##### 









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549


Form 10-KSB/A-2

|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark one) |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the year ended December 31,
    2002                                                    
|          
|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 000-24803

Vestin Group, Inc.

(Name of small business issuer in its
charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                           |  | 52-2102142                              
|(State or other jurisdiction of
    Incorporation or organization) |  | (I.R.S. Employer
    Identification No.)

2901 El Camino Avenue

Las Vegas, Nevada 89102


(Address of principal executive
offices)


(702) 227-0965

Issuers telephone number


Securities registered pursuant to
Section 12(b) of the Act:

None


Securities registered pursuant to
Section 12(g) of the Act:

Common Stock, $.0001 Par Value


Check
whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days.     Yes þ          No o

Check
if there is no disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B is not contained in this
form, and no disclosure will be contained, to the best of the
registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this
Form 10-KSB.     þ

State
issuers revenues for its most recent fiscal year.
$31,904,304

As
of October 24, 2003, there were 5,328,140 shares of
the issuers common stock, $.0001 par value issued and
5,197,840 outstanding. The aggregate market value of the
common stock held by non-affiliated stockholders on
October 24, 2003, was approximately, $6.1 million.

Indicate
by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the
Act).     Yes o          No þ



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##### 



Explanatory Note

This
Form 10-KSB/A-2 is being filed in response to comments
received from the Securities and Exchange Commission.

PART I



|        |                  
|------- | -----------------
|ITEM 3. | LEGAL PROCEEDINGS

The Company, Vestin Mortgage and Del Mar
Mortgage, Inc., a company wholly owned by Mike Shustek, the
largest shareholder and CEO of the Company, and various
affiliates of the Company are defendants in a civil action (the
Action). The Action was initiated by Desert Land,
L.L.C. (Desert Land) on various loans arranged by
Del Mar Mortgage, Inc. and/or Vestin Mortgage. On April 10,
2003, the United States District Court for the District of
Nevada (the Court) entered judgment jointly and
severally in favor of Desert Land against the Company, Vestin
Mortgage and Del Mar Mortgage, Inc. Judgment was predicated upon
the Courts finding that Del Mar Mortgage, Inc. received an
unlawful penalty fee from plaintiffs. The Company and Vestin
Mortgage, which did not receive any portion of the penalty fee,
were found by the Court to be successors to Del Mar
Mortgage, Inc. The Company and Vestin Mortgage are appealing
this finding.

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

1



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##### 



REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS

The Stockholders and Board of Directors of Vestin
Group, Inc.

We have audited the accompanying consolidated
balance sheet of Vestin Group, Inc. and Subsidiaries (the
Company) as of December 31, 2002, and the
related consolidated statements of income, changes in
stockholders equity, and cash flows for each of the two
years in the period ended December 31, 2002. These
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the financial position of Vestin Group, Inc. and
Subsidiaries at December 31, 2002, and the consolidated
results of their operations and their consolidated cash flows
for each of the two years in the period ended December 31,
2002, in conformity with accounting principles generally
accepted in the United States.



| |                      
| | ---------------------
| | /s/ ERNST & YOUNG LLP

Phoenix, Arizona

February 27, 2003


2



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##### 



VESTIN GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

|                                                                              |                                                                                                                |                                            |           |           |            | 
|----------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | --------- | --------- | ---------- | 
|                                                                              |                                                                                                                | December 31,                              
|                                                                              |                                                                                                                | 2002                                      
|                                                                              |                                                                                                                |                                           
|ASSETS                                                                       
|Cash                                                                          |                                                                                                                | $                                          | 2,523,017 |          
|Accounts receivable, net of allowance of $160,995                             |                                                                                                                |                                            | 5,234,469 |          
|Interest receivable                                                           |                                                                                                                |                                            | 113,352   |          
|Due from related parties                                                      |                                                                                                                |                                            | 1,803,112 |          
|Notes receivable                                                              |                                                                                                                |                                            | 700,000   |          
|Notes receivable  related party                                              |                                                                                                                |                                            | 117,964   |          
|Investments in real estate held for sale                                      |                                                                                                                |                                            | 5,980,509 |          
|Investments in mortgage loans on real estate, net
    of allowance of $80,000 |                                                                                                                |                                            | 8,874,643 |          
|Other investments  related parties                                           |                                                                                                                |                                            | 2,100,000 |          
|Other assets                                                                  |                                                                                                                |                                            | 670,999   |          
|Property and equipment, net                                                   |                                                                                                                |                                            | 719,113   |          
|                                                                              |                                                                                                                |                                            |           |          
|                                                                              |                                                                                                                | Total assets                               |           | $         | 28,837,178 | 
|                                                                              |                                                                                                                |                                            |           |          
|LIABILITIES AND STOCKHOLDERS
    EQUITY                                     
|Accounts payable and accrued expenses                                         |                                                                                                                | $                                          | 1,969,379 |          
|Dividend payable                                                              |                                                                                                                |                                            | 75,650    |          
|Income taxes payable                                                          |                                                                                                                |                                            | 1,395,538 |          
|Lines of credit                                                               |                                                                                                                |                                            | 7,000,000 |          
|Notes payable  related party                                                 |                                                                                                                |                                            | 1,901,428 |          
|Notes payable                                                                 |                                                                                                                |                                            | 151,003   |          
|                                                                              |                                                                                                                |                                            |           |          
|                                                                              |                                                                                                                | Total liabilities                          |           | $         | 12,492,998 | 
|                                                                              |                                                                                                                |                                            |           |          
|Commitments and contingencies                                                 |                                                                                                                |                                            |          |          
|Stockholders equity                                                          |                                                                                                                |                                            |           |          
|                                                                              | Preferred stock, $.0001 par value;
    20 million shares authorized; 907,800 shares issued and
    outstanding |                                            | $         | 91        |           
|                                                                              | Common stock, $.0001 par value; 100 million
    shares authorized; 5,324,340 shares issued and outstanding     |                                            |           | 532       |           
|                                                                              | Additional paid-in capital                                                                                     |                                            |           | 8,922,885 |           
|                                                                              | Retained earnings                                                                                              |                                            |           | 7,420,672 |           
|                                                                              |                                                                                                                |                                            |           |          
|                                                                              |                                                                                                                | Total stockholders equity                 |           | $         | 16,344,180 | 
|                                                                              |                                                                                                                |                                            |           |          
|                                                                              |                                                                                                                | Total liabilities and stockholders equity |           | $         | 28,837,178 | 
|                                                                              |                                                                                                                |                                            |           |          

The accompanying notes are an integral part of
these statements.

3



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##### 



VESTIN GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

|                                                                   |                                                                                                      |                                                                         |           |                   |            |   |           |            |            | 
|------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | --------- | ----------------- | ---------- | - | --------- | ---------- | ---------- | 
|                                                                   |                                                                                                      |                                                                        
|                                                                   |                                                                                                      | For the Year Ended                                                     
|                                                                   |                                                                                                      |                                                                        
|                                                                   |                                                                                                      | December 31, 2002                                                       |           | December 31, 2001
|                                                                   |                                                                                                      |                                                                         |           |                  
|Revenues                                                           |                                                                                                      |                                                                         |           |                   |            |   |           |           
|                                                                   | Loan placement and related fees                                                                      |                                                                         | $         | 30,607,054        |            |   | $         | 20,201,393 |           
|                                                                   | Interest income                                                                                      |                                                                         |           | 626,657           |            |   |           | 605,763    |           
|                                                                   | Other income                                                                                         |                                                                         |           | 670,593           |            |   |           | 634,482    |           
|                                                                   |                                                                                                      |                                                                         |           |                   |            |   |           |           
|                                                                   |                                                                                                      | Total revenues                                                          |           |                   | 31,904,304 |   |           |            | 21,441,638 | 
|                                                                   |                                                                                                      |                                                                         |           |                   |            |   |           |           
|Expenses                                                           |                                                                                                      |                                                                         |           |                   |            |   |           |           
|                                                                   | General and administrative expenses (2002
    includes a $4,798,926 provision for loss  see Note M) |                                                                         |           | 17,516,041        |            |   |           | 10,064,969 |           
|                                                                   | Sales and marketing expenses                                                                         |                                                                         |           | 7,896,687         |            |   |           | 7,577,806  |           
|                                                                   | Interest expenses                                                                                    |                                                                         |           | 493,078           |            |   |           | 753,361    |           
|                                                                   |                                                                                                      |                                                                         |           |                   |            |   |           |           
|                                                                   |                                                                                                      | Total expenses                                                          |           |                   | 25,905,806 |   |           |            | 18,396,136 | 
|                                                                   |                                                                                                      |                                                                         |           |                   |            |   |           |           
|                                                                   |                                                                                                      | Income from continuing operations before
    provision for income taxes |           |                   | 5,998,498  |   |           |            | 3,045,502  | 
|Provision for income taxes                                         |                                                                                                      |                                                                         | 2,166,660 |                   |            |   | 1,220,281 |           
|                                                                   |                                                                                                      |                                                                         |           |                   |            |   |           |           
|                                                                   |                                                                                                      | NET INCOME                                                              |           | $                 | 3,831,838  |   |           | $          | 1,825,221  | 
|Preferred stock dividends                                          |                                                                                                      |                                                                         | 933,800   |                   |            |   | 75,731    |           
|                                                                   |                                                                                                      |                                                                         |           |                   |            |   |           |           
|Net income applicable to common
    shareholders                   |                                                                                                      | $                                                                       | 2,898,038 |                   |            | $ | 1,749,490 |           
|                                                                   |                                                                                                      |                                                                         |           |                   |            |   |           |           
|Earnings per common share 
    Basic                              |                                                                                                      | $                                                                       | 0.54      |                   |            | $ | 0.29      |           
|                                                                   |                                                                                                      |                                                                         |           |                   |            |   |           |           
|Earnings per common share 
    Diluted                            |                                                                                                      | $                                                                       | 0.34      |                   |            | $ | 0.26      |           
|                                                                   |                                                                                                      |                                                                         |           |                   |            |   |           |           
|Weighted average number of common shares
    outstanding  Basic   |                                                                                                      |                                                                         | 5,396,363 |                   |            |   | 5,985,701 |           
|                                                                   |                                                                                                      |                                                                         |           |                   |            |   |           |           
|Weighted average number of common shares
    outstanding  Diluted |                                                                                                      |                                                                         | 8,498,358 |                   |            |   | 6,794,634 |           
|                                                                   |                                                                                                      |                                                                         |           |                   |            |   |           |           

The accompanying notes are an integral part of
these statements.

4



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##### 



VESTIN GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS EQUITY

Years Ended December 31, 2002 and
2001

|                                                                     |                                                                                  |                                              |                            |                            |   |                |    |            |   |          |            |               |   |         |      |          |   |        |           |       |   |   |            |   |   |   |            |   |   |   |            |           |           |           |           |         |         |         |            |           |           |           |           | 
|-------------------------------------------------------------------- | -------------------------------------------------------------------------------- | -------------------------------------------- | -------------------------- | -------------------------- | - | -------------- | -- | ---------- | - | -------- | ---------- | ------------- | - | ------- | ---- | -------- | - | ------ | --------- | ----- | - | - | ---------- | - | - | - | ---------- | - | - | - | ---------- | --------- | --------- | --------- | --------- | ------- | ------- | ------- | ---------- | --------- | --------- | --------- | --------- | 
|                                                                     |                                                                                  |                                              |                            |                            |   |                |    |            |   |          |            | Accumulated   |   |        
|                                                                     |                                                                                  | Preferred Stock                              |                            | Common Stock               |   | Treasury Stock |    | Additional |   |          |            | Other         |   |        
|                                                                     |                                                                                  |                                              |                            |                            |   |                |    | Paid-in    |   | Retained |            | Comprehensive |   |        
|                                                                     |                                                                                  | Shares                                       |                            | Amount                     |   | Shares         |    | Amount     |   | Shares   |            | Amount        |   | Capital |      | Earnings |   | Income |           | Total
|                                                                     |                                                                                  |                                              |                            |                            |   |                |    |            |   |          |            |               |   |         |      |          |   |        |           |      
|Balance at January 1, 2001                                           |                                                                                  |                                              |                           |                            |   | $              |   |            |   |          | 6,989,270  |               |   | $       | 699  |          |   |        | (2,400    | )     |   | $ | (11,306    | ) |   | $ | 1,739,427  |   |   | $ | 7,347,117  |           |           | $         | (115,790  | )       |         | $       | 8,960,147  |          
|Comprehensive income:                                                |                                                                                  |                                              |                            |                            |   |                |    |            |   |          |            |               |   |         |      |          |   |        |           |       |   |   |            |   |   |   |            |   |   |   |            |           |           |           |           |         |         |         |            |          
|                                                                     | Net income                                                                       |                                              |                            |                           |   |                |    |           |   |          |            |              |   |         |      |         |   |        |           |      |   |   |            |  |   |   |            |  |   |   |            | 1,825,221 |           |           |           |        |         |         |            | 1,825,221 |          
|                                                                     | Net unrealized loss on investments
    available-for-sale, net of tax of $24,591 |                                              |                            |                           |   |                |    |           |   |          |            |              |   |         |      |         |   |        |           |      |   |   |            |  |   |   |            |  |   |   |            |          |           |           |           | (47,733 | )       |         |            | (47,733   | )        
|                                                                     |                                                                                  |                                              |                            |                            |   |                |    |            |   |          |            |               |   |         |      |          |   |        |           |       |   |   |            |   |   |   |            |   |   |   |            |           |           |           |           |         |         |         |            |          
|                                                                     |                                                                                  |                                              | Total comprehensive income |                            |   |               |    |            |   |         |            |               |   |        |      |          |   |       |           |       |   |  |            |   |   |  |            |   |   |  |            |           |           | 1,825,221 |           |         |         | (47,733 | )          |           |           | 1,777,488 |          
|Divestiture of L.L. Bradford and Company                             |                                                                                  |                                              |                           |                            |   |                |   |            |   |          |           |               |   |         |     |          |   |        | (800,000  | )     |   |   | (540,000   | ) |   |   |           |   |   |   |           |           |           |           |          |         |         |         | (540,000   | )        
|Issuance of preferred stock                                          |                                                                                  |                                              | 937,800                    |                            |   |                | 94 |            |   |          |           |               |   |         |     |          |   |        |          |       |   |   |           |   |   |   | 9,377,904  |   |   |   |           |           |           |           |          |         |         |         | 9,377,998  |          
|Declaration of dividend on preferred stock                           |                                                                                  |                                              |                           |                            |   |                |   |            |   |          |           |               |   |         |     |          |   |        |          |       |   |   |           |   |   |   |           |   |   |   | (75,731    | )         |           |           |          |         |         |         | (75,731    | )        
|Declaration of common stock dividend                                 |                                                                                  |                                              |                           |                            |   |                |   |            |   |          |           |               |   |         |     |          |   |        |          |       |   |   |           |   |   |   |           |   |   |   | (112,324   | )         |           |           |          |         |         |         | (112,324   | )        
|Common stock issued for employee bonuses                             |                                                                                  |                                              |                           |                            |   |                |   |            |   |          |           |               |   |         |     |          |   |        | 30,000    |       |   |   | 44,442     |   |   |   | 49,758     |   |   |   |           |           |           |           |          |         |         |         | 94,200     |          
|Expenses related to issuance of warrants                             |                                                                                  |                                              |                           |                            |   |                |   |            |   |          |           |               |   |         |     |          |   |        |          |       |   |   |           |   |   |   | 928,992    |   |   |   |           |           |           |           |          |         |         |         | 928,992    |          
|Treasury stock acquired                                              |                                                                                  |                                              |                           |                            |   |                |   |            |   |          |           |               |   |         |     |          |   |        | (648,672  | )     |   |   | (3,640,581 | ) |   |   |           |   |   |   |           |           |           |           |          |         |         |         | (3,640,581 | )        
|Retirement of treasury stock                                         |                                                                                  |                                              |                           |                            |   |                |   |            |   |          | (1,421,072 | )             |   |         | (142 | )        |   |        | 1,421,072 |       |   |   | 4,147,445  |   |   |   | (4,147,303 | ) |   |   |           |           |           |           |          |         |         |         |           |          
|                                                                     |                                                                                  |                                              |                            |                            |   |                |    |            |   |          |            |               |   |         |      |          |   |        |           |       |   |   |            |   |   |   |            |   |   |   |            |           |           |           |           |         |         |         |            |          
|Balance at December 31, 2001                                         |                                                                                  |                                              | 937,800                    |                            |   |                | 94 |            |   |          | 5,568,198  |               |   |         | 557  |          |   |        |          |       |   |   |           |   |   |   | 7,948,778  |   |   |   | 8,984,283  |           |           |           | (163,523  | )       |         |         | 16,770,189 |          
|                                                                     | Comprehensive income:                                                            |                                              |                            |                            |   |                |    |            |   |          |            |               |   |         |      |          |   |        |           |       |   |   |            |   |   |   |            |   |   |   |            |           |           |           |           |         |         |         |            |           |          
|                                                                     |                                                                                  | Net income                                   |                            |                            |  |                |    |            |  |          |            |               |  |         |      |          |  |        |           |       |  |   |            |   |  |   |            |   |  |   |            |           | 3,831,838 |           |           |         |        |         |            |           | 3,831,838 |          
|                                                                     |                                                                                  | Realization of loss on marketable securities |                            |                            |  |                |    |            |  |          |            |               |  |         |      |          |  |        |           |       |  |   |            |   |  |   |            |   |  |   |            |           |          |           |           |         | 163,523 |         |            |           | 163,523   |          
|                                                                     |                                                                                  |                                              |                            |                            |   |                |    |            |   |          |            |               |   |         |      |          |   |        |           |       |   |   |            |   |   |   |            |   |   |   |            |           |           |           |           |         |         |         |            |          
|                                                                     |                                                                                  |                                              |                            | Total comprehensive income |   |                |   |            |   |          |           |               |   |         |     |          |   |        |          |       |   |   |           |   |   |   |           |   |   |   |           |           |           |           | 3,831,838 |         |         |         | 163,523    |           |           |           | 3,995,361 | 
|Declaration of dividend on preferred stock                           |                                                                                  |                                              |                           |                            |   |                |   |            |   |          |           |               |   |         |     |          |   |        |          |       |   |   |           |   |   |   |           |   |   |   | (933,800   | )         |           |           |          |         |         |         | (933,800   | )        
|Declaration of dividend on common stock                              |                                                                                  |                                              |                           |                            |   |                |   |            |   |          |           |               |   |         |     |          |   |        |          |       |   |   |           |   |   |   |           |   |   |   | (1,942,965 | )         |           |           |          |         |         |         | (1,942,965 | )        
|Expenses related to issuance of warrants                             |                                                                                  |                                              |                           |                            |   |                |   |            |   |          |           |               |   |         |     |          |   |        |          |       |   |   |           |   |   |   | 928,302    |   |   |   |           |           |           |           |          |         |         |         | 928,302    |          
|Treasury stock acquired                                              |                                                                                  |                                              |                           |                            |   |                |   |            |   |          |           |               |   |         |     |          |   |        | (296,200  | )     |   |   | (2,518,714 | ) |   |   |           |   |   |   |           |           |           |           |          |         |         |         | (2,518,714 | )        
|Common stock options exercised                                       |                                                                                  |                                              |                           |                            |   |                |   |            |   |          | 2,000      |               |   |         |     |          |   |        |          |       |   |   |           |   |   |   | 8,000      |   |   |   |           |           |           |           |          |         |         |         | 8,000      |          
|Warrants issued to purchase common stock for
    consulting services |                                                                                  |                                              |                           |                            |   |                |   |            |   |          |           |               |   |         |     |          |   |        |          |       |   |   |           |   |   |   | 37,807     |   |   |   |           |           |           |           |          |         |         |         | 37,807     |          
|Common stock issued from treasury for employee
    bonus             |                                                                                  |                                              |                           |                            |   |                |   |            |   |          |           |               |   |         |     |          |   |        | 1,000     |       |   |   | 6,120      |   |   |   |           |   |   |   |           |           |           |           |          |         |         |         | 6,120      |          
|Treasury stock retired                                               |                                                                                  |                                              |                           |                            |   |                |   |            |   |          | (295,200   | )             |   |         | (30  | )        |   |        | 295,200   |       |   |   | 2,512,594  |   |   |   |           |   |   |   | (2,518,684 | )         |           |           |          |         |         |         | (6,120     | )        
|Preferred stock converted into common stock                          |                                                                                  |                                              | (30,000                    | )                          |   |                | (3 | )          |   |          | 49,342     |               |   |         | 5    |          |   |        |          |       |   |   |           |   |   |   | (2         | ) |   |   |           |           |           |           |          |         |         |         |           |          
|                                                                     |                                                                                  |                                              |                            |                            |   |                |    |            |   |          |            |               |   |         |      |          |   |        |           |       |   |   |            |   |   |   |            |   |   |   |            |           |           |           |           |         |         |         |            |          
|Balance at December 31, 2002                                         |                                                                                  |                                              | 907,800                    |                            |   | $              | 91 |            |   |          | 5,324,340  |               |   | $       | 532  |          |   |        |          |       |   | $ |           |   |   | $ | 8,922,885  |   |   | $ | 7,420,672  |           |           |           |          |         |         | $       | 16,344,180 |          
|                                                                     |                                                                                  |                                              |                            |                            |   |                |    |            |   |          |            |               |   |         |      |          |   |        |           |       |   |   |            |   |   |   |            |   |   |   |            |           |           |           |           |         |         |         |            |          

The accompanying notes are an integral part of
these statements

5



---



##### 



VESTIN GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                          |                                                                                       |                                                                          |                                       |                                           |           |            |            |             |           |            |            |  
|----------------------------------------- | ------------------------------------------------------------------------------------- | ------------------------------------------------------------------------ | ------------------------------------- | ----------------------------------------- | --------- | ---------- | ---------- | ----------- | --------- | ---------- | ---------- | -
|                                          |                                                                                       |                                                                         
|                                          |                                                                                       | For the Year Ended                                                      
|                                          |                                                                                       |                                                                         
|                                          |                                                                                       | December 31, 2002                                                        |                                       | December 31, 2001                        
|                                          |                                                                                       |                                                                          |                                       |                                          
|Cash flow from operating activities:      |                                                                                       |                                                                          |                                       |                                           |           |            |            |            
|                                          | Net income                                                                            |                                                                          | $                                     | 3,831,838                                 |           |            | $          | 1,825,221   |          
|                                          | Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                                          |                                       |                                           |           |            |            |             |          
|                                          |                                                                                       | Depreciation                                                             |                                       |                                           | 114,875   |            |            |             | 74,861    |           
|                                          |                                                                                       | Stock based compensation                                                 |                                       |                                           | 966,109   |            |            |             | 1,023,192 |           
|                                          |                                                                                       | Net gain from sales of investment in real estate
    held for sale       |                                       |                                           | (168,889  | )          |            |             |          |           
|                                          |                                                                                       | Loss on investment in marketable securities                              |                                       |                                           | 256,658   |            |            |             |          |           
|                                          |                                                                                       | Loss on other investments                                                |                                       |                                           | 5,202,426 |            |            |             |          |           
|                                          |                                                                                       | Provision for losses on investments in mortgage
    loans on real estate |                                       |                                           | 80,000    |            |            |             |          |           
|                                          |                                                                                       | Changes in operating assets and liabilities:                             |                                       |                                           |           |            |            |             |           |           
|                                          |                                                                                       |                                                                          | Accounts receivable                   |                                           |           | (1,859,079 | )          |             |           | (1,469,985 | )         
|                                          |                                                                                       |                                                                          | Interest receivable                   |                                           |           | (113,352   | )          |             |           |           |           
|                                          |                                                                                       |                                                                          | Due from stockholder                  |                                           |           |           |            |             |           | (20,037    | )         
|                                          |                                                                                       |                                                                          | Due from related parties              |                                           |           | (1,074,346 | )          |             |           | (220,116   | )         
|                                          |                                                                                       |                                                                          | Notes receivable                      |                                           |           |           |            |             |           | (814,999   | )         
|                                          |                                                                                       |                                                                          | Other assets                          |                                           |           | 71,012     |            |             |           | (271,422   | )         
|                                          |                                                                                       |                                                                          | Accounts payable and accrued expenses |                                           |           | 446,614    |            |             |           | 761,204    |           
|                                          |                                                                                       |                                                                          | Due to related parties                |                                           |           |           |            |             |           | (147,962   | )         
|                                          |                                                                                       |                                                                          | Dividend payable                      |                                           |           | (112,324   | )          |             |           |           |           
|                                          |                                                                                       |                                                                          | Income taxes payable                  |                                           |           | (67,705    | )          |             |           | (716,769   | )         
|                                          |                                                                                       |                                                                          |                                       |                                           |           |            |            |            
|                                          |                                                                                       |                                                                          |                                       | Net cash provided by operating activities |           |            | 7,573,837  |             |           |            | 23,188     |  
|                                          |                                                                                       |                                                                          |                                       |                                           |           |            |            |            
|Cash flows from investing
    activities: |                                                                                       |                                                                          |                                       |                                           |           |            |            |            
|                                          | Purchase of property and equipment                                                    |                                                                          |                                       | (529,271                                  | )         |            |            | (194,895    | )        
|                                          | Cash advanced on notes receivable                                                     |                                                                          |                                       | (144,500                                  | )         |            |            |            |          
|                                          | Principal payments received on notes receivable                                       |                                                                          |                                       | 1,071,999                                 |           |            |            | 153,000     |          
|                                          | Principal payments received on notes receivable
     related party                   |                                                                          |                                       | 132,999                                   |           |            |            |            |          
|                                          | Purchase of investment in real estate held for
    sale                               |                                                                          |                                       | (111,171                                  | )         |            |            | (407,746    | )        
|                                          | Proceeds from sale of investment in real estate
    held for sale                     |                                                                          |                                       | 4,717,000                                 |           |            |            | 83,500      |          
|                                          | Purchase of investment in marketable securities                                       |                                                                          |                                       | (215,460                                  | )         |            |            | (41,576     | )        
|                                          | Proceeds from sale of investment in marketable
    securities                         |                                                                          |                                       | 151,087                                   |           |            |            |            |          
|                                          | Purchase of other investments                                                         |                                                                          |                                       |                                          |           |            |            | (1,161,262  | )        
|                                          | Purchase of investments in mortgage loans on real
    estate from the Funds           |                                                                          |                                       | (23,273,124                               | )         |            |            |            |          
|                                          | Proceeds from sale of investments in mortgage
    loans on real estate to the Funds   |                                                                          |                                       | 24,200,856                                |           |            |            |            |          
|                                          | Purchase of investments in mortgage loans on real
    estate                          |                                                                          |                                       | (29,241,363                               | )         |            |            | (42,767,487 | )        
|                                          | Proceeds from sale of investments in mortgage
    loans on real estates               |                                                                          |                                       | 17,784,257                                |           |            |            | 41,241,121  |          
|                                          |                                                                                       |                                                                          |                                       |                                           |           |            |            |            
|                                          |                                                                                       |                                                                          |                                       | Net cash used in investing activities     |           |            | (5,456,691 | )           |           |            | (3,095,345 | )
|                                          |                                                                                       |                                                                          |                                       |                                           |           |            |            |            

6



---



##### 



VESTIN GROUP, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH
FLOWS  (Continued)

|                                                |                                                                                                                                       |                                                         |           |                   |            |   |           |             |           | 
|----------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------- | --------- | ----------------- | ---------- | - | --------- | ----------- | --------- | 
|                                                |                                                                                                                                       |                                                        
|                                                |                                                                                                                                       | For the Year Ended                                     
|                                                |                                                                                                                                       |                                                        
|                                                |                                                                                                                                       | December 31, 2002                                       |           | December 31, 2001
|                                                |                                                                                                                                       |                                                         |           |                  
|Cash flows from financing
    activities:       |                                                                                                                                       |                                                         |           |                   |            |   |           |            
|                                                | Advances on line of credit                                                                                                            |                                                         | $         | 33,700,000        |            |   | $         | 20,000,000  |          
|                                                | Payments on line of credit                                                                                                            |                                                         |           | (26,700,000       | )          |   |           | (20,000,000 | )        
|                                                | Payments on notes payable                                                                                                             |                                                         |           | (5,058,982        | )          |   |           | (3,402,412  | )        
|                                                | Proceeds from notes payable                                                                                                           |                                                         |           |                  |            |   |           | 7,600,000   |          
|                                                | Proceeds from sale of preferred stock                                                                                                 |                                                         |           |                  |            |   |           | 4,377,998   |          
|                                                | Proceeds from common stock options exercised                                                                                          |                                                         |           | 8,000             |            |   |           |            |          
|                                                | Payment of dividend on preferred stock                                                                                                |                                                         |           | (858,150          | )          |   |           | (75,731     | )        
|                                                | Payment of dividend on common stock                                                                                                   |                                                         |           | (1,942,965        | )          |   |           |            |          
|                                                | Purchase of treasury stock                                                                                                            |                                                         |           | (2,518,714        | )          |   |           | (2,699,871  | )        
|                                                |                                                                                                                                       |                                                         |           |                   |            |   |           |            
|                                                |                                                                                                                                       | Net cash provided by (used in) financing
    activities |           |                   | (3,370,811 | ) |           |             | 5,799,984 | 
|                                                |                                                                                                                                       |                                                         |           |                   |            |   |           |            
|                                                |                                                                                                                                       | NET CHANGE IN CASH                                      |           |                   | (1,253,665 | ) |           |             | 2,727,827 | 
|Cash at beginning of period                     |                                                                                                                                       |                                                         | 3,776,682 |                   |            |   | 1,048,855 |            
|                                                |                                                                                                                                       |                                                         |           |                   |            |   |           |            
|Cash at end of period                           |                                                                                                                                       | $                                                       | 2,523,017 |                   |            | $ | 3,776,682 |            
|                                                |                                                                                                                                       |                                                         |           |                   |            |   |           |            
|Supplemental cash flow information:             |                                                                                                                                       |                                                         |           |                   |            |   |           |            
|                                                | Cash paid for federal income taxes                                                                                                    |                                                         | $         | 2,221,360         |            |   | $         | 2,167,342   |          
|                                                |                                                                                                                                       |                                                         |           |                   |            |   |           |            
|                                                | Cash paid for interest                                                                                                                |                                                         | $         | 495,935           |            |   | $         | 639,358     |          
|                                                |                                                                                                                                       |                                                         |           |                   |            |   |           |            
|Noncash investing and financing
    activities: |                                                                                                                                       |                                                         |           |                   |            |   |           |            
|                                                | Sale of real property in exchange for note
    receivable                                                                             |                                                         | $         |                  |            |   | $         | 812,500     |          
|                                                |                                                                                                                                       |                                                         |           |                   |            |   |           |            
|                                                | Acquisition of real properties in exchange for
    notes payable                                                                      |                                                         | $         |                  |            |   | $         | 4,109,644   |          
|                                                |                                                                                                                                       |                                                         |           |                   |            |   |           |            
|                                                | Exchange of mortgage loan for note receivable                                                                                         |                                                         | $         |                  |            |   | $         | 940,710     |          
|                                                |                                                                                                                                       |                                                         |           |                   |            |   |           |            
|                                                | Spin-off of L.L. Bradford and Company                                                                                                 |                                                         | $         |                  |            |   | $         | 572,147     |          
|                                                |                                                                                                                                       |                                                         |           |                   |            |   |           |            
|                                                | Issuance of 500,000 shares of preferred stock in
    satisfaction of note payable                                                     |                                                         | $         |                  |            |   | $         | 5,000,000   |          
|                                                |                                                                                                                                       |                                                         |           |                   |            |   |           |            
|                                                | Retirement of treasury stock                                                                                                          |                                                         | $         | 2,518,714         |            |   | $         | 4,147,445   |          
|                                                |                                                                                                                                       |                                                         |           |                   |            |   |           |            
|                                                | Dividends declared on preferred stock                                                                                                 |                                                         | $         | 75,650            |            |   | $         | 112,324     |          
|                                                |                                                                                                                                       |                                                         |           |                   |            |   |           |            
|                                                | Exchange of note receivable for acquisition of
    treasury stock                                                                     |                                                         | $         |                  |            |   | $         | 940,710     |          
|                                                |                                                                                                                                       |                                                         |           |                   |            |   |           |            
|                                                | Notes payable assumed through foreclosure                                                                                             |                                                         | $         | 2,714,181         |            |   | $         |            |          
|                                                |                                                                                                                                       |                                                         |           |                   |            |   |           |            
|                                                | Investments in real estate held for sale acquired
    through foreclosure                                                             |                                                         | $         | 5,900,059         |            |   | $         |            |          
|                                                |                                                                                                                                       |                                                         |           |                   |            |   |           |            
|                                                | Purchase of rights to receive proceeds related to
    loan guarantee in exchange for investments in mortgage loans on
    real estate |                                                         | $         | 4,798,926         |            |   | $         |            |          
|                                                |                                                                                                                                       |                                                         |           |                   |            |   |           |            

The accompanying notes are an integral part of
these statements.

7



---



##### 



VESTIN GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

December 31, 2002


Note A  Organization and Summary of
Significant Accounting Policies



| |             
| | ------------
| | Organization

Vestin Group, Inc. (Vestin Group or
the Company) was incorporated in the State of
Delaware on June 2, 1998. The Company conducts its
operations primarily through Vestin Mortgage, Inc., a wholly
owned subsidiary (Vestin Mortgage). Vestin Mortgage
operates as a mortgage broker licensed in the state of Nevada.
Vestin Mortgage is engaged in the brokerage and placement of
commercial loans secured by real property. Vestin
Mortgages primary operations consist of the brokerage and
placement of commercial, construction, acquisition and
development, land, and residential mortgage loans secured by
real property as well as managing two publicly held funds,
Vestin Fund I, LLC (Fund I) and Vestin
Fund II, LLC (Fund II), which invest in
mortgage loans. Vestin Mortgage as manager of Fund I and
Fund II will be referred to as Managing Member.

The Company operates in one business segment.



| |                            
| | ---------------------------
| | Principles of Consolidation

The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. All
significant inter-company transactions and balances have been
eliminated in consolidation.



| |                 
| | ----------------
| | Use of Estimates

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from those estimates.



| |                    
| | -------------------
| | Revenue Recognition

The Company recognizes revenue primarily from
loan placement fees, loan servicing fees and extension fees.
Loan placement fees are recorded as revenue at the close of
escrow and reduced by direct loan placement costs on loans which
the Company has not recorded as investments in mortgage loans on
its financial statements. Typically, deeds of trust related to
loans placed are initially in the Companys name to
facilitate the loan placement process. Upon arranging a funding
source for such loans, the deeds of trust are assigned to the
respective investor (i.e., individual investors, Fund I, and
Fund II). Loan servicing fees are recorded as revenue when such
services are rendered. Servicing fees represent the interest
spread between what is paid to the investor and what the
borrower pays for the use of the money, which can vary from loan
to loan. Servicing costs approximate servicing fees and
therefore, the Company has not recognized a servicing asset or
liability. Extension fees are generally recorded as revenue at
the extension grant date. Significantly, all loans originated by
the Company are transferred to Fund I and Fund II
within two weeks since the Companys source of funding for
such loans came directly from these Funds. Additionally, loans
transferred to Fund I and Fund II do not contain any
contracts, agreements or commitments for right of
refusal associated with the ownership of loans transferred
to these Funds. Accordingly, sale or transfer of mortgage loans
to affiliate parties is based on the carrying basis, which
approximates fair value of such loans at the sale or transfer
date.

Interest income on investments in mortgage loans
on real estate is accrued by the effective interest method. The
Company does not recognize interest income from loans once they
are determined to be impaired. A loan is impaired when, based on
current information and events, it is probable that the Company
will be unable to collect all amounts due according to the
contractual terms of the loan agreement or when the payment of
interest is 90 days past due.

8



---



##### 



VESTIN GROUP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                             
| | --------------------------------------------
| | Investments in Real Estate Held for
    Sale

Investments in real estate held for sale include
real estate acquired through foreclosure and are carried at the
lower of the recorded amount, inclusive of any senior
indebtedness, or the propertys estimated fair value, less
estimated costs to sell.



| |                              
| | -----------------------------
| | Investments in Mortgage Loans

Investments in mortgage loans are secured by
trust deeds and mortgages. Generally, all of the Companys
mortgage loans require interest only payments with a balloon
payment of the principal at maturity. The Company has both the
intent and ability to hold mortgage loans until maturity and
therefore, mortgage loans are classified and accounted for as
held for investment and are carried at cost. Loans originated
and transferred to Fund I and Fund II which were
originally held by the Company are accounted for at the
acquisition cost and no gain or loss is recognized since the
Company is acting as an agent for these Funds. Loan to value
ratios are based on appraisals obtained at the time of loan
origination and may not reflect subsequent changes in value
estimates. Such appraisals are generally dated within
12 months of the date of loan origination. The appraisals
may be for the current estimate of the as-if
developed value of the property, and which approximates
the post-construction value of the collateralized property
assuming that such property is developed. As-if developed values
on raw land loans or acquisition and development loans often
dramatically exceed the immediate sales value and may include
anticipated zoning changes, selection by a purchaser against
multiple alternatives, and successful development by the
purchaser; upon which development is dependent on availability
of financing. As most of the appraisals will be prepared on an
as-if developed basis, if a loan goes into default prior to any
development of a project, the market value of the property may
be substantially less than the appraised value. As a result,
there may be less security than anticipated at the time the loan
was originally made. If there is less security and a default
occurs, the Company may not recover the full amount of the loan.



| |                          
| | -------------------------
| | Allowance for Loan Losses

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



| |                       
| | ----------------------
| | Property and Equipment

Property and equipment are stated at cost.
Depreciation is provided principally on the straight-line method
over the estimated useful lives of the assets ranging from three
to seven years. The cost of repairs and maintenance is charged
to expense as incurred.



| |                  
| | -----------------
| | Advertising Costs

Advertising costs are expensed as incurred and
were approximately $3,015,000 and $4,220,000 for the years ended
December 31, 2002 and 2001, respectively.

9



---



##### 



VESTIN GROUP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |             
| | ------------
| | Income Taxes

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



| |                                    
| | -----------------------------------
| | Impairment of Long-Lived
    Assets

The Company continually monitors events and
changes in circumstances that could indicate carrying amounts of
long-lived assets may not be recoverable. When such events or
changes in circumstances are present, the Company assesses the
recoverability of long-lived assets by determining whether the
carrying value of such assets will be recovered through
undiscounted expected future cash flows. If the total of the
future cash flows is less than the carrying amount of those
assets, the Company recognizes an impairment loss based on the
excess of the carrying amount over the estimated fair value of
the assets. Assets to be disposed of are reported at the lower
of the carrying amount or the fair value less costs to sell.



| |                         
| | ------------------------
| | Stock-Based Compensation

The Company applies Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock
Issued to Employees, and Related Interpretations, in accounting
for stock options issued to employees. Under APB No. 25,
employee compensation cost is recognized when estimated fair
value of the underlying stock on date of the grant exceeds
exercise price of the stock option. For stock options and
warrants issued to non-employees, the Company applies SFAS
No. 123, Accounting for Stock-Based Compensation, which
requires the recognition of compensation cost based upon the
fair value of stock options at the grant date using the
Black-Scholes option pricing model.

The following table represents the effect on net
loss and loss per share if the Company had applied the fair
value based method and recognition provisions of Statement of
Financial Accounting Standards (SFAS No. 123),
Accounting for Stock-Based Compensation, to stock-based employee
compensation:

|                                                                                                                                                     |                                         |      |            |      |  |   |            |      | 
|---------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------- | ---- | ---------- | ---- |  | - | ---------- | ---- | 
|                                                                                                                                                     |                                         | 2002 |            | 2001
|                                                                                                                                                     |                                         |      |            |     
|Net income, as reported                                                                                                                              |                                         | $    | 3,831,838  |      |  | $ | 1,825,221  |     
|Deduct: Total stock-based employee compensation
    expense determined under fair value based methods for all
    awards, net of related tax effects |                                         |      | (1,900,730 | )    |  |   | (1,427,117 | )   
|                                                                                                                                                     |                                         |      |            |      |  |   |            |     
|Pro forma net income                                                                                                                                 |                                         | $    | 1,931,108  |      |  | $ | 398,104    |     
|                                                                                                                                                     |                                         |      |            |      |  |   |            |     
|Net income per common share Basic earnings per
    share, as reported                                                                                |                                         | $    | 0.54       |      |  | $ | 0.29       |     
|                                                                                                                                                     |                                         |      |            |      |  |   |            |     
|                                                                                                                                                     | Diluted earnings per share, as reported |      | $          | 0.34 |  |   | $          | 0.26 | 
|                                                                                                                                                     |                                         |      |            |      |  |   |            |     
|                                                                                                                                                     | Basic earnings per share, pro forma     |      | $          | 0.18 |  |   | $          | 0.05 | 
|                                                                                                                                                     |                                         |      |            |      |  |   |            |     
|                                                                                                                                                     | Diluted earnings per share, pro forma   |      | $          | 0.12 |  |   | $          | 0.05 | 
|                                                                                                                                                     |                                         |      |            |      |  |   |            |     

As required, the pro forma disclosures above
include options granted since February 26, 1998
(Inception). Consequently, the effects of applying SFAS
No. 123 for providing pro forma disclosures may not be
representative of the effects on reported net income for future
years until all options outstanding are included in the pro
forma disclosures.

10



---



##### 



VESTIN GROUP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                     
| | ------------------------------------
| | Recent Accounting
    Pronouncements

In December 2002, SFAS No. 148, Accounting
for Stock-Based Compensation  Transition and
Disclosure, (SFAS No. 148) was issued. This
Statement amends FASB Statement No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods of
transition for an entity that voluntarily changes to the fair
value based method of accounting for stock-based employee
compensation. In addition, this Statement amends the disclosure
requirements of SFAS No. 123 and APB Opinion No. 28,
Interim Financial Reporting, to require prominent
disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee
compensation and the effect of the method used on reported
results. SFAS No. 148 is effective for fiscal years ending
after December 15, 2002 and for interim periods beginning
after December 15, 2002. The adoption of the provisions of
SFAS No. 148 did not have a material impact on the
Companys results of operations, financial position or cash
flows.

In November 2002, the Financial Accounting
Standards Board issued FASB Interpretation No. 45
(FIN No. 45), Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others an interpretation of SFAS
No. 5, 57, and 107 and rescission of FASB Interpretation
No. 34, was issued. FIN No. 45 clarifies the
requirements of SFAS No. 5, Accounting for Contingencies,
relating to a guarantors accounting for, and disclosure
of, the issuance of certain types of guarantees. The adoption of
the provisions of FIN No. 45 did not have a material impact
on the Companys results of operations, financial position
or cash flows.

In January 2003, the FASB issued Interpretation
No. 46, Consolidation of Variable Interest
Entities (FIN 46), which addresses
consolidation by business enterprises of variable interest
entities (VIEs). The accounting provisions and
expanded disclosure requirements for VIEs are effective at
inception for VIEs created after January 31, 2003, and are
effective for reporting periods beginning after June 15,
2003 for VIEs created prior to February 1, 2003. An entity
is subject to consolidation according to the provisions of
FIN 46 if, by design, either (i) the total equity
investment at risk is not sufficient to permit the entity to
finance its activities without additional subordinated financial
support from other parties, or (ii) as a group, the holders
of the equity investment at risk lack: (a) direct or
indirect ability to make decisions about an entitys
activities (b) the obligation to absorb the expected
losses of the entity if they occur; or (c) the right to
receive the expected residual returns of the entity if they
occur. In general, FIN 46 will require a VIE to be
consolidated when an enterprise has a variable interest that
will absorb a majority of the VIEs expected losses or
receive a majority of the VIEs expected residual return.
Implementation had no effect on results of operations for the
first quarter of 2003. The Company continues to evaluate its
relationships and interest in entities that may be considered
VIEs. The impact of adopting FIN 46 on the Consolidated
Financial Statements is still being reviewed.

Note B  Accounts
Receivable

The Company services loans which have been
arranged for the investor parties through a servicing agreement.
Accounts receivable represent extension, interest and loan
placement fees earned but not yet received. As of
December 31, 2002, accounts receivable totaling $5,234,469
is net of allowance for doubtful accounts of $160,995.

Note C  Notes Receivable

Notes receivable consist of the following:

Promissory note totaling $400,000 related to
proceeds from properties sold by the Company. This note matures
in December, 2006, bears interest at 8%, and is secured by real
estate. Promissory note totaling $300,000 related to proceeds
from properties sold by the Company. This note matures in
October, 2003, bears interest at 10.5%, and is secured by real
estate.

11



---



##### 



VESTIN GROUP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note D  Investment in Mortgage
Loans on Real Estate

At December 31, 2002, the Companys
investments in mortgage loans had maturity dates ranging from
January 1999 through June 2006. The Company had approximately
$712,000 in loans that were greater than 90 days past due
on interest or past maturity at December 31, 2002. As of
December 31, 2002, all other mortgage loans payments were
current and performing according to their terms. Management has
evaluated the collectibility of the loans in light of the types
and dollar amounts of loans in the portfolio, adverse situations
that may affect the borrowers ability to repay, prevailing
economic conditions and the underlying collateral securing the
loan and, therefore, believes that the allowance for loan losses
of $80,000 as of December 31, 2002 is sufficient.

Note E  Investment in Real Estate
Held For Sale

At December 31, 2002, the Company had ten
properties totaling $5,980,509, which were acquired through
foreclosure and recorded as investments in real estate held for
sale and secure specific payables as discussed in Note H. Such
investments in real estate held for sale are recorded at the
lower of cost or fair value less costs to sell. It is not the
Companys intent to invest in or own real estate.

Note F  Property and
Equipment

Property and equipment consists of the following
as of December 31, 2002:

|                               |  |   |          |  
|------------------------------ |  | - | -------- | -
|Furniture and fixtures         |  | $ | 102,176  |  
|Computers and equipment        |  |   | 448,363  |  
|Real estate                    |  |   | 293,774  |  
|Leasehold improvements         |  |   | 89,174   |  
|                               |  |   |          |  
|                               |  |   | 933,487  |  
|Less: Accumulated depreciation |  |   | (214,374 | )
|                               |  |   |          |  
|Total property and equipment   |  | $ | 719,113  |  
|                               |  |   |          |  

Note G  Notes Payable

Notes payable totaling $151,003 as of
December 31, 2002, consists of promissory notes to various
parties related to foreclosed real estate properties (developed
parcels of land) during 2002. The notes are collateralized by
the foreclosed real estate property. Since the Company acquired
the properties through foreclosure, it is not required and does
not intend to accrue or pay interest on these notes.

Note H  Notes Payable-Related
Party

Notes payable  related party totaling
$1,901,428 as of December 31, 2002, consists of the
following:

Note payable to a company solely owned by the
Companys Chief Executive Officer totaling $158,000 related
to developed parcels of land. The note is collateralized by the
real estate property. Since the Company acquired the properties
through foreclosure, it is not required and does not intend to
accrue or pay interest on this note.

Note payable to an entity controlled by a company
owned by the Companys Chief Executive Officer totaling
$569,061 related to vacant land. The note is collateralized by
the real estate property. Since the Company acquired the
property through foreclosure, it is not required and does not
intend to accrue or pay interest on this note.

12



---



##### 



VESTIN GROUP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note payable to an entity controlled by a company
owned by the Companys Chief Executive Officer totaling
$1,174,367 related to vacant land. The note is collateralized by
the real estate property. Since the Company acquired the
property through foreclosure, it is not required and does not
intend to accrue or pay interest on this note.



|         |                
|-------- | ---------------
|Note I  | Lines of Credit

The Company maintains a total of $7,000,000 in
revolving lines of credit with two financial institutions
specifically for interim funding of mortgage loans placed. As of
December 31, 2002, the balance on these lines of credit
totaled $7,000,000, which are payable in monthly installments of
interest only at the prime lending rate plus an additional rate
ranging from 1.0% to 2.0% (prime lending rate of 4.25% at
December 31, 2002). However, one of these lines of credit
totaling $2,000,000 has an interest rate floor of 7.5%. These
lines of credit are guaranteed by the Companys Chief
Executive Officer and are secured by the deeds of trust on the
property being advanced against. Both lines of credit expire in
June 2003. The Company intends to renew only the $2,000,000 line
of credit after its expiration. The Company is in compliance
with all the covenants on these lines of credit as of
December 31, 2002.



|         |                 
|-------- | ----------------
|Note J  | Credit Agreement

The Company has entered into a credit agreement
with a financial institution that maintains non-interest bearing
trust funds held on behalf of the investors and other funds of
the Company. The credit agreement allows the Company to borrow
funds up to the amount held in the trust accounts and other
funds held at the institution at a rate of 1% and invest those
funds in commercial paper (securities), which are generally
one-day sweep accounts. The Company has provided the financial
institution with a security interest in the securities and, at
all times, the securities remain in the financial
institutions custody and control. The balance drawn down
upon the credit agreement was $-0- at December 31, 2002.



|         |               
|-------- | --------------
|Note K  | Trust Accounts

The Company manages certain trust assets
including cash and receivables on behalf of the investors. The
cash is held at a financial institution, and the Company records
and reconciles the receivables from borrowers. At
December 31, 2002, the cash held in trust approximated
$7,605,662 and the trust receivable was $1,277,044. The related
trust liability was $8,882,706 at December 31, 2002. The
trust assets and liabilities are not recorded on the balance
sheet of the Company at December 31, 2002.



|         |                          
|-------- | -------------------------
|Note L  | Loans Serviced for Others

The Company services loans for others that were
originated by the Company, which are not shown on the balance
sheet. The face amount of these loans at December 31, 2002
approximated $678,439,707.



|         |                           
|-------- | --------------------------
|Note M  | Related Party Transactions

Notes receivable  related party
consists of a note receivable of approximately $118,000 from
Donovan Jacobs, an employee of the Company, dated April 19,
2000. The note is unsecured, matures on April 19, 2004 and
bears interest at 10%. Interest only payments are made on a
semi-annual basis with the principal and any accrued interest
due as a lump sum at maturity. As of December 31, 2002, the
balance on this note was approximately $118,000.

Due from related parties totaling $1,803,112 are
comprised of the following as of December 31, 2002:

Amounts due from Fund I totaling $530,873 relate
to management fees, earnings on units invested in Fund I, and
reimbursable expenses. Amounts due from Fund I bear no interest
and are due on demand.

13



---



##### 



VESTIN GROUP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Amounts due from Fund II totaling $1,247,156
relate to management fees, earnings on units invested in Fund
II, and reimbursable expenses. Amounts due from Fund II bear no
interest and are due on demand.

Amounts due from inVestin Nevada, Inc. totaling
$25,083 relate to advances made for start-up costs. Amounts due
from inVestin Nevada, Inc. bear no interest and are due on
demand. In October 2002, Vestin Mortgage entered into an
agreement to provide management services to inVestin Nevada,
Inc., a corporation wholly-owned by the Chief Executive Officer
of the Company that will seek to raise $100,000,000 through the
sale of subordinated notes to Nevada residents. During February
2003, this balance was paid off in full.

On July 2, 2001, Vestin Mortgage brokered a
loan to Arroyo Heights Golf Club (Arroyo) for
$10,000,000. The loan was funded by Fund I and Fund II
(together, the Funds) and was guaranteed by three
guarantors. Subsequently, Arroyo defaulted on the loan, and the
Funds foreclosed and took title to the collateral. Based on an
appraisal at the conclusion of the foreclosure, the Funds
determined that there was a $4.8 million shortfall between
the carrying amount of the loan and the value of the collateral.
The Funds filed litigation to recover the shortfall from the
individuals who had guaranteed the payment of the loan. Vestin
Mortgage purchased the rights to collect the proceeds of the
guarantee from the Funds on December 31, 2002 in exchange
for investments in mortgage loans on real estate valued at
$4.8 million. Vestin Mortgage did not recognize any gain or
loss on the sale to the Funds.

Vestin Mortgage assumed control of the litigation
and filed a motion for summary judgment against the loan
guarantors, which was denied by the Nevada State District Court
on May 2, 2003. Trial on this matter is scheduled for
January of 2004. Vestin Mortgage believes that it will prevail
in the litigation against the guarantors and that at least one
of the three guarantors has sufficient assets to satisfy a
judgment of $4.8 million plus interest. In evaluating the
litigation, however, the Companys management and its legal
counsel cannot provide any assurances that the Company would
obtain a favorable judgment and would succeed in enforcing and
collecting on any such judgment. Therefore, the Company provided
a valuation allowance for the entire amount paid for the rights
to receive the proceeds of the judgment and recorded the
allowance as an expense in 2002. This provision for allowance is
reflected in General and Administrative expenses on the
Consolidated Statement of Income for the year ended
December 31, 2002.

Other investments  related
parties consists of the Companys investments in units of
Fund I and Fund II totaling $1.0 million and
$1.1 million, respectively, as of December 31, 2002.

During the years ended December 31, 2002 and
2001, the Company paid $509,283 and $54,200, respectively, for
legal fees to Berkley, Gordon, Levine,
Goldstein & Garfinkel, LLP (Berkley
Gordon), a law firm in which the Executive Vice President
of Legal and Corporate Affairs of the Company has an equity
ownership interest.

The Companys President and Tax Manager are
equity owners in L.L. Bradford & Company, LLC, a
Certified Public Accounting firm (L.L. Bradford).
During 2002, $150,000 was paid to the certain personnel of L.L.
Bradford for services provided to the Company. Also, During
2002, L.L. Bradfords staff assisted in the preparation of
the Companys financial reports and provided bookkeeping
services at no charge to the Company.

The Company recognizes an annual management fee
up to 0.25% of the aggregate capital contributions to the Funds.
The Company may, in its sole discretion, waive its management
fee. For the year ended December 31, 2002, the Company
recorded management fees of approximately $249,000 from Fund I
and $586,000 from Fund II as compared to $131,000 from Fund I
and $87,000 from Fund II for the same period in 2001. In
connection with the organization of the Funds, the Company
received approximately 100,000 Units in Fund I for expenses paid
by the Company to unaffiliated third parties in connection with
the offering of units in Fund I, and 110,000 units from Fund II
for such offering expenses which is the maximum amount allowed
for such expenses under the Operating Agreement of Fund II.

14



---



##### 



VESTIN GROUP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

During the year ended December 31, 2002, the
Company sold $24.2 million in loans to the Funds pursuant
to the terms of the Operating Agreements of the Funds which
permit the Funds to acquire loans from the Company if the loans
were acquired to facilitate their acquisition by the Funds and
provided that the price paid is no greater than the
Companys cost. During the year ended December 31,
2002, the Company also purchased $23.3 million in loans
from the Funds.

In September 2002, the Company entered into a one
year Aircraft Usage Agreement with C5, LLC, a company
wholly-owned by the Companys Chief Executive Officer. The
agreement is to allow the Company to use an airplane on a
preferred basis over any other proposed user. The Company is
required to pay a monthly fee based on an hourly rate of $3,000
per hour for the first 10 hours and $2,500 per hour for each
hour thereafter. The Company is required to make a minimum
monthly payment equivalent to 16 hours of usage ($45,000).
The agreement automatically renews for successive periods of one
year each unless terminated by either party no less than thirty
days prior to the end of the term.

During 2002, the Company paid approximately
$232,000 to a Company owned jointly by Michael Shustek, the
Companys Chief Executive Officer, and William Si Redd, a
stockholder of the Company, related to the use of an airplane
for company travel.

The Company had an investment in the amount of
$153,810 in a mortgage loan to an entity which is 100% owned by
the Companys Chief Executive Officer (CEO).
During December 2002, a sale of the property securing the
investment was consummated. As of December 31, 2002, the
Company recorded a receivable for the proceeds of the loan
payoff which was fully collected in January 2003.



|         |             
|-------- | ------------
|Note N  | Income Taxes

The components of the provision
(benefit) for income taxes are as follows at
December 31:

|         |  |      |           |      |  |   |           |  
|-------- |  | ---- | --------- | ---- |  | - | --------- | -
|         |  | 2002 |           | 2001
|         |  |      |           |     
|Current  |  | $    | 2,096,828 |      |  | $ | 1,475,246 |  
|Deferred |  |      | 69,832    |      |  |   | (254,965  | )
|         |  |      |           |      |  |   |           |  
|         |  | $    | 2,166,660 |      |  | $ | 1,220,281 |  
|         |  |      |           |      |  |   |           |  

Deferred taxes result from temporary differences
in the recognition of certain revenue and expense items for
income tax and financial reporting purposes. The significant
components of the Companys deferred taxes as of
December 31 are as follows:

|                        |                                 |      |         |         |  |   |         |         | 
|----------------------- | ------------------------------- | ---- | ------- | ------- |  | - | ------- | ------- | 
|                        |                                 | 2002 |         | 2001   
|                        |                                 |      |         |        
|Deferred tax assets:    |                                 |      |         |         |  |   |         |        
|                        | Allowance for doubtful accounts |      | $       | 27,448  |  |   | $       | 53,465  | 
|                        | Unrealized loss on investments  |      |         |        |  |   |         | 84,240  | 
|                        | Spokesperson stock warrants     |      |         | 315,623 |  |   |         | 315,623 | 
|                        | Officer salaries                |      |         | 25,295  |  |   |         | 12,070  | 
|                        | Allowance for loan losses       |      |         | 27,200  |  |   |         |        | 
|                        |                                 |      |         |         |  |   |         |        
|Net deferred tax assets |                                 | $    | 395,566 |         |  | $ | 465,398 |        
|                        |                                 |      |         |         |  |   |         |        

Deferred tax assets are included in other assets
in the accompanying Consolidated Balance Sheet.

15



---



##### 



VESTIN GROUP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The reconciliation of the statutory federal rate
to the Companys effective income tax rate is as follows:

|                        |  |      |           |      |  |   |           | 
|----------------------- |  | ---- | --------- | ---- |  | - | --------- | 
|                        |  | 2002 |           | 2001
|                        |  |      |           |     
|Statutory tax provision |  | $    | 2,039,490 |      |  | $ | 1,035,471 | 
|Non-deductible expenses |  |      | 127,170   |      |  |   | 184,810   | 
|                        |  |      |           |      |  |   |           | 
|                        |  | $    | 2,166,660 |      |  | $ | 1,220,281 | 
|                        |  |      |           |      |  |   |           | 



|         |                                     
|-------- | ------------------------------------
|Note O  | Earnings (Loss) Per Common
    Share

Basic earnings per common share is calculated by
dividing net income by the weighted average number of common
share outstanding during the period. Diluted earnings per common
share is calculated by dividing net income by the sum of the
weighted average number of common shares outstanding, plus all
additional common shares that would have been outstanding if
potentially dilutive securities or common stock equivalents had
been issued. The following table reconciles the weighted average
number of shares used in the earnings per share calculations as
of December 31, 2002 and 2001:

|                                |                                                                      |                                      |           |               |  |           |  |           |  |  |   |      | 
|------------------------------- | -------------------------------------------------------------------- | ------------------------------------ | --------- | ------------- |  | --------- |  | --------- |  |  | - | ---- | 
|                                |                                                                      |                                     
|                                |                                                                      | For the Year Ended December 31, 2002
|                                |                                                                      |                                     
|                                |                                                                      | Income                               |           | Shares        |  | Per-Share
|                                |                                                                      | (Numerator)                          |           | (Denominator) |  | Amount   
|                                |                                                                      |                                      |           |               |  |          
|Net income:                     |                                                                      | $                                    | 3,831,838 |               |  |           |  |           |  |  |   |     
|Less: Preferred stock dividends |                                                                      |                                      | (933,800  | )             |  |           |  |           |  |  |   |     
|Basic EPS:                      |                                                                      |                                      |           |               |  |           |  |           |  |  |   |     
|                                | Income available to common stockholders                              |                                      |           | 2,898,038     |  |           |  | 5,396,363 |  |  | $ | 0.54 | 
|                                |                                                                      |                                      |           |               |  |           |  |           |  |  |   |     
|Effect of dilutive securities:  |                                                                      |                                      |           |               |  |           |  |           |  |  |   |     
|                                | Options/warrants                                                     |                                      |           |              |  |           |  | 3,101,995 |  |  |   |     | 
|Diluted EPS:                    |                                                                      |                                      |           |               |  |           |  |           |  |  |   |     
|                                |                                                                      |                                      |           |               |  |           |  |           |  |  |   |     
|                                | Income available to common stockholders plus
    assumed conversions |                                      | $         | 2,898,038     |  |           |  | 8,498,358 |  |  | $ | 0.34 | 
|                                |                                                                      |                                      |           |               |  |           |  |           |  |  |   |     

|                                |                                                                      |                                      |           |               |  |           |  |           |  |  |   |      | 
|------------------------------- | -------------------------------------------------------------------- | ------------------------------------ | --------- | ------------- |  | --------- |  | --------- |  |  | - | ---- | 
|                                |                                                                      |                                     
|                                |                                                                      | For the Year Ended December 31, 2001
|                                |                                                                      |                                     
|                                |                                                                      | Income                               |           | Shares        |  | Per-Share
|                                |                                                                      | (Numerator)                          |           | (Denominator) |  | Amount   
|                                |                                                                      |                                      |           |               |  |          
|Net income:                     |                                                                      | $                                    | 1,825,221 |               |  |           |  |           |  |  |   |     
|Less: Preferred stock dividends |                                                                      |                                      | (75,731   | )             |  |           |  |           |  |  |   |     
|Basic EPS:                      |                                                                      |                                      |           |               |  |           |  |           |  |  |   |     
|                                | Income available to common stockholders                              |                                      |           | 1,749,490     |  |           |  | 5,985,701 |  |  | $ | 0.29 | 
|                                |                                                                      |                                      |           |               |  |           |  |           |  |  |   |     
|Effect of dilutive securities:  |                                                                      |                                      |           |               |  |           |  |           |  |  |   |     
|                                | Options/warrants                                                     |                                      |           |              |  |           |  | 808,933   |  |  |   |     | 
|Diluted EPS:                    |                                                                      |                                      |           |               |  |           |  |           |  |  |   |     
|                                |                                                                      |                                      |           |               |  |           |  |           |  |  |   |     
|                                | Income available to common stockholders plus
    assumed conversions |                                      | $         | 1,749,490     |  |           |  | 6,794,634 |  |  | $ | 0.26 | 
|                                |                                                                      |                                      |           |               |  |           |  |           |  |  |   |     

There were no securities considered antidilutive
in the computation of diluted earnings per share.

16



---



##### 



VESTIN GROUP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|         |                      
|-------- | ---------------------
|Note P  | Employee Benefit Plan



| |            
| | -----------
| | 401(k) Plan

The Company maintains a 401(k) Savings Plan which
covers substantially all full-time employees. Participants may
make tax-deferred contributions of up to 15% of annual
compensation (subject to other limitations specified by the
Internal Revenue Code). The Company matches employee
contributions dollar for dollar up to 7% of compensation. The
Company contributed approximately $161,000 and $110,000 to the
plan for the years ended December 31, 2002 and 2001,
respectively.

Note Q  Stockholders
Equity



| |                
| | ---------------
| | Preferred Stock

During fiscal year 2001, the Company issued
937,800 shares of Series A Convertible Preferred Stock
(Preferred Stock) at $10.00 per share for a total of
$9,378,000. This consisted of $4,378,000 in cash and $5,000,000
in exchange of a note payable. The holder of the Preferred Stock
is entitled to receive, when, as and if declared by the Board of
Directors of the Company, out of any funds legally available
therefore, dividends equal to ten percent (10%) of the original
issue price prior and in preference to any declaration or
payment of any dividends on the Companys common stock; and
convertible into the Companys common stock, at the option
of the holder thereof, at anytime after the date of issuance at
a conversion price of $6.08 per share of common stock. The
Preferred Stock is redeemable at the option of the Company at a
redemption price of eleven dollars ($11.00) per share. On
March 29, 2002, the Company amended the Preferred Stock
agreement to allow the holders of the Preferred Stock to be
entitled to receive, when, as and if declared by the Board of
Directors, dividends in an amount to be determined by the Board
of Directors, but not less than 0.83% of the original issue
price per annum and not more than 10% of the original issued
price per annum, prior and in preference to any declaration or
payment of any dividends on the Common Stock. Dividends on the
Series A Preferred may be paid in cash or in Common Stock
and shall not be cumulative.



| |                       
| | ----------------------
| | Common Stock Dividends

During fiscal year 2002, the Company declared and
paid cash dividends approximating $1,943,000 to common
stockholders.



| |              
| | -------------
| | Stock Options

During fiscal year 2002, the Company granted
stock options and warrants for 1,140,000 shares of common
stock to the chief executive officer and other eligible
employees. The stock options granted to eligible employees
totaling 640,000 have a term of 10 years from the date of
grant and vest equally over a three year period beginning one
year after the date of grant. The stock warrants granted to the
chief executive officer totaling 500,000 have a term of
10 years from the date of grant and vest entirely on the
date of grant.

As of December 31, 2002, outstanding stock
options and warrants totaled 2,714,000.

17



---



##### 



VESTIN GROUP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                        
| | ---------------------------------------
| | Stock Options and Warrants
    Activity

The following table summarizes the Companys
employee and directors stock options and warrants activity:

|                                       |  |           |           |          |  |   |      | 
|-------------------------------------- |  | --------- | --------- | -------- |  | - | ---- | 
|                                       |  |           |           | Weighted
|                                       |  |           |           | Average 
|                                       |  | Number Of |           | Exercise
|                                       |  | Shares    |           | Price   
|                                       |  |           |           |         
|Balance, January 1, 2001               |  |           | 961,800   |          |  | $ | 4.00 | 
|Options and warrants granted           |  |           | 636,700   |          |  |   | 5.05 | 
|Options and warrants exercised         |  |           |          |          |  |   |     | 
|Options and warrants forfeited/expired |  |           | 9,500     |          |  |   | 4.00 | 
|                                       |  |           |           |          |  |   |      | 
|Balance, January 1, 2002               |  |           | 1,589,000 |          |  |   | 4.45 | 
|Options and warrants granted           |  |           | 1,140,000 |          |  |   | 7.02 | 
|Options and warrants exercised         |  |           |          |          |  |   |     | 
|Options and warrants forfeited/expired |  |           | 15,000    |          |  |   | 6.24 | 
|                                       |  |           |           |          |  |   |      | 
|Balance, December 31, 2002             |  |           | 2,714,000 |          |  | $ | 5.36 | 
|                                       |  |           |           |          |  |   |      | 

The following table summarizes information about
options and warrants outstanding and exercisable for employees
and directors at December 31, 2002 and 2001:

|                  |  |             |           |                   |  |          |            |             |  |          |      |  |  |  |         |  |  |   |      | 
|----------------- |  | ----------- | --------- | ----------------- |  | -------- | ---------- | ----------- |  | -------- | ---- |  |  |  | ------- |  |  | - | ---- | 
|                  |  |             |           |                  
|Shares Underlying |  |             |           | Shares Underlying
|Options/Warrants  |  |             |           | Options/Warrants 
|Outstanding       |  |             |           | Exercisable      
|                  |  |             |           |                  
|                  |  | Shares      |           | Weighted          |  |          |            | Shares      |  |         
|                  |  | Underlying  |           | Average           |  | Weighted |            | Underlying  |  | Weighted
|                  |  | Options/    |           | Remaining         |  | Average  |            | Options/    |  | Average 
|Exercise          |  | Warrants    |           | Contractual       |  | Exercise |            | Warrants    |  | Exercise
|Prices            |  | Outstanding |           | Life              |  | Price    |            | Exercisable |  | Price   
|                  |  |             |           |                   |  |          |            |             |  |         
|$2.81             |  |             | 15,000    |                   |  |          | 8.00 years |             |  | $        | 2.81 |  |  |  | 10,000  |  |  | $ | 2.81 | 
|$4.00             |  |             | 967,300   |                   |  |          | 7.83 years |             |  | $        | 4.00 |  |  |  | 952,300 |  |  | $ | 4.00 | 
|$5.07             |  |             | 609,700   |                   |  |          | 8.27 years |             |  | $        | 5.07 |  |  |  | 604,700 |  |  | $ | 5.07 | 
|$7.02             |  |             | 1,137,000 |                   |  |          | 9.92 years |             |  | $        | 7.02 |  |  |  | 500,000 |  |  | $ | 7.02 | 

Pro forma information regarding net income and
net income per share, as disclosed in Note A, has been
determined as if the Company had accounted for its Employee
stock-based compensation plans and other stock options under the
fair value method of SFAS No. 123. The fair value of each
option and warrant grant are estimated on the date of grant
using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants under the fixed
option and warrant plans:

|                                 |  |      |       |      |  |  |       |  
|-------------------------------- |  | ---- | ----- | ---- |  |  | ----- | -
|                                 |  | 2002 |       | 2001
|                                 |  |      |       |     
|Average risk-free interest rates |  |      | 2.58  | %    |  |  | 3.41  | %
|Average expected life (in years) |  |      | 3     |      |  |  | 3     |  
|Volatility                       |  |      | 74.50 | %    |  |  | 84.22 | %
|Dividend yield                   |  |      | 0.26  | %    |  |  | 1.43  | %

The Black-Scholes option valuation model was
developed for use in estimating the fair value of short-term
traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the
input of highly subjective assumptions including expected stock
price volatility. Because the Companys Employee stock
options have characteristics significantly different from those
of traded options and because changes in the subjective input
assumptions can materially affect the fair value estimate, in

18



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##### 



VESTIN GROUP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

managements opinion the existing models do
not necessarily provide a reliable single measure of the fair
value of its employee stock options. During 2002 and 2001, there
were no options granted with an exercise price below the fair
value of the underlying stock at the grant date.

The weighted average fair value of options and
warrants granted with exercise prices at the current fair value
of the underlying stock during 2002 and 2001 was approximately
$3.51 and $2.76 per option, respectively.



| |               
| | --------------
| | Stock Warrants

Spokesperson Stock Warrants  In
January 2001, the Company consummated a Consulting Agreement
with Joe Namath, a National Football League Hall of Fame
inductee, to act as a spokesperson on behalf of the Company for
five years. In consideration, Mr. Namath will be
compensated in the amount of $1,000,000 cash annually and
received warrants to purchase 800,000 shares of the
Companys common stock at an exercise price of $0.01 and
warrants to purchase 400,000 shares of the Companys
common stock at an exercise price of $4.60. The
800,000 warrants vest immediately, and the
400,000 warrants vest within one year. The outstanding
warrants granted have a term of ten years from the date of
grant. The fair value of the warrants was estimated as of the
measurement date using the Black-Scholes option pricing model
with the following assumptions: dividend yield of 0.0%, expected
volatility of 54.51%, risk-free interest rate of 5.77% and an
expected holding period of five years. Based on these
assumptions, total compensation expense of the warrants granted
was approximately $4,650,000 and will be recognized over five
years, the length of the consulting agreement. Accordingly, the
Company recorded consulting expenses of approximately $930,000
for the year ended December 31, 2002. The following tables
summarize information about the Spokesperson Stock Warrants
activity during the year ended December 31, 2002:

|                           |                    |           |           |                |  |   |      |      | 
|-------------------------- | ------------------ | --------- | --------- | -------------- |  | - | ---- | ---- | 
|                           |                    |           |           | Weighted      
|                           |                    | Number of |           | Average       
|                           |                    | Warrants  |           | Exercise Price
|                           |                    |           |           |               
|Balance, January 1, 2001   |                    |           |          |                |  |   |     |     
|                           | Warrants granted   |           |           | 1,200,000      |  |   | $    | 1.54 | 
|                           | Warrants canceled  |           |           |               |  |   |      |     | 
|                           | Warrants expired   |           |           |               |  |   |      |     | 
|                           | Warrants exercised |           |           |               |  |   |      |     | 
|                           |                    |           |           |                |  |   |      |     
|Balance, December 31, 2001 |                    |           | 1,200,000 |                |  | $ | 1.54 |     
|                           | Warrants granted   |           |           |               |  |   |      |     | 
|                           | Warrants canceled  |           |           |               |  |   |      |     | 
|                           | Warrants expired   |           |           |               |  |   |      |     | 
|                           | Warrants exercised |           |           |               |  |   |      |     | 
|                           |                    |           |           |                |  |   |      |     
|Balance, December 31, 2002 |                    |           | 1,200,000 |                |  | $ | 1.54 |     

The Company estimates the fair value of stock
warrants granted to the Companys national spokesperson by
using the Black-Scholes option pricing-model with the following
assumptions used for grants in 2001 using specific grant dates;
no dividend yield; expected volatility of 54.51%; risk free
interest rates of 5.77%; and expected lives of 6 years for
all non-employee stock warrants. Total consulting expenses under
SFAS No. 123 relating to non-statutory stock options to be
recognize over the consulting contract period of five years will
approximate $4,650,000. Accordingly, the Company recorded
consulting expenses of approximately $930,000 for the year ended
December 31, 2001.

19



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##### 



VESTIN GROUP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                 |           |                     |  |                |           |          |  |            |      |  |  |   |      |  |  |   |      | 
|---------------- | --------- | ------------------- |  | -------------- | --------- | -------- |  | ---------- | ---- |  |  | - | ---- |  |  | - | ---- | 
|                 |           | Exercise Price      |  |                |           |          |  |           
|                 |           | Equals, Exceeds or  |  |                |           |          |  |           
|Number of        |           | is Less than Market |  | Weighted       |           |          |  | Weighted  
|Warrants Granted |           | Price of Stock on   |  | Average        |           | Exercise |  | Average   
|During 2002      |           | Grant Date          |  | Exercise Price |           | Price    |  | Fair Value
|                 |           |                     |  |                |           |          |  |           
|                 |          |                     |  |                | Equals    |          |  | $          |     |  |  | $ |     |  |  | $ |     | 
|                 | 400,000   |                     |  |                | Exceeds   |          |  |            | 4.60 |  |  |   | 4.60 |  |  |   | 2.81 | 
|                 | 800,000   |                     |  |                | Less than |          |  |            | 0.01 |  |  |   | 0.01 |  |  |   | 4.62 | 
|                 |           |                     |  |                |           |          |  |            |      |  |  |   |      |  |  |   |      | 
|                 | 1,200,000 |                     |  |                |           |          |  | $          | 1.54 |  |  |   |      |  |  | $ | 4.00 | 
|                 |           |                     |  |                |           |          |  |            |      |  |  |   |      |  |  |   |      | 

Consultant Warrants  During 2002, the
Company issued warrants to purchase 8,333 shares of common stock
to consultants, and as a result, the Company recorded $37,807 in
consulting expenses during 2002. The warrants have an exercise
price $7.25 per share, weighted average fair value of $4.54 per
share, vest immediately and have a term of 5 years. The
fair value was estimated as of the measurement date using
Black-Scholes option pricing model with the following
assumptions: dividend yield of 0.25%, expected volatility of
89.52%, risk-free interest rate of 2.89% and expected holding
period of one year.



| |               
| | --------------
| | Treasury Stock

During fiscal year 2001, the Company acquired
1,448,672 shares of treasury stock, which includes 800,000
shares related to the spin-off L.L. Bradford & Company,
for a total value of approximately $4,191,887. During October
2001, the Company awarded 30,000 shares of its treasury
stock to two employees of the Company. Expenses related to this
bonus totaled $94,200. 1,421,072 shares of treasury stock
were retired as of December 31, 2001.

During fiscal year 2002, the Company acquired
296,200 shares of treasury stock for a total value of
$2,518,714 of which 1,000 shares were awarded to an
employee as bonus totaling $6,120. The remaining
295,200 shares of treasury stock were retired as of
December 31, 2002, which the excess of purchase price over
the par value has been allocated to retained earnings.

Note R  Employment
Agreements

The Company has employment agreements and
arrangements with certain officers and key employees. The
agreements generally continue for a period of three years or
until terminated by the executive or the Company with cause. The
agreements and arrangements provide the employees with a base
salary and benefits, which approximates $1,591,000 annually. The
agreements contain covenants against competition with the
Company, which extend for a period of time after termination.

Note S  Fair Value of Financial
Instruments

The carrying amounts of cash, accounts
receivable, accounts payable, dividends payable, and notes
payable approximate fair value because of the short-term
maturity of these instruments.

The carrying value of mortgage loans and notes
receivable approximates the fair value at December 31,
2002. The fair value is estimated based upon projected cash
flows discounted at the estimated current interest rates at
which similar loans would be made.

Note T  Concentrations

Financial instruments, which potentially subject
the Company to credit risk, include cash in bank, accounts
receivable and loans secured by trust deeds.

20



---



##### 



VESTIN GROUP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The Company maintains its cash in bank deposit
accounts, which, at times, may exceed federally insured limits.
The Company has not experienced any losses in such accounts and
believes it is not exposed to any significant credit risk on
cash.

Concentration of credit risk with respect to
accounts receivable is limited because of the large number of
diverse customers. The Company controls credit risk through real
estate securing mortgage loans and monitoring procedures. The
Company believes it is not exposed to any significant credit
risk on accounts receivable.

Concentrations of mortgage loans serviced exist
in California, Hawaii, Nevada, and Texas with approximately 14%,
10%, 38% and 22% of mortgage loan balances as of
December 31, 2002, respectively. As such, the Company has a
significant geographic concentration of credit risk that may be
adversely affected by periods of economic decline in these
states.

Concentrations of mortgage loans exist at
December 31, 2002 in commercial, construction, and
acquisition and development loans. Concentrations of mortgage
loans also exist with one borrower which represents
approximately 77% of the total investments in mortgage loans at
December 31, 2002. As such, the Company has a significant
product concentration and concentration of credit risk with one
borrower that may be adversely affected by periods of economic
decline.

The Companys investments in mortgage loans
on real estate will require the borrower to make a balloon
payment of the principal at maturity. To the extent that a
borrower has an obligation to pay a mortgage loan in a lump sum
payment, its ability to satisfy this obligation may be dependent
upon its ability to refinance or raise a substantial amount of
cash. An increase in interest rates over the mortgage rate
applicable at origination of the loan may have an adverse effect
on the borrowers ability to refinance.

Note U  Commitments and
Contingencies



| |                  
| | -----------------
| | Lease Commitments

The Company operates from leased office
facilities under a noncancellable operating lease. The lease
requires the Company to pay certain escalation clauses for real
estate taxes, operating expense, usage and common area charges.
The Company also leases equipment and a vehicle under
noncancellable operating leases. Rent expense for leased office
facilities, equipment, and the vehicle charged to operations for
the year ended December 31, 2002 and 2001 was $568,772 and
$404,849, respectively.

Future minimum rental payments required under the
operating leases as of December 31, 2002, are as follows:

|     |  |   |           | 
|---- |  | - | --------- | 
|2003 |  |   | 418,329   | 
|2004 |  |   | 364,608   | 
|2005 |  |   | 326,398   | 
|2006 |  |   | 74,700    | 
|     |  |   |           | 
|     |  | $ | 1,184,035 | 
|     |  |   |           | 

In September 2002, the Company entered into a one
year Aircraft Usage Agreement with C5, LLC, a company wholly
owned by the Companys Chief Executive Officer. The
agreement is to allow the Company to use an airplane on a
preferred basis over any other proposed user. The Company is
required to pay a monthly fee based on an hourly rate of $3,000
per hour for the first 10 hours and $2,500 per hour for each
hour thereafter. The Company is required to make a minimum
monthly payment equivalent to 16 hours of usage ($45,000). The
agreement automatically renews for successive periods of one
year each unless terminated by either party no less than thirty
days prior to the end of the term. Future minimum payments
required under this agreement for 2003 total $360,000.

21



---



##### 



VESTIN GROUP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Legal
Proceedings

In addition to the Desert Land litigation as
described under Note V, the Company is involved with
certain other legal proceedings incidental to its business
activities. Management believes that the outcome of these
proceedings will not have a material adverse effect on the
Companys financial condition, results of operations and
cash flows.

Note V  Events
(Unaudited) Subsequent to the Date of the Independent
Auditors Report

The Company, Vestin Mortgage and Del Mar
Mortgage, Inc., a company wholly owned by Mike Shustek, the
largest shareholder and CEO of the Company, and various
affiliates of the Company are defendants in a civil action (the
Action). The Action was initiated by Desert Land,
L.L.C. (Desert Land) on various loans arranged by
Del Mar Mortgage, Inc. and/or Vestin Mortgage. On April 10,
2003, the United States District Court for the District of
Nevada (the Court) entered judgment jointly and
severally in favor of Desert Land against the Company, Vestin
Mortgage and Del Mar Mortgage, Inc. Judgment was predicated upon
the Courts finding that Del Mar Mortgage, Inc. received an
unlawful penalty fee from plaintiffs. Vestin Group and Vestin
Mortgage, which did not receive any portion of the penalty fee,
were found by the Court to be successors to Del Mar
Mortgage, Inc. Vestin Group and Vestin Mortgage are appealing
this finding.

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

The Company elected to contribute capital of
$1.6 million to Fund I in the form of an
interest-bearing amortizing note of $723,763 and the forgiveness
of an obligation due from Fund I in the amount of $876,237,
which resulted in a charge to current earnings totaling
$1.6 million for the three months ended March 31,
2003. The Company made this capital contribution to restore
member capital accounts in Fund I. The Company will not
receive any additional units in Fund I in consideration of
the capital contribution. The capital contribution will increase
the existing members capital accounts in Fund I.
Fund I is an important funding source for mortgage loans
placed by the Company; accordingly, management believes the
capital contribution is in the Companys best long-term
interest.

In order to comply with the operating agreements
of Fund I and Fund II and Federal statutes, both Funds
may redeem no more than 10% of the members capital in any
calendar year. Beginning capital as of January 1, 2003 for
Fund I and Fund II were $97.5 million and
$315.0 million, respectively, which would limit redemptions
for Fund I and Fund II to $9.75 million and
$31.5 million for calendar 2003, respectively. On
June 17, 2003, Fund I discontinued accepting requests
for the redemption of units for the 2003 calendar year. As of
September 19, 2003, the total of redemptions made and
redemptions requested and awaiting payment was $9.1 million
for Fund I. All redemptions requests received after that
date have been logged for redemption beginning in January 2004.
As of September 30, 2003 requests to redeem 831,000 units
in 2004 and 120,526 units in 2005 had been logged. On
September 12, 2003, Fund II discontinued accepting
requests for the redemption of units for the 2003 calendar year.
As of September 12, 2003, the total of redemptions made and
redemptions requested and awaiting payment was
$30.9 million for Fund II. All redemptions requests
received after that date have been logged for redemption
beginning in January 2004. As of September 30, 2003,
requests to redeem 579,480 units had been logged.

22



---



##### 



PART III



|         |                                 
|-------- | --------------------------------
|ITEM 13. | EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

|        |    |             |  |                                                                                                                                                              |  |  |    |  
|------- | -- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------ |  |  | -- | -
|Exhibit |    |             |  | Page Number/                                                                                                                                                
|Number  |    | Description |  | Filing Method                                                                                                                                               
|        |    |             |  |                                                                                                                                                             
|        | 2  | .1          |  | Agreement and Plan of Reorganization among the
    Company, Capsource, Inc. and Stephen J. Byrne, dated as of
    April 9, 1999                              |  |  | (1 | )
|        | 2  | .2          |  | Asset Acquisition Agreement between the Company
    and Del Mar Holdings, Inc., dated as of April 9, 1999                                                    |  |  | (1 | )
|        | 2  | .3          |  | Asset Acquisition Agreement between the Company
    and Del Mar Mortgage, Inc., dated as of April 9, 1999                                                    |  |  | (1 | )
|        | 2  | .4          |  | Agreement and Plan of Reorganization among the
    Company, L.L. Bradford & Company and the Shareholders
    of L.L. Bradford & Company, dated June 30, 2000 |  |  | (2 | )
|        | 3  | .1          |  | Certificate of Incorporation                                                                                                                                 |  |  | (3 | )
|        | 3  | .2          |  | By-laws                                                                                                                                                      |  |  | (3 | )
|        | 10 | .1          |  | Employment Agreement between Del Mar Mortgage,
    Inc. and Steve Byrne, dated November 3, 1998                                                              |  |  | (3 | )
|        | 10 | .2          |  | Transition Agreement between Del Mar Mortgage,
    Inc. and Capsource, Inc., dated April 27, 1999 and First
    Amendment thereto                            |  |  | (4 | )
|        | 10 | .3          |  | Employment Agreement between Del Mar Mortgage
    Inc. and Mike Whiteaker, dated May 3, 1999                                                                 |  |  | (4 | )
|        | 10 | .4          |  | The 2000 Stock Option Plan of Sunderland
    Corporation                                                                                                     |  |  | (4 | )
|        | 10 | .5          |  | Employment Agreement between the Company and
    Michael V. Shustek, dated December 1, 1999                                                                  |  |  | (4 | )
|        | 10 | .6          |  | Employment Agreement between the Company and Ira
    S. Levine, dated September 1, 2000                                                                      |  |  | (6 | )
|        | 10 | .7          |  | Employment Agreement between the Company and
    Lance K. Bradford, dated April 1, 2000                                                                      |  |  | (7 | )
|        | 10 | .8          |  | Third Amended and Restated Operating Agreement of
    DM Mortgage Investors, LLC, dated as of November 2, 2000                                               |  |  | (5 | )
|        | 31 | .1          |  | Section 302 Certification of Michael V. Shustek                                                                                                              |  |  |    |  
|        | 31 | .2          |  | Section 302 Certification of John W. Alderfer                                                                                                                |  |  |    |  
|        | 32 |             |  | Certification Pursuant to U.S.C. 18 Section
    13.50                                                                                                        |  |  |    |  
|        | 99 | .1          |  | Consent of Independent Auditors                                                                                                                              |  |  |    |  
|        | 99 | .2          |  | Consent of Independent Auditors                                                                                                                              |  |  |    |  



---



|    |                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Previously filed on Form 8-K (File No. 000-24803)
    on May 4, 1999.                                                                                                  
|   
|(2) | Previously filed on Form 8-K (File No. 000-24803)
    on April 14, 2000.                                                                                               
|   
|(3) | Previously filed on Form 10-KSB (File No.
    000-24803) on August 13, 1998.                                                                                           
|   
|(4) | Previously filed on Form 10-KSB (File No.
    000-24803) on March 31, 2000.                                                                                            
|   
|(5) | Previously filed by Vestin Fund I (formerly DM
    Mortgage Investors, LLC or DM) on DMs
    prospectus on Form 424B5 (File No. 333-32800) on
    November 15, 2000.
|   
|(6) | Previously filed on Form 10-KSB (File No.
    000-24803) on April 2, 2001.                                                                                             
|   
|(7) | Previously filed on Form 10-KSB/A (File No.
    000-24803) on April 30, 2001.                                                                                          

(b) Reports on Form 8-K.

Current Reports on Form 8-K filed with the
Commission on August 8, 2003 and August 18, 2003,
which report the following items:



| |                                                                
| | ---------------------------------------------------------------
| | (i) Item 5  Other Events and
    Regulation FD Disclosure; and
|
| | (ii) Item 9  Regulation FD
    Disclosure.                    

23



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##### 



SIGNATURES

In accordance with Section 13 or 15(d) of
the Securities Exchange Act, the registrant caused this report
to be signed on its behalf by the undersigned thereunto duly
authorized.



| |                   
| | ------------------
| | Vestin Group, Inc.



| |     |                     
| | --- | --------------------
| | By: | /s/ JOHN W. ALDERFER

| |                        
| | -----------------------
| |                        
| | John W. Alderfer       
| | Chief Financial Officer

Dated: November 3, 2003

In accordance with the Exchange Act, this report
has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

|                                                                                     |  |                                                                 |  |                  |  | 
|------------------------------------------------------------------------------------ |  | --------------------------------------------------------------- |  | ---------------- |  | 
|                                                                                     |  |                                                                 |  |                 
|Signatures                                                                           |  | Title                                                           |  | Date            
|                                                                                     |  |                                                                 |  |                 
|/s/ JOHN W. ALDERFERJohn W. Alderfer
    *Principal Financial and Accounting Officer |  | Chief Financial Officer                                         |  | November 3, 2003
|                                                                                    
|/s/ MICHAEL V. SHUSTEKMichael V. Shustek
    *Principal Executive Officer            |  | Chairman of the Board, Chief Executive Officer
    and Director |  | November 3, 2003

24