximately $186,000 at March 31, 2008. The third property is a 1.5 acre
      vacant parcel in Tustin Hills, CA which was taken over in October 2007 (loan
      amount: $270,000) subject to a senior first trust deed loan amounting to
      $550,000. The first trust deed bears a 12% interest rate, with a monthly
      interest payment of $5,500. The senior note has matured in February 2008. The
      fourth property consists of a 24.02 vacant parcel in Los Gatos Hills, Santa
      Clara County, CA. This property was taken over in August 2007 (loan amount:
      $260,000) and was subject to a senior first trust deed loan amounting to
      $1,125,000. The first trust deed bears a 12% interest rate, with a monthly
      interest payment of $11,250, and is maturing in April 2008. The senior note
      is
      now past due. The fifth property consists of a 10 acre undeveloped land in
      Galt,
      CA (loan amount: $890,000). This property was taken over in January 2008 and
      was
      subject to a senior first trust deed loan amounting to $800,000, which was
      assumed by the Fund. The senior lien bears an 11% interest rate, with a monthly
      interest only payment of $7,333.33. The total notes payable due at March 31,
      2008 total $2,475,000.




-19-


**LAKESIDE
        MORTGAGE FUND, LLC**
 **(A
        CALIFORNIA LIMITED LIABILITY COMPANY)**
 **Notes
        to Financial Statements (Unaudited)**
 **March
        31, 2008**


The
      Manager is working to re-structure the notes and at the same time has listed
      the
      properties for sale with real estate brokers in the communities where the
      properties are located. The only other significant carrying costs that the
      Company anticipates in connection with holding the properties are real estate
      property taxes and liability insurance. The taxes and insurance premiums are
      expensed when incurred.





**Note
      6 -**  **Concentrations,
      commitments and contingencies and workout agreements**





**Notes
      receivable - non related parties**


Five
      (5)
      loans totaling $2,653,930 were made to separate entities controlled by the
      same
      person. The various borrowing entities were organized for different purposes,
      and own real properties
      in various places in California, mostly in the Central Valley. These loans
      represent 15% of the total loan portfolio. All 5 loans have matured and remained
      outstanding at March 31, 2008. Interests on these loans have not been accrued
      for periods ranging from 6-13 months. The loans are collateralized by the
      underlying real estate properties, and are personally guaranteed by the
      controlling person.





**Commitments
      and contingencies**


The
      Fund has outstanding loan commitments on five (5) construction loans totaling
      $1,495,265 which was undisbursed at March 31, 2008.





**Workout
      agreements**


The
      Fund periodically negotiates various workout agreements with borrowers whose
      loans are past maturity or who are delinquent in making payments. The Fund
      is
      not obligated to fund additional money as of March 31, 2008. As of March 31,
      2008, there were eight (8) loans totaling $ 6,147,270 under negotiation or
      in
      the process of workout agreements.




-20-


**LAKESIDE
        MORTGAGE FUND, LLC**
 **(A
        CALIFORNIA LIMITED LIABILITY COMPANY)**
 **Notes
        to Financial Statements (Unaudited)**
 **March
        31, 2008**


**Legal
      proceedings**


The
      Fund is involved in various legal actions arising in the normal course of
      business. In the opinion of management, such matters will not have a material
      effect on the financial position of the Fund.





**Note
      7 - Regulatory Requirements**





**Employee
      Retirement Income Security Act of 1974 (“ERISA”)**


Some
      of
      the investors purchasing membership interests are employee benefit plans,
      including Individual Retirement Accounts, which are subject to ERISA. Persons
      making the investment decisions for such ERISA investors are deemed to be
“fiduciaries” of such investors and must discharge their duties with the care,
      skill and prudence which a prudent person would exercise under the
      circumstances.





Normally
      an investment in an equity interest of an entity, such as a membership interest
      in the Fund, will be deemed a “plan asset” of the ERISA investor, but the
      underlying assets of the entity will not be deemed plan assets. However, if
      (i)
      the equity interests are not publicly-offered securities, (ii) the entity is
      not
      one of several types of “operating companies” defined in ERISA regulations, and
      (iii) investment by ERISA investors exceeds 25% of the value of the class of
      equity interests, then the underlying assets of the entity may be deemed “plan
      assets,” with the entity deemed a “fiduciary” with respect to the ERISA
      investors.





**Securities
      Laws**


In
      offering the units of membership interest, the Fund is subject to applicable
      federal and state securities laws. On the federal level, the Fund is offering
      the membership interests pursuant to the exemption from registration for
      intrastate offerings provided by Section 3(a) (11) of the Securities Act of
      1933, as amended, and Rule 147 promulgated thereunder. In accordance with this
      exemption, the membership interests are offered only in California, the Fund
      restricts the amount of its assets which are located outside of California
      and
      members are prohibited from transferring any part of their membership interests
      to out-of-state transferees for a period of nine (9) months.





On
      the
      state level, the Fund is offering the units of membership interest pursuant
      to a
      permit issued by the California Department of Corporations. The permit requires
      annual renewal. The original permit was issued on February 24, 2003. The permit
      was most recently renewed on February
      29, 2008.





As
      of
      March 31, 2008, the Fund was in compliance with all applicable federal and
      state
      securities laws.


-21-


**Item
      2. M** **anagement’s
      Discussion and Analysis of Financial Condition and Results of
      Operations**





**Critical
      Accounting Policies.**





In
      preparing the financial statements, management is required to make estimates
      based on the information available that affect the reported amounts of assets
      and liabilities as of the balance sheet dates and revenues and expenses for
      the
      reporting periods.  Such estimates relate principally to the
      determination of (1) the allowance for loan losses (i.e. the amount of allowance
      established against loans receivable as an estimate of potential loan losses)
      including the accrued interest that are estimated to be unrecoverable based
      on
      estimates of amounts to be collected plus estimates of the value of the property
      as collateral and (2) the valuation of real estate held.  At March 31,
      2008, there were five (5) real estate properties held, acquired through
      foreclosure in a prior year and the early part of 2008.





Loans
      and
      the related accrued interest and late fees are analyzed on a periodic basis
      for
      recoverability. Delinquencies are identified and followed up as part of the
      loan
      servicing procedures.  Delinquencies are determined based upon
      contractual terms.  A provision is made for loan losses to adjust the
      allowance for loan losses to an amount considered by management to be adequate,
      with due consideration to collateral values, and to provide for unrecoverable
      loans and receivables, including impaired loans, other loans, accrued interest,
      and late fees on loans.




The
      allowance for loan losses is established as losses are estimated to have
      occurred through a provision for loan losses that is charged to earnings. Loan
      losses are charged against the allowance when management believes the
      uncollectibility of a loan balance is confirmed. Subsequent recoveries, if
      any,
      are credited to income. The allowance for loan losses is evaluated on a regular
      basis by management and is based upon management’s periodic review of the
      collectibility of the loans in light of historical experience, the types and
      dollar amounts of loans in the portfolio, adverse situations that may affect
      the
      borrower’s ability to repay, estimated value of any underlying collateral and
      prevailing economic conditions. This evaluation is inherently subjective as
      it
      requires estimates that are susceptible to significant revision as more
      information becomes available.





**Forward-Looking
      Statements**




Certain
      statements in this Report on Form 10-Q which are not historical facts may be
      considered forward-looking statements within the meaning of Section 27A of
      the
      Securities Act of 1933, as amended, and Section 21E of the Securities and
      Exchange Act of 1934, as amended, including statements regarding the Fund’s
      expectations, hopes, intentions, beliefs and strategies regarding the future.
      Forward-looking statements include statements regarding future interest rates
      and economic conditions and their effect on the Fund and its assets, trends
      in
      the California real estate market, estimates as to the allowance for loan
      losses, estimates of future investor withdrawals, 2008 annualized yield
      estimates, the intention not to sell the Fund’s loan portfolio and the
      expectation foreclosures will not have a material effect on liquidity. Actual
      results may be materially different from what is projected by such
      forward-looking statements. Factors that might cause such a difference include
      unexpected changes in economic conditions and interest rates, the impact of
      competition and competitive pricing and downturns in the real estate markets
      in
      which the Fund has made loans. All forward-looking statements and reasons why
      results may differ included in this Form 10-Q are made as of the date hereof,
      and we assume no obligation to update any such forward-looking statement or
      reason why actual results may differ.





-22-


**Related
      parties**





The
      Fund
      treats the affiliated companies of the Manager as related parties due to the
      significant influence of the Manager and its Board with respect to the
      management and operations of the Fund. The Manager arranges, services and
      maintains the loan portfolio of the Fund as well as managing the day-to-day
      affairs of the Fund. Pursuant to the Operating Agreement between the Fund and
      the Manager, the Manager is entitled to receive certain fees, compensation
      and
      expense reimbursements from the Fund. The Manager is entitled to receive from
      the Fund an asset management fee, payable monthly, in a maximum amount of 2.75%
      of the gross assets under management per year (0.229% per month). The Manager
      is
      also entitled to receive a loan servicing fee, payable monthly, in a maximum
      amount of 0.25% of the total unpaid principal balances of loans serviced (0.02%
      per month). The Manager may waive these fees in order to improve the return
      to
      investor members. The Manager is also entitled to receive reimbursement from
      the
      Fund for organizational, syndication and other operating expenses incurred
      on
      behalf of the Fund, including out-of-pocket general and administrative expenses
      of the Fund related to the offering of membership interests, accounting and
      audit fees, legal fees and expenses, postage and other expenses related to
      the
      preparation of reports to members.





The
      Manager receives other fees from third parties as compensation to the Manager
      for acting as broker in arranging loans from the Fund. These fees (which are
      not
      paid by the Fund, but rather by third party borrowers) are determined on a
      case-by-case basis, are generally 3% to 5% of the loan amount, and generally
      consist of brokerage, origination, renewal and/or processing fees.





The
      Fund
      receives certain operating and administrative services form the Manager, some
      of
      which may not be reimbursed to the Manager. During
      the three months ended March 31, 2008 and 2007, the Manager waived a total
      of $172,929
      and $144,570 of
      management fees, respectively. The
      Fund’s financial position and results of operations would likely be different
      without this relationship with the Manager.





Additionally,
      the Fund may invest up to 20% of its total assets in loans to affiliated
      entities. On March 31, 2008, the Fund had an interest in three (3) loans issued
      by affiliated entities. One loan is a commercial loan for $411,000, of which
      $286,828 was funded through March 31, 2008. The note bears an interest rate
      of
      15.00% and is due on May 27, 2008. The second participation loan amounting
      to
      $500,000 matures in December 2008 and bears a nominal interest rate of 9% per
      annum. Interest payment has been delinquent since April 2007 totaling $45,000
      as
      of March 31, 2008. The third loan amounting to $1,200,000 matured on March
      8,
      2008. Interest at 11.90%, has been delinquent since March 6, 2008. This loan
      is
      in the process of being extended by the affiliate borrower. Pursuant to a
      provision of the Operating Agreement, the Manager is obligated to purchase
      from
      the Fund any related party loan with respect to which any material event of
      default by the borrower has occurred and is continuing for thirty (30) days.
      There are two such loans described above. The Manager is aware of the default
      on
      these two (2) loans and is in active discussion with the affiliated borrowers
      with the objective of curing all defaults by September 30, 2008.





-23-


For
      the
      quarters ended March 31, 2008 and 2007, the Fund recognized interest income
      on
      loans to related parties amounting to
      $23,990 and $16,758, respectively.





As
      noted,
      the Fund is limited in its investments with affiliated entities to a maximum
      of
      20% of its total assets, as defined. As of March 31, 2008, the Fund is in
      compliance with this restriction.





**Results
      of Operations**





Changes
      in the Fund’s operating results are tabulated for reference and discussed
      below:


Changes
                  during the three
                monthsended
                March
                  31, 2008 versus 2007Dollars
              
              PercentRevenueInterest
                  Income
              
              $
              (74,170
              )
              
              (17.0
              )%ExpensesProfessional
                  fees
              
              
              19,400
              
              
              143.7
              %Provision
                  for losses on loans and real estate
              
              
              106,238
              
              
              590.2
              %Interest
                  expense
              
              
              64,917
              
              
              100.0
              %Other
                  operating expenses
              
              
              21,425
              
              
              40.5
              %211,980
              
              
              252.3
              %Net
                  Income
              
              $
              (286,150
              )
              
              (
                  81.5
              )%





The
      decrease in interest on loans for the three month period ended March 31, 2008
      as
      compared to the same period in 2007 was primarily due to higher level of non
      performing loans for longer period of time during the current period. There
      were
      eleven (11) non performing loans that have delinquent interest for periods
      ranging from 3-13 months versus three (3) non performing loans with past due
      interests ranging between 5-6 months on March 31, 2008 and 2007, respectively.
      Additionally, there were five (5) real estate owned properties (REO) amounting
      to $6,140,000 on March 31, 2008 versus $380,000 on March 31, 2007.





-24-


The
      increase in professional fees for the three month period ended March 31, 2008
      as
      compared to 2007 was due to increased audit fees and outside consultants for
      regulatory filing compliance.





The
      increase in interest expense is the result of notes payable assumed in
      connection with taking control of the REO’s.





The
      increase in the provision for losses on loans and real estate properties for
      the
      three month ended March 31, 2008 as compared to 2007 was due to management’s
      decision to increase the allowance for losses to reflect the current market
      conditions.





**Allowance
      for Losses.**





The
      Manager periodically reviews the loan portfolio, examining the status of
      delinquencies, the underlying collateral securing these loans, real estate
      held
      for sale expenses, sales activities, borrower’s payment records and other data
      relating to the loan portfolio.  Data on the local real estate market
      and on the national and local economy are studied. Based upon this and other
      information, the allowance for loan losses is increased or decreased. Borrower
      foreclosures are a normal aspect of the Fund’s operations.  The Fund
      is not a credit based lender and hence while it reviews the credit history
      and
      income of borrowers, and if applicable, the income from income producing
      properties, the Manager expects on occasion to take back real estate
      security.  At
      March
      31, 2008, ten (10) loans ($7,167,247 or 40% of total loan portfolio) have
      already matured and remained unpaid at the end of the period. One of the loans
      ($470,000) was subsequently paid off in April 2008 and another loan ($549,240)
      is scheduled to be paid off in May 2008. Accrued interest receivable on these
      loans amounted to $66,986 as of March 31, 2008; however these loans were
      classified under non-accrual status at the time the Manager deemed that
      collection of interest was doubtful; therefore interest had not been accrued
      on
      these loans for periods ranging from 1-13 months. Additionally, two (2) loans
      amounting to $400,000 and $683,000 that have not yet matured were delinquent
      in
      interest payment for 3 and 6 months, respectively. The
      Manager occasionally enters into workout agreements with borrowers who are
      past
      maturity or delinquent in their regular payments.  The partnership had
      no negotiated workout agreement as of March 31, 2008.  Typically, a
      workout agreement allows the borrower to extend the maturity date of the balloon
      payment and/or allows the borrower to make current monthly payments while
      deferring for periods of time, past due payments, or allows time to pay the
      loan
      in full.   The number of foreclosures and workout agreements will
      generally rise during difficult times and conversely fall during good economic
      times.   These factors have been considered by management to
      arrive at an appropriate level of allowance for loan losses. Due to the number
      of variables involved, the magnitude of possible swings and the Manager’s
      inability to control many of these factors, actual results may and do sometimes
      differ materially from estimates made by the Manager.





Five
      (5)
      loans were foreclosed during 2007 and first quarter of 2008 when the borrowers
      failed to pay off the loans at maturity. The REOs are valued at the lower of
      the
      estimated net realizable values and carrying costs of the REOs ($6,139,900).
      The
      first REO was taken over in April 2007 (loan amount: $850,000) consisting of
      a
      commercial property (vacant building and 1.39 acre parcel in Oroville, CA).
      The
      second property was taken over in May 2007 (construction loan amount: $928,200)
      consisting of two (2) newly-constructed single family homes in Marina City,
      CA.
      When the borrower defaulted, the Company took possession of the unfinished
      project and hired a general contractor to finish the construction project.
      This
      involved the infusion of additional funds to finish the project amounting to
      approximately $186,000 at March 31, 2008. The third property is a 1.5 acre
      vacant parcel in Tustin Hills, CA which was taken over in October 2007 (loan
      amount: $270,000) subject to a senior first trust deed loan amounting to
      $550,000. The first trust deed bears a 12% interest rate, with a monthly
      interest payment of $5,500. The senior note has matured in February 2008. The
      fourth property consists of a 24.02 vacant parcel in Los Gatos Hills, Santa
      Clara County, CA. This property was taken over in August 2007 (loan amount:
      $260,000) and was subject to a senior first trust deed loan amounting to
      $1,125,000. The first trust deed bears a 12% interest rate, with a monthly
      interest payment of $11,250, and is maturing in April 2008. The senior note
      is
      now past due. The fifth property consists of a 10 acre undeveloped land in
      Galt,
      CA (loan amount: $890,000). This property was taken over in January 2008 and
      was
      subject to a senior first trust deed loan amounting to $800,000. The senior
      lien
      bears an 11% interest rate, with a monthly interest only payment of
      $7,333.33.





-25-


The
      Manager is working to re-structure the notes and at the same time has listed
      the
      properties for sale with real estate brokers in the communities where the
      properties are located. The only other significant carrying costs that the
      Company anticipates in connection with holding the properties are real estate
      property taxes and liability insurance. The taxes and insurance premiums are
      expensed when incurred .





The
      Manager made a provision of $124,238 and $18,000 to the loan loss reserve during
      the three month periods ended March 31, 2008 and 2007,
      respectively.  The allowance for loan loss reserve of $311,750 and
      $187,512 as of March 31, 2008 and December 31, 2007, respectively, is considered
      to be adequate for the secured loan portfolio balances of $ 17,814,287
      and $18,822,891, respectively. The reserve for losses on REOs as of March 31,
      2008 and December 31, 2007 was $100,000.








**PORTFOLIO
      REVIEW**





**Loan
      Portfolio**





The
      Fund’s loan portfolio consists primarily of short-term (one to two years), fixed
      rate loans secured by real estate in the State of California. At
      March
      31, 2008, the Fund’s loan portfolio consisted of twenty three (23) real estate
      loans to unrelated parties totaling $15,827,459, and three (3) loans receivable
      from related parties amounting to $1,986,828.




At
      March 31, 2008, the Fund held the following types
      of mortgages:


Commercial
              
              $
              4,254,828Construction
              
              
              5,445,976Unimproved
                  Land
              
              
              8,113,483Total
              
              $
              17,814,287First
                  Mortgages
              
              $
              13,921,662Second
                  Mortgages
              
              
              3,892,625Total





-26-


Scheduled
      maturities of loans secured by trust deeds as of March 31, 2008 and the interest
      sensitivity of such loans are as follows:




FixedInterestRateYear
                  Ending December 31:2008
              
              $
              17,131,2872009
              
              
              683,000Total





The
      scheduled maturities for the year ending 2008 include ten (10) loans
      ( $
      7,167,247) that
      are
      past maturity at March 31, 2008. It is the Fund’s experience that loans can be
      refinanced or repaid before or after the maturity date. Therefore, the above
      tabulation for scheduled maturities is not a forecast of future cash
      receipts.





Five
      (5)
      loans totaling $2,653,930 were made to separate entities controlled by the
      same
      person. The various borrowing entities were organized for different purposes,
      and own real properties
      in various places in California, mostly in the Central Valley. These loans
      represent 15% of the total loan portfolio. All 5 loans have matured and remained
      outstanding at March 31, 2008. Interest on these loans has not been accrued
      for
      periods ranging from 6-13 months. The loans are collateralized by the underlying
      real estate properties, and are personally guaranteed by the controlling
      person.





**Liquidity
      and Capital Resources**





As
      of
      March 31, 2008, we have sold a total of 231,744.74 Units, at $100 per Unit,
      for
      a total of $23,174,474. As of March 31, 2008, Fund members electing to reinvest
      their monthly income distributions have reinvested $2,395,057 back into the
      Fund. After deducting for broker commissions and offering expenses ($1,097,398),
      the net proceeds to the Fund from these sales (which include reinvestment of
      earnings) have been $24,472,133. Members withdrew a total of $3,025,600 through
      the period ended March 31, 2008. As of March 31, 2008, the Fund has $17,814,287
      invested in commercial mortgage loans, with the remainder in the form of cash
      and other assets. As of March 31, 2008, the Fund has 381 members.





-27-


To
      compare this with how the Fund was doing during the same period last year,
      as of
      March 31, 2007 we had sold a total of 211,388.77 Units, for a total of
      $21,138,877. Reinvested funds amounted to $1,518,142. After deducting for broker
      commissions and offering expenses ($966,561), the net proceeds to the Fund
      from
      these sales were $21,690,458. Members withdrew a total of $1,138,688 through
      the
      period ended March 31, 2007. The Fund had $19,551,227 invested in commercial
      mortgage loans, with the remainder in the form of cash and other assets. As
      of
      March 31, 2007, the Fund had 381 members.





Syndication
      costs incurred in connection with the raising of capital by offering units
      of
      membership interest in the Fund are
      being treated as a reduction of paid in capital. Initial marketing fees, and
      broker’s commissions paid to an outside brokerage firm, are treated as
      contra-equity accounts. The fees are currently up to 6.5% (6% commission, 0.5%
      marketing fee). Brokers are also entitled to receive “trailer commissions,”
equivalent to 1.0% of the average daily balance of invested capital for each
      investor. These are received following each anniversary of the investor’s
      initial investment. As of March 31, 2008, the Fund has
      capitalized $1,097,398 of syndication costs since inception.





The
      Fund
      will continue to be managed by Lakeside Financial Group, Inc., which will
      continue to underwrite and select loans for the Fund to invest in, as well
      as
      short term investments for cash between loans. The Fund will continue to raise
      capital with its intrastate offering under a permit from the California
      Department of Corporations. The Manager will continue to manage the Fund as
      described in the Fund’s Operating Agreement. The Fund will continue to pay the
      Manager, on a monthly basis, a management fee (annualized at 2.75% of gross
      assets under management) and loan servicing fee (annualized at 0.25% of loan
      principal amounts) to the extent these fees are not waived by the Manager.
      During the quarter ended March 31, 2008, the Manager accepted no management
      fees
      and waived a total of $172,929 of these
      fees.





The
      Fund
      will continue to raise capital through the sale of membership interests and
      invest that capital in commercial real estate loans. The Fund has no off-balance
      sheet arrangements.





Additionally,
      the Fund relies upon loan payoffs and borrowers’ mortgage payments for the
      source of funds for loans.  Recently, mortgage interest rates have
      decreased somewhat from those available at the inception of the
      partnership.  If interest rates were to increase substantially, the
      yield of the partnership’s loans may provide lower yields than other comparable
      debt-related investments.  Additionally, since the partnership has
      made primarily fixed rate loans, if interest rates were to rise, the likely
      result would be a slower prepayment rate for the partnership.  This
      could cause a lower degree of liquidity as well as a slowdown in the ability
      of
      the partnership to invest in loans at the then current interest
      rates.  Conversely, in the event interest rates were to decline, the
      partnership could experience significant borrower prepayments, which, if the
      partnership can only obtain the then existing lower rates of interest may cause
      a dilution of the partnership’s yield on loans, thereby lowering the
      partnership’s overall yield to the limited partners.  Cash is
      constantly being generated from borrower interest payments, late charges,
      amortization of loan principal and loan payoffs.  Currently, cash flow
      exceeds partnership expenses, earnings and limited partner capital payout
      requirements.  Excess cash flow will be invested in new loan
      opportunities, when available, and in other partnership business.





-28-


Fund
      members are allowed to withdraw from the Fund and receive a return of the amount
      in their capital accounts only after 12 months from the date of admission into
      the Fund (“Holding Period”). Members must give a 60-day written notice prior to
      withdrawing and payments to any withdrawing member are limited to $ 25,000
      per
      quarter. After the Holding Period, members may withdraw and receive a return
      of
      their capital accounts subject to the availability of cash in the Fund, and
      subject to the following penalties for early withdrawal pursuant to the terms
      of
      the operating agreement: (i) 3% of withdrawal amount within the first year
      following the Holding Period; (ii) 2% of withdrawal amount within the second
      year following the Holding Period; and (iii) 1% of withdrawal amount within
      the
      third year following the Holding Period. Aggregate withdrawals among all members
      may not exceed 10% of the Fund’s total capital for any calendar year. The Fund
      does not maintain a reserve for withdrawing members. The Fund’s capacity to
      return a withdrawing member’s capital account is limited by the availability of
      cash on hand after payment of expenses and provision for maintaining adequate
      reserves, in the discretion of the Manager.





As
      of
      March 31, 2008 the Fund has received requests for withdrawal from forty three
      (43) investors representing $2,534,000 of membership interest which have not
      yet
      been paid, subject to the limitations of the membership agreement that does
      not
      allow for total annual fund withdrawals of more than 10% of the total capital
      account at the beginning of the year ($2,244,000). The withdrawals are expected
      to be processed and paid over the next eight (8) quarters.





**Current
      Economic Conditions**





The
      Fund
      primarily makes secured mortgage loans in the State of California, concentrating
      in the Northern California communities. California’s economic health plays a
      significant role in the performance of the real estate industry, and property
      values, which provide the underlying collateral for our loans. The vitality
      of
      California’s economy is driven by numerous diverse industries including,
      technology, finance, health, medical care, government, and
      entertainment.





In
      recent
      years, the economy of the United States and California has stagnated. Although
      the economic activities have declined in the past four years, United States
      Gross Domestic Product (GDP) continues to remain positive with annual growth
      rates of 3.6%, 3.1%, 2.9% and 2.2% for the years 2004 through 2007. The first
      quarter continued to indicate an increase with a gain of 0.6%. A weakening
      in
      real estate is predicted to continue causing further slowing in the
      economy.





-29-


The
      Consumer Price Index (CPI) will continue to have added pressure brought on
      by
      record breaking oil prices exceeding $120 per barrel in May 2008. Consumer
      Price
      Index (CPI) measured a 3.1% estimate at a compounded annual rate during the
      first three months of 2008.





Unemployment
      rate in the United States is another factor with the borrower’s ability to
      service their debt, decreased to a low of 4.4% in December 2006 and gradually
      rose to 5.0% in December 2007. The unemployment rate in the United States for
      March 2008 was 5.1%. April, 2008 indicated a declining trend of 5.0%. The most
      recent low in California’s unemployment occurred in November 2006 at 4.8% and as
      of March 2008, continues to steadily increase to a preliminary estimate of
      6.2%.





The
      Federal Reserve, after having left the Federal Funds Rate unchanged at 5.25%
      for
      more than two years, began to react to the slowing economy, rising unemployment
      and the turmoil created by a credit crisis stemming from the sub prime mortgage
      loan market write downs. The Federal Reserves’ initial goals were aimed at
      stimulating the economy, while keeping inflation in check and creating jobs.
      Later its efforts expanded to increase liquidity in the financial system. Since
      the initial Federal Funds Rate reduction of 0.5% in September, 2007, the Federal
      Reserve has further reduced this rate by 0.25% in October 2007, 0.25% in
      December 2007, 1.25% in January 2008, 0.75% in March 2008 and 0.25% in April
      2008. The Federal Funds Rate now stands at 2.00% as of May 12, 2008. The prime
      rate offered by banks for borrowing has followed in step with the reductions
      in
      the Federal Funds Rate and is currently at 5.0%. Like the Federal Funds Rate,
      the Prime Rate has been reduced by 3.25% since September 2007, a period of
      just
      seven months. Short term treasury yields have also fallen, but the longer term
      yields represented by the 10 year treasury bonds have not decreased as
      dramatically. As of May 1, 2008, the 10 year treasury yield was 3.78% compared
      to 4.04% at December 31, 2007 and 4.61% at September 30, 2007 shortly after
      the
      Federal Reserve began efforts to lower interest rates.





The
      actions taken by the Federal Reserve on the mortgage rates has only seen a
      slow
      response. Freddie Mac reports average interest rates for 30 year fixed rate
      conforming loans were 6.66% for June 2007, 6.38% for September 2007, 6.10%
      for
      December 2007, 5.97% for March 2008 and most recently 5.92% for April 2008.
      Although the mortgage rates declined, it did little to stimulate the market
      enough to indicate a significant increase.





There
      continues to be an increase in loan delinquencies and foreclosures in the real
      estate market in California and nationwide. During the first quarter of 2008,
      the number of vacant land, commercial developments in foreclosure increased
      to
      the highest level in more than 15 years. Lending institutions throughout
      California sent 113,676 default notices during the first quarter of 2008, an
      increase of 39.4% from the first quarter of 2007. (Dataquick) On a national
      and
      local level, volumes and median home prices have declined from their highs
      in
      2005 to 2006. (California Association of Realtors) CAR, reported their unsold
      inventory index, which indicates the number of months need to deplete the market
      supply of properties at the current sales rate, was 11.6 months in March 2008
      compared to 7.6 months in March 2007.





Commercial
      real estate has continued to fare well in 2008. A stable commercial market
      helps
      keep values stable. Stable property values provide comfort that loans secured
      by
      these properties will perform well.





**Item
      3.**  **QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**





At
      March
      31, 2008, the Fund held the following types of mortgages:


Commercial
              
              $
              4,254,828Construction
              
              
              5,445,976Unimproved
                  Land
              
              
              8,113,483Total
              
              $
              17,814,287First
                  Mortgages
              
              $
              13,921,662Second
                  Mortgages
              
              
              3,892,625Total
              
              $
              17,814,287


Scheduled
      maturities of loans secured by trust deeds as of March 31, 2008 and the interest
      sensitivity of such loans are as follows:


Fixed
                Interest
                RateYear
                  Ending December 31:2008
              
              $
              17,131,2872009
              
              
              683,000Total
              
              $
              17,814,287





The
      scheduled maturities for the year ending 2008 include ten (10) loans
      ( $
      7,167,247) that
      are
      past maturity at March 31, 2008. It is the Fund’s experience that loans can be
      refinanced or repaid before or after the maturity date. Therefore, the above
      tabulation for scheduled maturities is not a forecast of future cash
      receipts.





The
      Fund
      has no variable interest rate loans at March 31, 2008.





At
      March
      31, 2008, 100% of the Fund’s loans receivable was collateralized by properties
      located in California.





At
      March
      31, 2008, the Fund’s loan portfolio consisted of twenty three (23) real estate
      loans to unrelated parties totaling $15,827,459, and three (3) loans receivable
      from related parties amounting to $1,986,828.





-30-


o
            Loan
                200409 amounting to $110,476, due in monthly installments of $1,003
                interest only at 10.90% maturing on August 31, 2008. This loan is
                secured
                by a first trust deed on the underlying
                property.


o
            Loan
                200412, an investment in participation notes issued by an affiliate
                amounting to $500,000 and maturing in December 2008. Interest is
                payable
                monthly at an effective rate of approximately 11.00% per
                annum.


o
            Loan
                200502 amounting to $470,737, due in monthly installments of$ 4,276
                interest only at 10.90%. This loan matured on January 18, 2008 and
                is
                secured by a first trust deed on the underlying
                property.


o
            Loan
                200504 amounting to $802,800 due in monthly installments of $8,028
                interest only at 12.00%. This loan matured on September 8, 2006 and
                is
                secured by a second trust deed on the underlying
                property.


o
            Loan
                200507 amounting to $257,375 due in monthly installments of $2,574
                interest only at 12.00%. This loan matured on June 25, 2007 and is
                secured
                by a second trust deed on the underlying
                property.


o
            Loan
                200510 amounting to $455,042 due in monthly installments of $4,550
                interest only at 12.00%. This loan matured on August 8, 2007 and
                is
                secured by a second trust deed on the underlying
                property.


o
            Loan
                200511 amounting to $549,240 due in monthly installments of $5,492
                interest only at 12.00%. This loan matured on March 15, 2008 and
                is
                secured by a first trust deed on the underlying
                property.


o
            Loan
                200601 amounting to $552,000 due in monthly installments of $5,014
                interest only at 10.90%. This loan matured on January 11, 2008 and
                is
                secured by a first trust deed on the underlying
                property.


o
            Loan
                200602 amounting to $589,473 due in monthly installments of $5,895
                interest only at 12%. This loan matured on January 30, 2007 and is
                secured
                by a first trust deed on the underlying
                property.


o
            Loan
                200603 amounting to $2,780,000 due in monthly installments of $27,800
                interest only at 12% maturing on May 2, 2008. This loan is secured
                by a
                first trust deed on the underlying
                property.


o
            Loan
                200608 amounting to $525,000 due in monthly installments of $4,769
                interest only at 10.90% maturing on June 7, 2008. This loan is secured
                by
                a first trust deed on the underlying
                property.


o
            Loan
                200609 amounting to $390,580 due in monthly installments of $3,873
                interest only at 11.90%. This loan matured on June 23, 2007 and is
                secured
                by a second trust deed on the underlying
                property.


o
            Loan
                200609.1 amounting to $345,000 due in monthly installments of $3,134
                interest only at 10.90% maturing on June 27, 2008. This loan is secured
                by
                a first trust deed on the underlying
                property.


o
            Loan
                200612 amounting to $570,000 due in monthly installments of $5,653
                interest only at 11.90% maturing on August 30, 2008. This loan is
                secured
                by a first trust deed on the underlying
                property.






-31-




o
            Loan
                200613 amounting to $400,000 due in monthly installments of $4,167
                interest only at 12.50% maturing on October 4, 2008. This loan is
                secured
                by a first trust deed on the underlying
                property


o
            Loan
                200614 amounting to $380,000 due in monthly installments of $3,800
                interest only at 12.00% maturing on April 17, 2008. This loan is
                secured
                by a first trust deed on the underlying
                property.


o
            Loan
                200615 amounting to $1,100,000 due in monthly installments of $10,542
                interest only at 11.50% maturing on October 20, 2008. This loan is
                secured
                by a first trust deed on the underlying
                property.


o
            Loan
                200701 amounting to $1,900,000 due in monthly installments of $19,792
                interest only at 12.50%. This loan matured on January 11, 2008 and
                is
                secured by a first trust deed on the underlying
                property.


o
            Loan
                200702 amounting to $665,691 due in monthly installments of $6,601
                interest only at 11.90% maturing on September 2, 2008. This loan
                is
                secured by a first trust deed on the underlying
                property.


o
            Loan
                200703 amounting to $1,200,000 due in monthly installments of $11,900
                interest only at 11.90% maturing on March 8, 2008. This loan is secured
                by
                a second trust deed on the underlying
                property.


o
            Loan
                200704 amounting to $683,000 due in monthly installments of $6,773
                interest only at 11.90% maturing on June 4, 2009. This loan is secured
                by
                a first trust deed on the underlying
                property.


o
            Loan
                200705 amounting to $119,665 due in monthly installments of $1,187
                interest only at 11.90% maturing on July 13, 2008. This loan is secured
                by
                a first trust deed on the underlying
                property.


o
            Loan
                200706 amounting to $1,085,000 due in monthly installments of $10,760
                interest only at 11.90% maturing on August 17, 2008. This loan is
                secured
                by a first trust deed on the underlying
                property.


o
            Loan
                200707 amounting to $952,792 due in monthly installments of $9,131
                interest only at 11.50% maturing on September 6, 2008. This loan
                is
                secured by a first trust deed on the underlying
                property.


o
            Loan
                200708 amounting to $145,000 due in monthly installments of $1,438
                interest only at 11.90% maturing on September 21, 2008. This loan
                is
                secured by a first trust deed on the underlying
                property.


o
            Loan
                200709 amounting to $286,828 due in monthly installments of $3,585
                interest only at 15.00% maturing on May 27, 2008. This loan is secured
                by
                a second trust deed on the underlying
                property.








**Market
      Risk.**





The
      Fund’s primary market risk in terms of its profitability is the exposure to
      fluctuations in general interest rates and diminution in values of the
      underlying real estate collaterals due to adverse economic
      conditions.  All of the Fund’s mortgage loans earn interest at fixed
      rates. Changes in interest rates may also affect the value of the Fund’s
      investment in mortgage loans and the rates the Fund reinvests funds obtained
      from loan repayments and new capital contributions from investors.  If
      interest rates increase, the interest rates the Fund obtains from reinvested
      funds will generally increase, but the value of the Fund’s existing loans at
      fixed rates will generally tend to decrease.  The risk is mitigated as
      the Fund does not intend to sell its loan portfolio, rather such loans are
      held
      until they are paid off.  If interest rates decrease, the amounts
      becoming available to the Fund for investment due to repayment of partnership
      loans may be reinvested at lower rates than the Fund  had
      been
      able to obtain in prior investments, or than the rates on the repaid
      loans.  In addition, interest rate decreases may encourage borrowers
      to refinance their loans with the Fund at a time where the Fund is unable to
      reinvest in loans of comparable value.  The Fund does not hedge or
      otherwise seek to manage interest rate risk.  The Fund does not enter
      into risk sensitive instruments for trading purposes.





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**ASSET
      QUALITY**





A
      consequence of lending activities is occasionally losses will be experienced
      and
      the amount of such losses will vary from time to time, depending upon the risk
      characteristics of the loan portfolio as affected by economic conditions and
      the
      financial experiences of borrowers.  Many of these factors are beyond
      the control of the Manager.  There is no precise method of predicting
      specific losses or amounts that ultimately may be charged off on particular
      segments of the loan portfolio, especially in light of the current economic
      environment.





The
      conclusion a loan may become uncollectible, in whole or in part, is a matter
      of
      judgment.  Although institutional lenders are subject to requirements
      and regulations that, among other things, require them to perform ongoing
      analyses of their portfolios, loan-to-value ratios, reserves, etc., and to
      obtain and maintain current information regarding their borrowers and the
      securing properties, the partnership is not subject to these regulations and
      has
      not adopted certain of these practices.  Rather, the Manager, in
      connection with the periodic closing of the accounting records of the Fund
      and
      the preparation of the financial statements, determines whether the allowance
      for loan losses is adequate to cover potential loan losses of the
      Fund.  As of March 31, 2008 the Manager has determined the allowance
      for loan losses and real estate owned of $411,750 (loans: $311,750 and real
      estate owned: $100,000) is adequate.  Because of the number of
      variables involved, the magnitude of the swings possible and the Manager’s
      inability to control many of these factors, actual results may and do sometimes
      differ significantly from estimates made by the Manager





**Item
      4T.**  **Controls
      and Procedures.**





As
      of
      March 31, 2008, the Fund carried out an evaluation, under the supervision and
      with the participation of the Manager’s
      Principal Executive Officer and Principal Financial Officer, of the
      effectiveness of the design and operation of the Fund’s disclosure controls and
      procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934,
      as
      amended.  Based upon that evaluation, the Manager’s
      Principal Executive Officer and Principal Financial Officer, concluded the Fund’s disclosure controls and procedures are effective in timely
      alerting the Manager to material information relating to the partnership that
      is
      required to be included in our periodic filings with the Securities and Exchange
      Commission.  There were no significant changes in the Fund’s internal
      control over financial reporting during the Fund’s first fiscal quarter that
      have materially affected, or are reasonably likely to materially affect, the
      Fund’s internal control over financial reporting. The Fund ’s
      operations are managed by its fund manager, Lakeside Financial Group, Inc.
      The
      Manager does not own a membership interest in the Fund .


-33-


**PART
      II - OTHER INFORMATION**




**Item
      1.**  **Legal
      Proceedings**





In
      the
      normal course of business, the Fund may become involved in various types of
      legal proceedings such as assignment of rents, bankruptcy proceedings,
      appointment of receivers, unlawful detainers, judicial foreclosure, etc. to
      enforce the provisions of the deeds of trust, collect the debt owed under the
      promissory notes, or to protect, or recoup its investment from the real property
      secured by the deeds of trust. None of these actions would typically be of
      any
      material importance. As of the date hereof, the Fund is not involved in any
      legal proceedings other than those that would be considered part of the normal
      course of business.





**Item
      2.**  **Unregistered
      Sales of Equity Securities and Use of Proceeds**





During
      the period covered by this report the Fund made sales of unregistered securities
      set forth in the table below. All sales were of units of membership interest
      in
      the Fund, for the purchase price of $100 per unit of membership interest, and
      all sales were for cash consideration. No sales involved any underwriter, but
      all sales were effected through a licensed securities broker, ePlanning
      Securities, Inc., to whom a commission was paid of up to 6.5% of the sales
      price.





All
      sales
      were made under the exemption from registration provided by Section 3(a)(11)
      of
      the Securities Act of 1933, as amended, and under Rule 147 promulgated
      thereunder. The offering is limited to California residents only. The Fund
      derives 100% of its revenues from loans secured by real property located in
      California. The Fund’s Operating Agreement and Subscription Agreement, both of
      which are executed by the investor, contain written disclosures regarding the
      limitations on resale prescribed by Rule 147.





With
      respect to applicable state securities laws, all sales were made pursuant to
      a
      permit issued to the Fund by the California Department of Corporations (“DOC”)
      pursuant to Sections 25110 and 25113 of the California Corporations Code. The
      permit must be renewed each year by filing a renewal application and an updated
      Offering Circular for approval by the DOC. The renewed permit was issued by
      the
      DOC on February 29, 2008.





During
      the period covered by this report the Fund made the following sales of
      unregistered securities, to various investors meeting the Fund’s investor
      suitability standards, on the terms described above:


Date
                  of Sale
              Units
                  Sold
              Purchase
                  Price01/14/08
              294.51
              $29,45102/01/08
              252.25
              $25,22503/31/08
              233.38
              $23,33801/04/08
                  (reinvestment)
              628.54
              $
                  62,85402/05/08
                  (reinvestment)
              628.03
              $
                  62,80303/05/08
                  (reinvestment)
              381.74
              $
                  38,174




-34-


**Item
      3.**  **Defaults
      on Senior Securities**




Three
      (3)
      of the loans guaranteed by the same Principal (Note 6 - Concentration) were
      subordinated to first trust deed loans totaling $2,929,000 at interest rates
      of
      11%-12% per year. Interests on these notes have been delinquent for periods
      ranging from 7-15 months and the borrower has not paid the holder of the first
      trust deed as of March 31, 2008. Additionally, another loan that was guaranteed
      by the same Principal was foreclosed upon in January 2008, subject to a first
      trust deed amounting to $800,000 at 11% interest rate. Interest on this senior
      note was 16 months past due as of March 31, 2008, therefore, based on the terms
      of the note, the Fund is in default on this senior deed of trust.





A
      senior
      first trust deed amounting to $550,000 at 12% interest rate has already matured
      on February 1, 2008. The Fund holds the second trust deed and exercised its
      right to foreclose in October 2007 and the property has now been listed for
      sale. Interest has been delinquent since January 2007, therefore, based on
      the
      terms of the note, the Fund is in default on this senior deed of
      trust.





A
      senior
      first trust deed amounting to $1,125,000 at 12% interest rate was assumed when
      the Fund foreclosed on a promissory note in August 2007. Interest on this senior
      note was 7 months past due, therefore, based on the terms of the note, the
      Fund
      is in default on this senior deed of trust.




**Item
      6.**  **Exhibits**





Exhibit
      No.  Description





3.1.*
            Articles
                of Organization


3.1.*
            Operating
                Agreement of Lakeside Mortgage Fund,
                LLC


3.2.**
            Amendment
                No. 1 to Operating Agreement


31.1.
            Certification
                of Chief Executive Officer Pursuant to Section 302 of the
                Sarbanes-Oxley
                Act of 2002.


31.2.
            Certification
                of Chief Financial Officer Pursuant to Section 302 of the
                Sarbanes-Oxley
                Act of 2002.


32.1.
            Certification
                of Chief Executive Officer Pursuant to Section 906 of the
                Sarbanes-Oxley
                Act of 2002.


32.2.
            Certification
                of Chief Financial Officer Pursuant to Section 906 of the
                Sarbanes-Oxley
                Act of 2002.





*
      Incorporated by reference to the Company’s Registration Statement on Form 10-SB,
      as amended, originally filed with the Commission under the Exchange Act on
      August 6, 2004.





**
      Incorporated by reference to the Company’s Annual Report on Form 10-KSB,
      originally filed with the Commission under the Exchange Act on March 30,
      2005.





**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15 (d) of the Securities Exchange Act
      of
      1934 the registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereto duly authorized on this 20 th day of
      May, 2008




LAKESIDE
                MORTGAGE FUND, LLC,
              A
                California Limited Liability CompanyBy:
            Lakeside
              Financial Group, Inc.,
              ManagerBy:
            /s/ Paula M. LewisPaula M. Lewis, President & CEO






-35-