##### Table of Contents



U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB/A-1

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the year ended December 31, 2002

[   ] TRANSITION REPORT UNDER 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 of 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 under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange 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 x No o

Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of 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. x



| |  | State issuers revenues for its most recent fiscal year. $31,904,304                                                                                                                                                                                           
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | As of April 30, 2003, there were approximately 5,328,000 shares of the
issuers common stock, $.0001 par value, issued and outstanding. The
aggregate market value of the common stock held by non-affiliates on April
30, 2003 was approximately $7.6 million.

DOCUMENTS INCORPORATED BY REFERENCE

Transitional Small Business Disclosure Format (check one): Yes o No x





---

TABLE OF CONTENTS



|                                              |                                                                                                                         |  |  |  |  |  |  | 
|--------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                       
|                                              | ITEM 1. DESCRIPTION OF BUSINESS                                                                                        
|                                              | ITEM 2. DESCRIPTION OF PROPERTY                                                                                        
|                                              | ITEM 3. LEGAL PROCEEDINGS                                                                                              
|                                              | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                            
|PART II                                      
|                                              | ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                                                       
|                                              | ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS                                                                           
|                                              | ITEM 7. FINANCIAL STATEMENTS                                                                                           
|                                              | ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                           
|PART III                                     
|                                              | ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
|                                              | ITEM 10. EXECUTIVE COMPENSATION                                                                                        
|                                              | ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                                                
|                                              | ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                
|                                              | ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K                                                                              
|PART IV                                      
|                                              | ITEM 14. CONTROL AND PROCEDURES                                                                                        
|SIGNATURES                                   
|CERTIFICATION PURSUANT TO                    
|SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
|EXHIBIT 99.1                                 
|EXHIBIT 99.2                                 
|EXHIBIT 99.3                                 



---



##### Table of Contents






PART I

NOTE REGARDING FORWARD LOOKING STATEMENTS

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




ITEM 1. DESCRIPTION OF BUSINESS

Introduction

Vestin Group, Inc. (Vestin Group) is a holding company which conducts all
of its operations through its wholly owned subsidiaries. Vestin Group
together with its subsidiaries shall be hereinafter referred to as the
Company. 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.

Vestin Mortgage serves as the manager of Vestin Fund I, LLC (formerly DM
Mortgage Investors, LLC; Fund I), a Nevada limited liability company which
was organized to invest in mortgage loans. Fund I filed a registration
statement on Form S-11 with the Securities and Exchange Commission (the
SEC) to offer and sell up to $100,000,000 of its units. In August 2000,
the SEC declared the Form S-11 effective; by June 2001, Fund I had raised
$100,000,000 from the sale of units. The Company is also the manager of
Vestin Fund II, LLC (Fund II), a second Nevada limited liability company
to invest in mortgage loans. Fund II filed a registration statement with the
SEC with respect to the proposed issuance of up to $500,000,000 of its units
which was declared effective in June 2001. As of April 30, 2003, Fund II had
raised approximately $364,000,000 through the sale of its units. Fund I and
Fund II are sometimes referred to collectively hereinafter as the Funds.

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

The Company

The Company is primarily engaged in the commercial mortgage brokerage
business. The Company arranges loans to owners and developers of real
property whose financing needs are not being met by traditional mortgage
lenders. The underwriting standards and length of time required by
traditional mortgage lenders, such as commercial banks, result in certain
potential borrowers who are unable to or unwilling to go through the process
required by traditional lenders. As a non-conventional lender, the Company
focuses on the needs of borrowers unable or unwilling to meet the more
restrictive requirements of traditional lenders. When evaluating prospective
borrowers, the Company will typically focus on the value of collateral,
which reduces the paperwork and time needed to evaluate other factors.

Mortgage Brokerage Operations

The Companys mortgage business involves processing loan applications as
well as approving, funding, and servicing loans. In processing a loan
application, the Company will determine whether a proposed loan satisfies
the Companys lending criteria by analyzing the purpose of the loan, the
value of the underlying real estate, and the credit history and references
of the borrower. In order to verify a prospective borrowers equity in a
property or project, the Company typically receives an independent appraisal
from an appraiser licensed or qualified as an independent appraiser and who
is certified by or holds designations from one or more of the following
organizations: the Federal National Mortgage Association of Review
Appraisers, the Appraisal Institute, the Society of Real Estate Appraisers,
M.A.I., or Class IV Savings and Loan Appraisers. Generally, these appraisals
are completed within twelve months prior to funding of the loan and may have
been previously performed for the borrower. The appraisals may be for the
current fair market value of the property at the time the loan is funded.
The appraisals also may be done on an estimated as-if developed or as-if
completed value of the property, which approximates the post-construction
value of

2



---



##### Table of Contents



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. As a result, as-if
developed and as-if completed appraisals are inherently riskier than
appraisals for the current fair market value of the property. In any event,
appraisals are only estimates of value and cannot be relied on solely as
measures of realizable value. An employee or agent of Vestin Mortgage
reviews each appraisal report and conducts a physical inspection for each
property.

Additionally, the Company will order and review a property title search and
review the documentation provided to determine whether there exists
sufficient evidence of the borrowers right to the property or project.
Generally, employees of the Company will physically inspect the property to
enhance the Companys knowledge with respect to the underlying property in
an effort to ensure there is sufficient equity in the property to secure the
financing. A physical inspection includes an assessment of the subject
property, the adjacent properties and the neighborhood but generally does
not include entering any structures on the property.

The loan approval process of the Company typically involves a review by a
loan committee consisting of three or more officers of the Company
authorized to approve loans. The loan committee meets on a weekly basis to
review potential loans, reports and other information regarding a particular
loan and/or borrower. The officers serving on the loan committee have
substantial experience in the real estate and mortgage lending industries.
The credit evaluation process may take up to 20 days as compared to
conventional lenders which may take up to 120 days or longer in approving a
particular loan.

The loans brokered by the Company for the Funds typically require the
borrowers to execute promissory notes on the behalf of the Funds. The Funds
receive monthly interest payments from the promissory notes as paid by the
borrowers. Interest payments from the borrower may actually come from an
interest reserve account established at loan closing which the Company
controls. The deeds of trust grant a security interest in the real property
that serves as collateral for the loan. The Company will arrange loans which
generally range from 50-75% of the appraised value of the property that
serves as collateral for the loan in order to provide protection for the
investments while permitting a significant return. The appraised value can
increase or decrease as conditions and circumstances affecting the property
change. Such change can be significant.

The general terms of a loan brokered by the Company typically include: (i) a
one to seven year maturity date; (ii) regular interest payments; and (iii) a
balloon payment of principal payable in full at the end of the term. To
the extent that a borrower has an obligation to pay mortgage loan principal
in a large lump sum payment, such borrowers ability to repay the loan may
depend upon its ability to sell the property, obtain suitable refinancing,
or otherwise raise capital.

The Company monitors the repayment of the loans through its loan accounting
department which services the loans. Servicing agents in the loan accounting
department receive loan payments from the borrowers, disburse corresponding
payments to the applicable lenders and assist in collection efforts on past
due loans. Additionally, the servicing agents review loan status reports and
alert collection agents within the Company in the event a borrower has not
made a payment on its loan within one day of such payments due date.
Collection agents notify the delinquent borrower of its default and allow
the borrower to respond in a timely fashion prior to engaging in foreclosure
action. Should the Company be required to commence foreclosure action on
property serving as collateral to a loan in default, the Company will
simultaneously begin negotiations with potential purchasers of the
foreclosed property. Neither the Company nor the Funds intend to hold
foreclosed properties as investments.

Management of Fund I and Fund II

Vestin Mortgage is the manager of Fund I and Fund II, Nevada limited
liability companies. As manager, Vestin Mortgage evaluates prospective
investments, selects the mortgages in which the Funds will invest and makes
all investment decisions for the Funds. Additionally, Vestin Mortgage is
responsible for all administrative matters such as accounting, tax and legal
requirements for the Funds. Vestin Mortgage records an annual management fee
up to 0.25% of the aggregate capital contributions to the Funds per annum.
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, or approximately 1% of its
outstanding units, 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, or approximately 0.3% of its outstanding units, for such
offering expenses which is the maximum amount allowed for such expenses
under the Operating Agreement of Fund II. Fund I and Fund II are widely
held and no single person owns

3



---



##### Table of Contents



more than 5% of the units in either Fund.

The Operating Agreements for the Funds allow Vestin Mortgage to be
indemnified for any action, claim or liability arising from any act or
omission made in good faith and in the performance of its duties under the
Operating Agreement.

Types of Loans Brokered

The Company primarily brokers loans which are secured by first or second
mortgages on real property. Such loans fall into the following categories:
raw and unimproved land, acquisition and development, construction,
commercial property, residential and bridge loans. For more information on
how the Companys loans have been allocated historically among these
categories, see the table below under Sources of Revenue. Set forth below
is a discussion of the Companys loan categories, including a broad estimate
of the percentage range of the loans it brokers which may fall into each
category.

Raw And Unimproved Land Loans

Approximately 15  25% of the loans placed by the Company are loans made for
the purchase or development of raw, unimproved land. Generally, the Company
determines whether to broker these loans based upon the appraised value of
the property and the borrowers actual capital investment in the property.
The Company will generally broker loans with a face value of up to 60% of
the as-if developed appraised value of the property and we usually require
that the borrower has invested in the property actual capital expenditures
of at least 25% of the propertys value. As-if developed values on raw and
unimproved land loans often dramatically exceed the immediate sales value
and may include anticipated zoning changes, selection of a purchaser against
multiple alternatives, and successful development by the purchaser; upon
which development is dependent on availability of financing.

Acquisition and Development Loans

Approximately 10-25% of the loans placed by the Company are acquisition and
development loans. These loans enable borrowers to complete the basic
infrastructure and development of their property prior to the construction
of buildings or structures. Such development may include installing
utilities, sewers, water pipes, and/or streets. Generally, the Company will
broker loans with a face value of up to 60% of the appraised value of the
property. Loan to value ratios on some acquisition and development loans may
be calculated using as-if developed appraisals. Such appraisals have the
same valuation limitations as raw and unimproved land loans, described
above.

Construction Loans

Approximately 10-70% of the Companys brokered loans are construction loans.
A construction loan provides funds for the construction of one or more
structures on developed land. Funds under this type of loan will generally
not be forwarded to the borrower until work in the previous phase of the
project has been completed and an independent inspector has verified certain
aspects of the construction and its costs. Demand for construction loans
fluctuates significantly from year to year. Such demand generally slows
down during recessions or during periods of rising interest rates and
increases during periods of economic stability. The Company will typically
require material and labor lien releases by the borrower per completed phase
of the project. The Company will review the appraised value of the property
and proposed improvements, and will arrange loans for up to 75% of the
appraised value. Loan to value ratios on some construction loans may be
calculated using as-if developed appraisals. Such appraisals have the same
valuation limitations as raw and unimproved land loans, described above.

Commercial Property Loans

Approximately 20-50% of the loans placed by the Company are commercial
property loans. Commercial property loans provide funds to allow commercial
borrowers to make improvements or renovations to the property in order to
increase the net operating income of the property so that it may qualify for
institutional refinancing. The Company will review the appraised value of
the property and will broker loans for up to 75% of such appraised value.

Residential Loans

A small percentage of the loans brokered by the Company are residential
loans. Such loans facilitate the purchase or refinance of one to four family
residential property provided the borrower uses one of the units on the
property as such borrowers principal residence. The Company will place
loans for up to 75% of the appraised value of the property.

Bridge Loans

Up to 15% of the Companys brokered loans are bridge loans. Such loans
provide interim financing (up to six months) to enable commercial borrowers
to qualify for permanent refinancing. The Company will review the appraised
value of the property and will generally arrange for loans of up to 75% of
that value. Such appraisals may be based on either an as-is basis or as-if

4



---



##### Table of Contents



developed basis, depending on the circumstances.

Collateral

The types of collateral that will secure the loans brokered by the Company
include a first deed of trust, a second deed of trust or a leasehold
interest.

First Deed of Trust

The majority of the loans placed by the Company are secured by a first deed
of trust. Thus the applicable lender will have rights as a first mortgage
lender of the collateralized property.

Second Deed of Trust

Up to 10% of the loans placed by the Company may be in second mortgage loans
and in wraparound mortgage loans. In a second mortgage loan, the rights of
the lender (such as the right to receive payment on foreclosure) will be
subject to the rights of the first mortgage lender. In a wraparound loan,
the lenders rights will be comparably subject to the rights of a first
mortgage lender, but the aggregate indebtedness evidenced by the loan
documentation will be the first mortgage loan plus the new funds the lender
invests. The lender would receive all payments from the borrower and forward
to the senior lender its portion of the payments the lender receives.

Leasehold Interest

Up to 20% of the loans brokered by the Company may be in loans where the
collateral is an interest in a lease.

Sources of Revenue

The Companys mortgage brokerage operations generate revenues through (i)
loan placement fees on the loans it brokers; (ii) loan servicing fees; and
(iii) loan extension fees charged to borrowers who desire to extend the term
of their loan(s). Mortgage brokerage operations accounted for approximately
93% and 94% of the Companys revenues in 2002 and 2001, respectively.

For each loan brokered by the Company, the Company receives a loan placement
fee between 2% to 6% of the principal amount of the loan. Such fee is a
competitive fee based upon local market conditions. An evaluation and
processing fee of up to 5% per loan is charged to document and package the
loan. Such fee is also a competitive fee based upon local market conditions.
The servicing fee for administering the financing is an annual fee up
to .25% of the outstanding principal of each loan. Loan extension fees may be
up to 5% of outstanding principal on the loan as determined by law and local
market conditions. Late charges are assessed for non-timely payments.

During the year ended December 31, 2002, there were 79 mortgage loans placed
by the Company with an aggregate value of $477,942,550. During the year
ended December 31, 2001, there were 54 mortgage loans placed by the Company
with an aggregate value of $243,894,870. The majority of the loans placed by
the Company are secured by real estate located in Nevada and other western
states such as Arizona, California, Hawaii, Texas, Utah and Washington.

5



---



##### Table of Contents



The following chart sets forth a summary of the types of loans arranged by
the Company for the years ended December 31, 2002 and 2001.

|                                                   |  |            |    |               |  |                |             |                  |  |   |            |  |  |  |      |  
|-------------------------------------------------- |  | ---------- | -- | ------------- |  | -------------- | ----------- | ---------------- |  | - | ---------- |  |  |  | ---- | -
|                                                   |  | Number Of  |    | Aggregate     |  | Loan Placement |             | Average         
|                                                   |  | Loans      |    | Dollar Amount |  | Fees By Loan   |             | Origination Fees
|Loan Type                                          |  | Originated |    | In Total      |  | Type           |             | As A % Of Loans 
|                                                   |  |            |    |               |  |                |             |                 
|2002                                               |  |            |    |               |  |                |             |                  |  |   |            |  |  |  |      |  
|Bridge and Residential Loans                       |  |            | 15 |               |  | $              | 31,205,050  |                  |  | $ | 1,217,496  |  |  |  | 3.90 | %
|Construction and
Acquisition and Development
Loans |  |            | 25 |               |  |                | 226,836,000 |                  |  |   | 11,084,200 |  |  |  | 4.89 | %
|Land Loans                                         |  |            | 12 |               |  |                | 34,271,500  |                  |  |   | 1,047,450  |  |  |  | 3.06 | %
|Commercial Loans                                   |  |            | 27 |               |  |                | 185,630,000 |                  |  |   | 7,422,825  |  |  |  | 4.00 | %
|                                                   |  |            |    |               |  |                |             |                  |  |   |            |  |  |  |      |  
|                                                   |  |            | 79 |               |  | $              | 477,942,550 |                  |  | $ | 20,771,971 |  |  |  | 4.35 | %
|                                                   |  |            |    |               |  |                |             |                  |  |   |            |  |  |  |      |  
|2001                                               |  |            |    |               |  |                |             |                  |  |   |            |  |  |  |      |  
|Bridge and Residential Loans                       |  |            | 13 |               |  | $              | 87,868,600  |                  |  | $ | 3,333,050  |  |  |  | 3.79 | %
|Construction and
Acquisition and Development
Loans |  |            | 21 |               |  |                | 99,353,000  |                  |  |   | 4,392,617  |  |  |  | 4.42 | %
|Land Loans                                         |  |            | 8  |               |  |                | 12,180,000  |                  |  |   | 494,775    |  |  |  | 4.06 | %
|Commercial Loans                                   |  |            | 12 |               |  |                | 44,493,270  |                  |  |   | 1,773,082  |  |  |  | 3.98 | %
|                                                   |  |            |    |               |  |                |             |                  |  |   |            |  |  |  |      |  
|                                                   |  |            | 54 |               |  | $              | 243,894,870 |                  |  | $ | 9,993,524  |  |  |  | 4.10 | %
|                                                   |  |            |    |               |  |                |             |                  |  |   |            |  |  |  |      |  

Investment in Mortgage Loans and Other Investments

The Company accesses funds for loans which it brokers primarily from the
Fund I and Fund II. From time to time, the Company may co-invest in certain
mortgage loans. The type and nature of such mortgage loans generally mirror
the composition of loans placed through the Companys mortgage brokerage
operations. As of December 31, 2002, the Company held for investment
approximately $9,100,000 of interests in mortgage loans. Interest income
generated by such investments comprised less than 5% of the Companys
revenues for 2002 and 2001.

In the event of a default of one of the loans brokered by the Company, the
Company will initiate foreclosure activity on the property securing the
corresponding loan and, as a result, own such real estate. Simultaneously
with the foreclosure actions, the Company anticipates entering into
negotiations with potential purchasers of such property. Therefore, the
Company does not intend to make any long-term investments in foreclosed
properties, and plan to sell any properties it forecloses upon as soon as
reasonably possible. The types of real estate which the Company may own as a
result of foreclosure include raw and undeveloped land and commercial and
residential properties. 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. Such investments in
real estate held for sale are recorded at the lower of cost or fair value,
less costs to sell, based on appraisals and local market knowledge.

As of December 31, 2002, the Company held approximately 100,000 units in
Fund I, representing approximately 1% of the equity of Fund I, and 110,000
units in Fund II, representing approximately 0.3% of the equity of Fund II.
The primary activity of the Funds consists of investing in mortgage loans.
The Company serves as manager of the Funds and evaluates loans to determine
which loans the Funds should invest in.

Competition

The Company must compete both for sources of funds to finance the mortgage
loans which it brokers and for borrowers who are seeking mortgage loans.

Competition for Funding Sources

Historically, the main source of the Companys funds had been individual
investors interested in the investment opportunity offered by the Company.
In 2002, the Funds were the main source of the Companys funding. In seeking
investors for the Funds, the Company competes with alternative investment
vehicles as well as competing mortgage brokers. The attractiveness of the
Companys mortgage loans as compared with other investment opportunities
depends upon the yields on loans placed by the Company, the safety of the
underlying investment, the Companys reputation, general economic conditions
and real estate market conditions. The Companys principal advantage in
attracting investors is the high historical yields generated by loans
brokered by

6



---



##### Table of Contents



the Company. However, the Company is at a disadvantage compared to
alternative investment vehicles to the extent that an investment in mortgage
loans lacks liquidity and is not guaranteed or insured by a governmental
agency. In addition, the Company is smaller than many of the full service
financial firms which market alternative investment vehicles and has a more
limited operating history.

Competition for Borrowers

Generally, real estate developers depend upon the timely completion of a
project to obtain a competitive advantage when selling their properties. The
Company has sought to attract real estate developers by offering expedited
loan processing, which generally provides quick loan approval and funding of
a loan. As a result, the Company has established a market niche as a
non-conventional mortgage lender.

The Company considers its direct competitors to be the providers of
non-conventional mortgage loans, that is, lenders who offer short-term,
equity-based loans on an expedited basis for higher fees and rates than
those charged by conventional lenders. These competitors include, in the
Nevada market, USA Capital and Aspen Mortgage, and, in the regional market,
Bridge Capital and Owens Financial. Bridge Capital and Owens Financial
will, from time to time, participate in loans funded by the Company. To a
lesser extent, the Company also competes with conventional mortgage lenders
and mortgage loan investors, such as commercial banks, thrifts, conduit
lenders, insurance companies, mortgage brokers, pension funds and other
financial institutions that offer conventional mortgage loans. The Companys
principal competitors in its market niche as a non-conventional mortgage
lender also include: Bank of America, Bank One, Wells Fargo, Residential
Funding, First Security Bank, and United Bank of Texas. Many of the
companies against which the Company competes have substantially greater
financial, technical and other resources than the Company. Competition in
the Companys market niche depends upon a number of factors, including price
and interest rates of the loan, speed of loan processing, cost of capital,
reliability, quality of service and support services.

Government Approval and Regulation

The operations of Vestin Group are conducted through its wholly owned
operating subsidiary, Vestin Mortgage. These operations are subject to
regulation by federal, state and local laws and governmental authorities.
Vestin Mortgage conducts its real estate mortgage business under a license
issued by the State of Nevada Financial Institutions Division (the
Division). Under applicable Nevada law, the Division has broad
discretionary authority over Vestin Mortgages activities, including the
authority to conduct periodic regulatory audits of all aspects of Vestin
Mortgages operations. The Companys mortgage brokerage operations in
certain states are restricted because it is not licensed to act as a
mortgage broker in such states. Where such restrictions exist, the Company
generally works on a correspondent basis with a locally licensed mortgage
broker, in which the Company arranges for such broker to fund or participate
in the mortgage loans. In such an arrangement, the Company primarily serves
as the loan originator and the correspondent broker serves as an additional
funding source. If the Company retains a correspondent broker, fees will
be shared on a pari passubasis predicated on the amount of funding provided
by each broker. The Company intends to retain only properly licensed
correspondent mortgage dealers who comply with applicable laws and are
financially capable of fulfilling their obligations under the terms of the
arrangement.

The Company is required to comply with the Equal Credit Opportunity Act of
1974, which prohibits creditors from discriminating against loan applicants
on the basis of race, color, sex, age or marital status, and the Fair Credit
Reporting Act of 1970, which requires lenders to supply applicants with the
name and address of the reporting agency if the applicant is denied credit.
The Company is also subject to various other federal and state securities
laws regulating the issuance and sale of securities, as well as the Employee
Retirement Income Security Act of 1974.

Because the Companys business is regulated, the laws, rules and regulations
applicable to the Company are subject to regular modification and change.
There can be no assurance that laws, rules or regulations will not be
adopted in the future that could make compliance much more difficult or
expensive, restrict the Companys ability to broker or service loans,
further limit or restrict the amount of commissions, interest and other
charges earned on loans brokered by the Company, or otherwise adversely
affect the business or prospects of the Company.

Employees

As of December 31, 2002, the Company employed 58 personnel, all of whom are
full-time employees. Of these employees, 16 were employed to identify,
arrange, and service loans and 42 performed general and administrative as
well as information technology and marketing functions. The Company has
entered into employment agreements with certain officers and key employees.
No employees are covered by a collective bargaining agreement.

7



---



##### Table of Contents






ITEM 2. DESCRIPTION OF PROPERTY

The Company maintains its executive offices at 2901 El Camino Avenue, Las
Vegas, Nevada 89102. The Companys office is approximately 15,000 square
feet and houses the Companys marketing, loan processing and administrative
personnel. The annual rent is fixed at approximately $325,000 per year. The
lease agreement governing this property expires on April 2006. Although its
current offices are adequate for its current operations, the Company has
entered into negotiations to lease a newer and larger facility, which may be
ready for occupancy in 12-14 months. If the Company reaches an agreement to
lease this new facility, it intends to sublease its current facility. If
the Company is unable to sublease the facility, it may be liable for rent
payments totaling approximately $240,000 on the approximately one-year
remaining on the lease at the time the Company leaves its current facility.




ITEM 3. LEGAL PROCEEDINGS

The Company is a defendant in the following lawsuit incurred in the ordinary
course of business.

The Company, Vestin Mortgage and Del Mar Mortgage, Inc., (Del Mar Mortgage),
a company wholly owned by Michael Shustek, the largest shareholder and CEO of
the Company, and various affiliates of the Company are defendants in a civil
action entitled Desert Land, L.L.C. et al. v. Owens Financial Group, Inc., et
al.(the Civil Action). In the Civil Action, plaintiff alleged 18 claims for
relief including intentional interference with contractual relations and
prospective economic advantage, breach of contract, fraudulent inducement,
economic duress, common law fraud and securities fraud, and sought rescission
of various contracts entered into between plaintiffs and defendants,
compensatory damages in excess of $10,000,000 and punitive damages, among other
remedies. On April 10, 2003, the United States District Court for the District
of Nevada (the Court) dismissed 17 of plaintiffs claims, but entered a
judgment on the remaining claim for $5.0 million, plus interest accruing from
March 26, 2003, jointly and severally against Vestin Group, Vestin Mortgage and
Del Mar Mortgage. Subsequent to April 10, 2003, the Court stayed the execution
of the judgment pending the hearing and ruling on post-trial motions and,
accordingly, the Court did not require the defendants to post a bond for the
judgment. Del Mar Mortgage has agreed to indemnify Vestin Group and Vestin
Mortgage for any losses and expenses in connection with the Civil Action. Mr.
Shustek has guaranteed the indemnification. If the stay of execution is lifted,
Mr. Shustek has agreed to provide a bond in the amount of the judgment.
Although the ultimate outcome of the Civil Action is uncertain, after
consultation with legal counsel, the Company believes that the judgment against
Vestin Group and Vestin Mortgage will be vacated and will have no effect on its
operating results and financial condition. The defendants are appealing the
ruling by the Court.




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

None.

8



---



##### Table of Contents






PART II




ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a)  The Companys Common Stock is traded on the Nasdaq National Market under
the ticker symbol VSTN.

The table below lists the quarterly high and low sales prices for the Common
Stock as reported by the Nasdaq for the four quarters in 2002 and 2001. As
of April 30, 2003, the closing sale price for the Companys Common Stock was
$3.75 per share.

|               |  |          |      |         |  |  |      | 
|-------------- |  | -------- | ---- | ------- |  |  | ---- | 
|               |  | Nasdaq  
|               |  |         
|               |  | US $High |      | US $Low
|               |  |          |      |        
|2002           |  |          |      |         |  |  |      | 
|Fourth Quarter |  |          | 7.84 |         |  |  | 6.55 | 
|Third Quarter  |  |          | 9.20 |         |  |  | 6.11 | 
|Second Quarter |  |          | 9.75 |         |  |  | 6.80 | 
|First Quarter  |  |          | 8.02 |         |  |  | 5.05 | 
|2001           |  |          |      |         |  |  |      | 
|Fourth Quarter |  |          | 8.45 |         |  |  | 2.87 | 
|Third Quarter  |  |          | 3.32 |         |  |  | 1.35 | 
|Second Quarter |  |          | 4.65 |         |  |  | 2.00 | 
|First Quarter  |  |          | 5.12 |         |  |  | 4.06 | 

(b)  Holders

On April 30, 2003, there were approximately 857 stockholders of record of
the Companys Common Stock, which does not reflect the beneficial
stockholders whose shares are held in nominee names.

(c)  Dividends

Any determination to pay dividends is at the discretion of the Companys
Board of Directors and will depend upon the Companys financial condition,
results of operations, capital requirements, limitations contained in loan
agreements and such other factors as the Board of Directors deems relevant.
According to the Companys Certificate of Designations, holders of the
Companys Series A Preferred Stock are 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 Issue Price per annum,
prior and in preference to any declaration or payment of any dividends on
the Common Stock, which may be paid in cash or in Common Stock and are not
cumulative. The Company paid approximately $934,000 in dividends to
Preferred Stock shareholders during 2002. During 2002 the Company declared
dividends to holders of Common Stock as follows:

|         |  |              |      | 
|-------- |  | ------------ | ---- | 
|Month    |  | Dividend Per
|Declared |  | Common Share
|         |  |             
|March    |  | $            | 0.10 | 
|June     |  | $            | 0.02 | 
|August   |  | $            | 0.12 | 
|November |  | $            | 0.12 | 




ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS

The following financial review and analysis concerns the financial condition
and results of operations of the Company for the years ended December 31,
2002 and 2001. This information should be read in conjunction with the
Companys Consolidated Financial Statements and accompanying notes and other
detailed information regarding the Company appearing elsewhere in this Form
10-KSB.

9



---



##### Table of Contents



Critical Accounting Policies

Revenue recognition

The Company recognizes revenue primarily from loan placement fees, loan
servicing fees and extension fees. Loan placement fees are recorded as
revenue at the close of escrow and reduced by direct loan placement costs on
loans which the Company has not recorded as investments in mortgage loans on
its financial statements. Typically, deeds of trust related to loans placed
are initially in the Companys name to facilitate the loan placement
process. Upon arranging a funding source for such loans, the deeds of trust
are assigned to the respective investor (i.e., individual investors, Fund I,
and Fund II). Loan servicing fees are recorded as revenue when such services
are rendered. Servicing fees represent the interest spread between what is
paid to the investor and what the borrower pays for the use of the money,
which can vary from loan to loan. Servicing costs approximate servicing fees
and therefore, the Company has not recognized a servicing asset or
liability. Extension fees are generally recorded as revenue at the extension
grant date. Sale or transfer of mortgage loans to affiliate parties is
based on the carrying basis, which is the lower of cost or market value of
such loans.

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

Investments in real estate held for sale

Investments in real estate held for sale 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, either through payments or decrease of an interest reserve, with a
balloon payment of the principal at maturity. The Company has both the
intent and ability to hold mortgage loans until maturity and therefore,
mortgage loans are classified and accounted for as held for investment and
are carried at cost. Loan to value ratios are based on appraisals obtained
at the time of loan origination and may not reflect subsequent changes in
value estimates. Such appraisals are generally dated within 12 months of the
date of loan origination. The appraisals may be for the current fair
market value of the property at the time the loan is funded. The appraisals
also may be done on an estimated as-if developed or as-if completed
value of the property, which approximates the post-construction value of the
collateralized property assuming that such property is developed. As-if
developed values on raw land loans or acquisition and development loans
often dramatically exceed the immediate sales value and may include
anticipated zoning changes, selection by a purchaser against multiple
alternatives, and successful development by the purchaser; upon which
development is dependent on availability of financing. As most of the
appraisals will be prepared on an as-if developed basis, if a loan goes into
default prior to any development of a project, the market value of the
property may be substantially less than the appraised value. As a result,
there may be less security than anticipated at the time the loan was
originally made. If there is less security and a default occurs, the
Company may not recover the full amount of the loan. As a result, as-if
developed and as-if completed appraisals are inherently riskier than
appraisals for the current fair market value of the property. In any event,
appraisals are only estimates of value and cannot be relied on solely as
measures of realizable value. An employee or agent of Vestin Mortgage
reviews each appraisal report and conducts a physical inspection for each
property.

Allowance for loan losses

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

Income taxes

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

10



---



##### Table of Contents



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.

Results of Operations

Comparison of Year Ended December 31, 2002 and Year Ended December 31, 2001

Revenue



| |                       
| | ----------------------
| | Historical Performance

During 2002 the Companys total revenues increased $10.5 million to $31.9
million compared to $21.4 million for the same period in 2001. More than 90%
of total revenues were generated by the Companys mortgage brokerage
operations for both years. Less than 5% of total revenue was generated by
investments in mortgage loans. The Company generated $20.8 million of loan
placement fees in 2002 as compared to $10.0 million in 2001. The increase in
origination fees was due in large part to a $234 million increase in dollar
volume of loans originated. Extension fee revenues also increased by $1.0
million, primarily due to the increase in the loan portfolio the Company
serviced throughout 2002 as compared to 2001.

The Company placed 79 and 54 loans with an aggregate value of $477,942,550
and $243,894,870 in the fiscal years ended December 31, 2002, and 2001,
respectively. Historically, the Company has used funds from individual
investors, Fund I, Fund II and its own resources to fund loans to real
estate developers and owners for raw land, acquisition and development,
construction, commercial, residential and bridge loans. In 2002, the Company
used funds primarily from Fund I and Fund II.



| |                  
| | -----------------
| | Direct Investment

As of December 31, 2002 and 2001, the Company had approximately $9,000,000
and $6,074,000 invested in mortgage loans, respectively. Revenues related to
the Companys investments in mortgage loans approximated $543,000 and
$403,000 for the years ended December 31, 2002 and 2001, respectively. As of
December 31, 2002 the Company also had $2,100,000 invested as capital
contributions in Fund I and Fund II. The Company earns additional income
from interest earned on monies in its bank deposits.



| |                       
| | ----------------------
| | Geographical Expansion

Although the Company has historically focused its operations in certain
Southwestern states, the Company anticipates expanding its mortgage lending
operations throughout the United States. The Company has developed a
significant degree of knowledge with respect to the real estate markets in
the Southwestern states. Such knowledge is critical to the Companys
business as it enables the Company to process loan applications more quickly
than many conventional lenders. The Company is able to rapidly process loan
applications in large part because the Companys underwriting standards
focus heavily on the value of the underlying property rather than the
creditworthiness of the borrower. The Companys ability to quickly assess
the underlying value of real estate when it arranges the terms of a mortgage
loan is therefore essential to its strategy of providing fast turnaround for
loan applications.

Real estate markets are significantly influenced by local conditions as well
as by national economic conditions. Thus, real estate markets vary greatly
from place to place and local knowledge of a real estate market is essential
to prudent lending. In order to obtain such local knowledge, the Company
intends to engage the services of local real estate brokers and real estate
lawyers who are believed to be familiar with the markets into which the
Company may expand. No assurances can be given that the Company will be
successful in any geographical expansion of its operations or that it will
be able to mitigate the risk of such expansion by working with local brokers
and lawyers. Any difficulties encountered by the Company in this regard
could adversely affect the Companys results of operations, slow down its
expansion plans or result in a reduction of loan placement fees.

Sales and Marketing Expenses

Sales and marketing expenses primarily consist of advertising costs and
commissions. Sales and marketing expenses approximated $7.9 million and $7.6
million or 25% and 35% of the Companys total revenues for the years ended
December 31, 2002 and 2001, respectively. The decrease in sales and
marketing

11



---



##### Table of Contents



expenses in proportion to total revenues is primarily attributable to, among
others, the following factors: (i) during 2001, the Company broadened the
scope of its marketing efforts for awareness of the availability of the
Funds as an investment. The Company has reduced these efforts, as the Funds
have been successful in raising investor capital. Therefore advertising
costs and public relations costs were decreased by $0.7 million during 2002
(ii) commissions expense increased by $0.7 million as a direct result of the
increase in loan volume generated during 2002 (iii) The Companys printing
costs increased by $0.2 million primarily due to the preparation and
printing of public filings.

General and Administrative Expenses

General and administrative expenses include payroll and related expenses,
professional fees, and general corporate expenses. General and
administrative expenses of the Company were $17.5 million or 55% of the
total revenues for the year ended December 31, 2002, as compared to $10.1
million or 47% for 2001. General corporate expenses remained fairly constant
for 2002 as compared to 2001 with the exception of payroll expense which
increased by $0.5 million due to the hiring of additional staff during 2002
to support the Companys growth and an increase in legal fees of $0.7
million due primarily to the Companys growth and increases in the legal
work related to public filings and reports.

Losses on investments increased by $5.2 million for 2002 from 2001 primarily
due to the Companys write-off of $4.8 million related to the rights to a
legal judgment it acquired from the Funds as described in more detail below.
In addition, in 2002 the Company recorded a loss of $0.2 million related to
the sale of the Companys investment in Prepaid Advisors.com. These losses
are included in general and administrative expenses in the accompanying
Consolidated Statements of Income.

On July 2, 2001, Vestin Mortgage brokered a loan to Arroyo Heights Golf Club
(Arroyo) for $10,000,000. The loan was funded by 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
July 30, 2003. 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. However, because of the inherent risks associated with litigation
and enforcement of judgments, the Company elected to provide 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
write-off is reflected in General and Administrative expenses on the
Consolidated Statement of Income for the year ended December 31, 2002.

Income Before Income Taxes

As a result of the foregoing factors, income from continuing operations
before provision for income taxes approximated $6.0 million or 20% of the
Companys total revenues in 2002, an increase from $3.0 million or 15% of
the Companys total revenues in 2001.

Liquidity and Capital Resources

Liquidity is a measure of an entitys ability to meet potential cash
requirements, including ongoing commitments to fund lending activities. The
Company has historically met its capital requirements through cash flows
from operations and its ability to access individual investors, as well as
the Funds, who acquire interests in mortgage loans.

For the year ended December 31, 2002, the cash flows provided by operating
activities of the Company approximated $7.6 million or 24% of the Companys
total revenue, compared to cash provided by in operating activities of
$23,000 or less than 1% of total revenue for the same period in 2001. Cash
used in investing activities approximated $5.5 million for the year ended
December 31, 2002, compared to $3.1 million for the same period in 2001.
During 2002 the Company received proceeds from the sale of real estate held
for sale totaling $4.7 million which were reinvested into investments in
mortgage loans on real estate. The Company also received payments on notes
receivable totaling $1.1 million which were also reinvested into investments
in mortgage loans on real estate.

The Company has historically relied upon cash flow from operations and the
sale of securities to provide for its capital requirements. During the year
ended December 31, 2002, the Company generated net income of $3.8 million
and positive cash flow from operating activities of $7.6 million. The
Company believes that cash generated from operations, together with cash and
cash flows from investments in mortgage loans on real estate on hand at
December 31, 2002, will be sufficient to provide for its

12



---



##### Table of Contents



capital requirements to sustain currently expected loan volumes for at least
the next 12 months.

The Company is also exploring additional sources of financing including new
and/or expanded credit facilities. There can be no assurance that the
Company will be able to obtain any additional financing.

Funding Sources

The Company must have access to funding sources that are prepared to invest
in mortgage loans which the Company arranges. Historically, the Company
relied primarily upon individual investors for this purpose. This provided
the Company with a reasonably reliable source of funding for mortgage loans.

However, in order to expand its business, the Company organized Fund I and
Fund II upon which the Company has depended upon as its principal funding
sources. Fund I completed a public offering of its units in June 2001. Fund
II is currently seeking to raise $500,000,000 through a public offering of
its units; as of April 30, 2002 Fund II had raised approximately $364
million through the sale of units. The Companys wholly owned subsidiary,
Vestin Mortgage, is the manager of both Funds. Additionally, the Company
plans to organize additional funds which, if successful, would further
enhance its access to funding sources.

The Companys ability to continue to attract investors to acquire units in
Fund II depends upon a number of factors, some of which are beyond the
Companys control. The key factors in this regard include general economic
conditions, the condition of real estate markets, the availability of
alternative investment opportunities, the Companys track record and the
Companys reputation. The Company believes that its ability to attract
investors for mortgage loans has been enhanced by the high historical yields
generated by such mortgage loans. These yields may prove more attractive in
the near term if equity markets are perceived as risky or volatile and if
most fixed rate investments do not offer comparable yields.

Notwithstanding the high historical yields generated by its mortgage loans,
the Company believes its ability to attract investors to Fund II may be
impaired by the Companys small size and Fund IIs limited operating
history. In addition, the units in Fund II and the mortgage loan interests
acquired by Fund II are not federally insured as are certain bank deposits
and are generally illiquid as compared to government or corporate bonds.
Thus, the Companys ability to generate high yields is critical to
offsetting some of the disadvantages of investments in mortgage loans. The
Companys ability to attract investors would suffer if the performance of
Company-arranged mortgage loans declines or if alternative investment
vehicles offering comparable rates and greater safety or liquidity become
available.

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.

The Company from time to time considers additional funding sources for its
mortgage brokerage operations including new and/or expanded credit
facilities and securitization arrangements. The Company has no current
commitments in this regard, and there can be no assurance that the Company
will be able to obtain any additional financing.

An intercreditor agreement provides the Company an additional funding source
for mortgage loans whereby a third party investor (the Investor) may
participate in certain mortgage loans with the Company, Fund I, and Fund II
(collectively the Lead Lenders). In the event of borrower
non-performance, the intercreditor agreement gives the Lead Lenders the right to either (i)
continue to remit to the Investor the interest due on the participated loan
amount; (ii) substitute an alternative loan acceptable to the Investor; or
(iii) repurchase the participated loan amount from the Investor for the
outstanding balance plus accrued interest.

Commitments and Capital Requirements

The Company does not anticipate any material capital expenditures during the
next 12 months. The Company is committed to pay Joe Namaths management
company $1,000,000 per year through 2005 for public relations services. In
addition, the Company anticipates incurring significant marketing expenses
related to the sale of Units of Fund II as well as the general promotion of
Vestin and its services. The Companys minimum obligation for office rent
and equipment leases in 2003 is approximately $418,000. Fees generated by
its mortgage brokerage activities should be sufficient to meet all of these
capital requirements. Factors that could reduce cash flow from mortgage
brokerage operations include a general slowdown of commercial real estate
lending activity, a reduction in the amount of funds available to invest in
mortgages and a significant level of defaults on

13



---



##### Table of Contents



outstanding loans. The current recession has not resulted in a significant
slowdown in commercial lending activity in the markets serviced by the
Company with the sole exception of Hawaii which has suffered a significant
decline in tourism after September 11, 2001. However, a prolonged or deeper
recession could adversely impact the market for commercial real estate
loans. If the Companys mortgage brokerage operations do not generate
sufficient cash flow, the Company might be required to cut back the scope of
its operations and the extent of its marketing and promotional efforts.

The Company pays its Preferred Stock shareholders a dividend 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 Issue
Price per annum.

The Company does not have any interests in off-balance sheet special purpose
entities nor does it have any interests in non-exchange traded commodity
contracts.

Related Party Transactions

The Company has entered into a number of transactions with its principal
shareholder and other related parties. Such transactions fall into the
following categories:

Transactions with the Funds

The Company relies on the Funds as its primary funding source for its
mortgage brokerage activities. The Company recognizes an annual management
fee up to 0.25% of the aggregate capital contributions to the Funds per
annum. 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.

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 Agreement of the
Funds which permits the Funds to acquire loans from the Company if the loans
were acquired to facilitate their acquisition by the Funds and provided that
the price paid 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.

On July 2, 2001, Vestin Mortgage brokered a loan to Arroyo for $10,000,000.
The loan was funded by 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 Mortage 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
July 30, 2003. 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 of satisfy a judgment of $4.8 million plus
interest. However, because of the inherent risks associated with litigation
and enforcement of judgments, the Company elected to provide a valuation
allowance for the entire amount paid for the rights to receive the proceeds
of the judgment and recorded the allowance in 2002. This write-off is
reflected in General and Administrative expenses on the Consolidated
Statement of Income for the year ended December 31, 2002.

Transactions with Officers and Directors and their Affiliates

In 2000, the Company loaned an employee approximately $251,000 to enable him
to operate, develop and grow a California real estate loan fund. The Company
does not have any affiliation with the California real estate loan fund.
The loan is unsecured but is backed by a personal guaranty. The interest
rate of 10% is payable on a semi-annual basis and the principal is due on
the maturity date of April 19, 2004. As of March 31, 2003, the balance on
this note was approximately $118,000.

The Company had an investment in the amount of $153,810 in a mortgage loan
to Del Mar Mortgage, Inc. (Del Mar Mortgage, Inc.), 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. The Company has not
made, and does not contemplate making, any investments in Del Mar Mortage.

14



---



##### Table of Contents



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 certain personnel of L.L. Bradford for services
provided to the Company. Also, during 2002, L.L. Bradford assisted in the
preparation of the Companys financial reports and provided bookkeeping
services at no charge to the Company. The Companys Audit Committee
approved the engagement of L.L. Bradford.

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, a law firm in which the Executive Vice President
of Legal and Corporate Affairs of the Company has an equity ownership
interest.

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 the Companys Chief Executive Officer and a stockholder of the
Company related to the use of an airplane for company travel.

Factors Affecting the Companys Operating Results

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

Limited Experience in Certain Real Estate Markets

Currently, the Company brokers mortgage loans or works with mortgage brokers
primarily in areas in which Vestin Mortgage has substantial experience such
as Arizona, California, Nevada, Texas, and Hawaii. Depending on the market
and on the Companys performance, it plans to expand the Companys
operations throughout the United States. However, Vestin Mortgage has
limited experience outside of certain Southwestern states. Real estate
markets vary greatly from location to location. Vestin Mortgages limited
experience in most U.S. real estate markets may impact its ability to make
prudent investment decisions and may delay the loan approval process. This
delay could have a material impact on the Companys competitive advantage of
providing fast loan approvals. Accordingly, Vestin Mortgage plans to utilize
independent real estate advisors located in markets where Vestin Mortgage
lacks experience for consultation prior to making investment decisions. No
assurance can be given such advisors will provide effective assistance to
the Company.

Dependence on Key Personnel

The Companys success depends upon the continued contributions of certain
key personnel, including Michael V. Shustek, Stephen J. Byrne, Peggy S. May,
and Lance K. Bradford. The loss of any key personnel may be difficult to
overcome because of his/her extensive experience in his/her field, extensive
market contacts and familiarity with the Companys activities. If any of
these key employees were to cease employment, the Companys operating
results could suffer. The Companys future success also depends in large
part upon its ability to hire and retain additional highly skilled
managerial, operational and marketing personnel. Should the Company be
unable to attract and retain skilled personnel, the Companys performance
may suffer.

Risks of Underwriting Standards and Procedures

The Companys underwriting standards and procedures are more lenient than
conventional lenders in that the Company will invest in loans to borrowers
who will not be required to meet the credit standards of conventional
mortgage lenders.

The Company approves mortgage loans more quickly than other mortgage
lenders. Due to the nature of loan approvals, there may be a risk that the
credit inquiry the Company performs may not reveal all material facts
pertaining to the borrower and the security. As a result, loans arranged by
the Company and loans in which the Company may invest may suffer from a
higher rate of defaults as compared to loans arranged by more conventional
lenders. The Company attempts to mitigate this risk by insisting upon lower
loan to value ratios. Nonetheless, the Companys future results of
operations may be adversely affected by defaulting borrowers and the
attendant risk and expense of foreclosure proceedings. Additionally, loan to
value ratios on some construction and development loans may be calculated
using an As-if Completed appraisal, the values of which can dramatically
change.

Additionally, loan to value ratios are based on appraisals obtained at the
time of loan origination and may not reflect subsequent changes in value
estimates. Such appraisals are generally dated within 12 months of the date
of loan origination. The appraisals may be for the current estimate of the
as-if developed value of the property, which approximates the
post-construction value of

15



---



##### Table of Contents



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, we may not
recover the full amount of the loan.

Risks of Interest Rate Changes

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

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

One of the results of interest rate fluctuations is that borrowers may seek
to extend their low-interest-rate mortgage loans after market interest rates
have increased. Generally, the Companys loan documents permit the Company
to raise the interest rate it charges on extended loans anywhere from
between 3/4% to 3% from the then-current rate on the loan. This creates
three risks for the Company:

(i)  There can be no assurance that this permitted rate increase will be
adequate if interest rates have increased beyond the range contemplated by
the Companys loan documents.

(ii)  If interest rates rise, borrowers under loans with monthly or quarterly
principal payments may be compelled to extend their loans to decrease the
principal paid with each payment because the interest component has
increased. If this happens, there is a higher risk that the borrower may
default on the extended loan, and the increase in the interest rate on the
loan may not be adequate compensation for the increased risk. Distributions
on mortgage loans placed by the Company may decline if lenders are unable to
reinvest at higher rates or if an increasing number of borrowers default on
their loans.

(iii)  If, at a time of relatively low interest rates, a borrower prepays
obligations that have a higher interest rate from an earlier period,
investors will likely not be able to reinvest the funds in mortgage loans
earning that higher rate of interest. In the absence of a prepayment fee,
the investors will receive neither the anticipated revenue stream at the
higher rate nor compensation for their loss. This in turn could harm the
Companys reputation and may make it more difficult for the Company to
attract investors willing to acquire interests in mortgage loans.

Competition for Funds

The ability of the Company to access funds for mortgage loans depends upon
the perceived attractiveness of yields on loans placed by the Company, the
safety of the underlying investment, the Companys reputation, general
economic conditions and real estate market conditions. The Companys
principal advantage in attracting investors is the high historical yields
generated by loans brokered by the Company. The Company is at a disadvantage
compared to alternative investment vehicles to the extent that an investment
in mortgage loans lacks liquidity and is not guaranteed or insured by a
governmental agency. In addition, the fact that the Company is smaller than
many of the full service financial firms offering alternative investment
vehicles and has a more limited operating history may be disadvantages in
seeking to attract investors.

Competition for Borrowers

The Company considers its competitors for borrowers to be the providers of
non-conventional mortgage loans, that is, lenders who offer short-term,
equity-based loans on an expedited basis for slightly higher fees and rates
than those charged by conventional lenders. To a lesser extent, the Company
also competes with conventional mortgage lenders and mortgage loan
investors, such as commercial banks, thrifts, conduit lenders, insurance
companies, mortgage brokers, pension funds and other financial institutions
that offer conventional mortgage loans. Many of the companies against which
the Company competes have substantially greater financial, technical and
other resources than the Company. Competition in the Companys market niche
depends upon a number of factors, including price and interest rates of the
loan, speed of loan processing, cost of capital, reliability, quality of
service and support services.

16



---



##### Table of Contents






ITEM 7. FINANCIAL STATEMENTS

C O N T E N T S

|                                                   |                                                 |  |     |     | 
|-------------------------------------------------- | ----------------------------------------------- |  | --- | --- | 
|REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS |                                                 |  | S-1 |    
|CONSOLIDATED FINANCIAL STATEMENTS                  |                                                 |  |     |    
|                                                   | Consolidated Balance Sheet                      |  |     | S-2 | 
|                                                   | Consolidated Statements of Income               |  |     | S-3 | 
|                                                   | Consolidated Statements of Stockholders Equity |  |     | S-4 | 
|                                                   | Consolidated Statements of Cash Flows           |  |     | S-5 | 
|                                                   | Notes to Consolidated Financial Statements      |  |     | S-7 | 

17



---



##### Table of Contents



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

S-1



---



##### Table of Contents



Vestin Group, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETDecember 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                                  |          
|Line 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.

S-2



---



##### Table of Contents



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.

S-3



---



##### Table of Contents



Vestin Group, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY



|                                                                 |                                       |                                                                              |                            |   |                 |   |              |   |                |   |            |          |        |   |        |     |   |   |           |         |   |   |            |           |   |   | 
|---------------------------------------------------------------- | ------------------------------------- | ---------------------------------------------------------------------------- | -------------------------- | - | --------------- | - | ------------ | - | -------------- | - | ---------- | -------- | ------ | - | ------ | --- | - | - | --------- | ------- | - | - | ---------- | --------- | - | - | 
|                                                                 |                                       |                                                                              |                            |   | Preferred Stock |   | Common Stock |   | Treasury Stock
|                                                                 |                                       |                                                                              |                            |   |                 |   |              |   |               
|                                                                 |                                       |                                                                              |                            |   | Shares          |   | Amount       |   | Shares         |   | Amount     |          | Shares |   | Amount
|                                                                 |                                       |                                                                              |                            |   |                 |   |              |   |                |   |            |          |        |   |       
|Balance at January 1, 2001                                       |                                       |                                                                              |                           |   |                 | $ |             |   |                |   | 6,989,270  |          |        | $ | 699    |     |   |   | (2,400    | )       |   | $ | (11,306    | )        
|Comprehensive income:                                            |                                       |                                                                              |                            |   |                 |   |              |   |                |   |            |          |        |   |        |     |   |   |           |         |   |   |            |          
|                                                                 |                                       | Net income                                                                   |                            |   |                 |   |              |   |                |   |            |          |       |   |        |     |  |   |           |         |  |   |            |           |  |  
|                                                                 |                                       | Net unrealized loss on investments
available-for-sale, net of tax of $24,591 |                            |   |                |   |              |   |               |   |            |          |       |   |        |     |  |   |           |         |  |   |            |           |  |  
|                                                                 |                                       |                                                                              |                            |   |                 |   |              |   |                |   |            |          |        |   |        |     |   |   |           |         |   |   |            |          
|                                                                 |                                       |                                                                              | Total comprehensive income |   |                 |  |              |   |                |  |            |          |        |  |        |     |   |  |           |         |   |  |            |           |   |  | 
|Divestiture of L.L. Bradford and Company                         |                                       |                                                                              |                           |   |                 |   |             |   |                |   |            |          |        |   |        |     |   |   | (800,000  | )       |   |   | (540,000   | )        
|Issuance of preferred stock                                      |                                       |                                                                              | 937,800                    |   |                 |   | 94           |   |                |   |           |          |        |   |       |     |   |   |          |         |   |   |           |          
|Declaration of dividend on preferred stock                       |                                       |                                                                              |                           |   |                 |   |             |   |                |   |           |          |        |   |       |     |   |   |          |         |   |   |           |          
|Declaration of common stock stock dividend                       |                                       |                                                                              |                           |   |                 |   |             |   |                |   |           |          |        |   |       |     |   |   |          |         |   |   |           |          
|Common stock issued for employee bonuses                         |                                       |                                                                              |                           |   |                 |   |             |   |                |   |           |          |        |   |       |     |   |   | 30,000    |         |   |   | 44,442     |          
|Expenses related to issuance of warrants                         |                                       |                                                                              |                           |   |                 |   |             |   |                |   |           |          |        |   |       |     |   |   |          |         |   |   |           |          
|Treasury stock acquired                                          |                                       |                                                                              |                           |   |                 |   |             |   |                |   |           |          |        |   |       |     |   |   | (648,672  | )       |   |   | (3,640,581 | )        
|Retirement of treasury stock                                     |                                       |                                                                              |                           |   |                 |   |             |   |                |   | (1,421,072 | )        |        |   | (142   | )   |   |   | 1,421,072 |         |   |   | 4,147,445  |          
|                                                                 |                                       |                                                                              |                            |   |                 |   |              |   |                |   |            |          |        |   |        |     |   |   |           |         |   |   |            |          
|Balance at December 31, 2001                                     |                                       |                                                                              | 937,800                    |   |                 |   | 94           |   |                |   | 5,568,198  |          |        |   | 557    |     |   |   |          |         |   |   |           |          
|Comprehensive income:                                            |                                       |                                                                              |                            |   |                 |   |              |   |                |   |            |          |        |   |        |     |   |   |           |         |   |   |            |          
|                                                                 |                                       | Net income                                                                   |                            |   |                 |   |              |   |                |   |            |          |        |   |        |     |   |   |           |         |   |   |            |           |   |  
|                                                                 |                                       | Realization of loss on marketable securities                                 |                            |   |                 |   |              |   |                |   |            |          |        |   |        |     |   |   |           |         |   |   |            |           |   |  
|                                                                 |                                       |                                                                              |                            |   |                 |   |              |   |                |   |            |          |        |   |        |     |   |   |           |         |   |   |            |          
|                                                                 |                                       |                                                                              | Total comprehensive income |   |                 |   |              |   |                |   |            |          |        |   |        |     |   |   |           |         |   |   |            |           |   |   | 
|Declaration of dividend on preferred stock                       |                                       |                                                                              |                           |   |                 |   |             |   |                |   |           |          |        |   |       |     |   |   |          |         |   |   |           |          
|Declaration of dividend on common stock                          |                                       |                                                                              |                           |   |                 |   |             |   |                |   |           |          |        |   |       |     |   |   |          |         |   |   |           |          
|Expenses related to issuance of warrants                         |                                       |                                                                              |                           |   |                 |   |             |   |                |   |           |          |        |   |       |     |   |   |          |         |   |   |           |          
|Treasury stock acquired                                          |                                       |                                                                              |                           |   |                 |   |             |   |                |   |           |          |        |   |       |     |   |   | (296,200  | )       |   |   | (2,518,714 | )        
|Common stock options exercised                                   |                                       |                                                                              |                           |   |                 |   |             |   |                |   | 2,000      |          |        |   |       |     |   |   |          |         |   |   |           |          
|Warrants issued to purchase common stock
for consulting services |                                       |                                                                              |                           |   |                 |   |             |   |                |   |           |          |        |   |       |     |   |   |          |         |   |   |           |          
|Common stock issued from treasury for                            |                                       |                                                                              |                           |   |                 |   |             |   |                |   |           |          |        |   |       |     |   |   | 1,000     |         |   |   | 6,120      |          
|                                                                 | employee bonus
Treasury stock retired |                                                                              |                            |  |                 |   |              |  |                |   |            | (295,200 | )      |   |        | (30 | ) |   |           | 295,200 |   |   |            | 2,512,594 |  
|Preferred stock converted into common stock                      |                                       |                                                                              | (30,000                    | ) |                 |   | (3           | ) |                |   | 49,342     |          |        |   | 5      |     |   |   |           |         |   |   |            |          
|                                                                 |                                       |                                                                              |                            |   |                 |   |              |   |                |   |            |          |        |   |        |     |   |   |           |         |   |   |            |          
|Balance at December 31, 2002                                     |                                       |                                                                              | 907,800                    |   |                 | $ | 91           |   |                |   | 5,324,340  |          |        | $ | 532    |     |   | $ |          |         |   | $ |           |          
|                                                                 |                                       |                                                                              |                            |   |                 |   |              |   |                |   |            |          |        |   |        |     |   |   |           |         |   |   |            |          

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                                 |                                       |                                                                              |                            |   |            |   |            |            |               |           |          |   |             |         |            |        |           |           | 
|---------------------------------------------------------------- | ------------------------------------- | ---------------------------------------------------------------------------- | -------------------------- | - | ---------- | - | ---------- | ---------- | ------------- | --------- | -------- | - | ----------- | ------- | ---------- | ------ | --------- | --------- | 
|                                                                 |                                       |                                                                              |                            |   |            |   |            |            |               |           |          |   | Accumulated |         |            |        |          
|                                                                 |                                       |                                                                              |                            |   | Additional |   |            |            |               |           | Other    |   |             |         |           
|                                                                 |                                       |                                                                              |                            |   | Paid-in    |   | Retained   |            | Comprehensive |           |          |   |            
|                                                                 |                                       |                                                                              |                            |   | Capital    |   | Earnings   |            | Income        |           | Total   
|                                                                 |                                       |                                                                              |                            |   |            |   |            |            |               |           |         
|Balance at January 1, 2001                                       |                                       | $                                                                            | 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                         |                                       |                                                                              |                           |   |            |   |           |            |               |           |         |   |             |         | (540,000   | )     
|Issuance of preferred stock                                      |                                       |                                                                              | 9,377,904                  |   |            |   |           |            |               |           |         |   |             |         | 9,377,998  |       
|Declaration of dividend on preferred stock                       |                                       |                                                                              |                           |   |            |   | (75,731    | )          |               |           |         |   |             |         | (75,731    | )     
|Declaration of common stock stock dividend                       |                                       |                                                                              |                           |   |            |   | (112,324   | )          |               |           |         |   |             |         | (112,324   | )     
|Common stock issued for employee bonuses                         |                                       |                                                                              | 49,758                     |   |            |   |           |            |               |           |         |   |             |         | 94,200     |       
|Expenses related to issuance of warrants                         |                                       |                                                                              | 928,992                    |   |            |   |           |            |               |           |         |   |             |         | 928,992    |       
|Treasury stock acquired                                          |                                       |                                                                              |                           |   |            |   |           |            |               |           |         |   |             |         | (3,640,581 | )     
|Retirement of treasury stock                                     |                                       |                                                                              | (4,147,303                 | ) |            |   |           |            |               |           |         |   |             |         |           |       
|                                                                 |                                       |                                                                              |                            |   |            |   |            |            |               |           |          |   |             |         |            |       
|Balance at December 31, 2001                                     |                                       |                                                                              | 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                                          |                                       |                                                                              |                           |   |            |   |           |            |               |           |         |   |             |         | (2,518,714 | )     
|Common stock options exercised                                   |                                       |                                                                              | 8,000                      |   |            |   |           |            |               |           |         |   |             |         | 8,000      |       
|Warrants issued to purchase common stock
for consulting services |                                       |                                                                              | 37,807                     |   |            |   |           |            |               |           |         |   |             |         | 37,807     |       
|Common stock issued from treasury for                            |                                       |                                                                              |                           |   |            |   |           |            |               |           |         |   |             |         | 6,120      |       
|                                                                 | employee bonus
Treasury stock retired |                                                                              |                            |  |            |   |            | (2,518,684 | )             |           |          |  |             |         |            | (6,120 | )        
|Preferred stock converted into common stock                      |                                       |                                                                              | (2                         | ) |            |   |            |            |               |           |          |   |             |         |           |       
|                                                                 |                                       |                                                                              |                            |   |            |   |            |            |               |           |          |   |             |         |            |       
|Balance at December 31, 2002                                     |                                       | $                                                                            | 8,922,885                  |   |            | $ | 7,420,672  |            |               | $         |         |   |             | $       | 16,344,180 |       
|                                                                 |                                       |                                                                              |                            |   |            |   |            |            |               |           |          |   |             |         |            |       

The accompanying notes are an integral part of these statements.

S-4



---



##### Table of Contents



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 estates                         |                                                                      |                                       | (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 | )
|                                      |                                                                                   |                                                                      |                                       |                                           |           |                    |            |                  

The accompanying notes are an integral part of these statements.

S-5



---



##### Table of Contents



Vestin Group, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS  CONTINUED

|                                            |                                                                                                                               |                                                     |           |             |            |      |           |             |           | 
|------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------- | --------- | ----------- | ---------- | ---- | --------- | ----------- | --------- | 
|                                            |                                                                                                                               |                                                     |           | 2002        |            | 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.

S-6



---



##### Table of Contents



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. 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.

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

S-7



---



##### Table of Contents



investment and are carried at cost. Loan to value ratios are based on
appraisals obtained at the time of loan origination and may not reflect
subsequent changes in value estimates. Such appraisals 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.

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

S-8



---



##### Table of Contents



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.

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

S-9



---



##### Table of Contents



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. The servicing agreement stipulates that all
extension fees charged on behalf of the investors shall be retained by the
Company as part of the loan servicing fees. 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.

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

S-10



---



##### Table of Contents



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.



| |                                                                                                                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 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

S-11



---



##### Table of Contents



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.                                                                                                                                                                                                                                                                                                                                    
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | 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. 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. However, because of the inherent risks associated
with litigation and enforcement of judgments, the Company elected to
provide 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 write-off 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.

During the year ended December 31, 2002, the Company sold $24.2 million in
loans to the Funds pursuant to the terms of the

S-12



---



##### Table of Contents



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 the Companys Chief Executive Officer and 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.

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 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

S-13



---



##### Table of Contents



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.

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

S-14



---



##### Table of Contents



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.

STOCK OPTIONS AND WARRANTS ACTIVITY

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

|                                       |  |           |           |          |  |          |      | 
|-------------------------------------- |  | --------- | --------- | -------- |  | -------- | ---- | 
|                                       |  |           |           |          |  | Weighted
|                                       |  |           |           |          |  | Average 
|                                       |  | Number    |           | Exercise
|                                       |  | Of 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 Outstanding |      | Options/Warrants 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

S-15



---



##### Table of Contents



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 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   |           | AVERAGE 
|                           |  | OF       |           | Exercise
|                           |  | Warrants |           | 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

S-16



---



##### Table of Contents



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.

|                 |           |                     |  |                    |  |                |      |            |      |          |      |  |  |   |      |   |      | 
|---------------- | --------- | ------------------- |  | ------------------ |  | -------------- | ---- | ---------- | ---- | -------- | ---- |  |  | - | ---- | - | ---- | 
|                 |           |                     |  | Exercise Price     |  |                |      |            |      |          |      |  |  |   |      |  
|                 |           |                     |  | Equals, Exceeds or |  |                |      |            |      |          |      |  |  |   |      |  
|Number of        |           | is Less than Market |  | Weighted           |  |                |      |            |      | Weighted
|Warrants Granted |           | Price of Stock      |  | Average            |  |                |      |            |      | Average 
|During 2002      |           | on Grant Date       |  | Exercise Price     |  | Exercise 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.

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.

S-17



---



##### Table of Contents



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.

NOTE V  EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT
AUDITORS REPORT

The Company, Vestin Mortgage and Del Mar Mortgage, Inc., (Del Mar
Mortgage), a company wholly owned by Mike Shustek, the largest
shareholder and CEO of the Company, and various affiliates of the Company
are defendants in a civil action entitled Desert Land, L.L.C. et al. v.
Owens Financial Group, Inc.(the Action). On April 10, 2003, the United
States District Court for the District of Nevada (the Court) dismissed
17 of the plaintiffs claims, but entered a judgment on the remaining
claim for $5.0 million, plus interest accruing from March 26, 2003,
jointly and severally against Vestin Group, Vestin Mortgage and Del Mar
Mortgage. Subsequent to April 10, 2003, the Court stayed the execution
of the judgment pending the hearing and ruling on post-trial motions and,
accordingly, the Court did not require the defendants to post a bond for
the judgment. Del Mar Mortgage has agreed to indemnify Vestin Group and
Vestin Mortgage for any losses and expenses in connection with the Civil
Action. Mr. Shustek has guaranteed the indemnification. If the stay of
execution

S-18



---



##### Table of Contents



is lifted, Mr. Shustek has agreed to provide a bond in the amount of the
judgment. Although the ultimate outcome of the Civil Action is
uncertain, after consultation with legal counsel, the Company believes
that the judgment against Vestin Group and Vestin Mortgage will be
vacated and will have no effect on the Companys operating results and
financial condition. The defendants are appealing the ruling by the
District Court.

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.

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.

S-19



---



##### Table of Contents






ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL                 DISCLOSURE

Effective April 18, 2002, the Company replaced Grant Thornton LLP with Ernst
and Young as its independent auditors. During the period from January 1,
2002 through April 18, 2002, there were no disagreements with Grant Thornton
LLP on any matters of accounting principles or practices, financial
statement disclosure, or auditing scope and procedures which, if not
resolved to the satisfaction of Grant Thornton LLP would have caused Grant
Thornton LLP to make reference to the matter in their report.




PART III




ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH                SECTION 16(a) OF THE EXCHANGE ACT

The directors and officers of Vestin Group are as follows:

|                     |  |     |    |       |  |                                                                          
|-------------------- |  | --- | -- | ----- |  | -------------------------------------------------------------------------
|Name                 |  | Age |    | Title
|                     |  |     |    |      
|Michael V. Shustek   |  |     | 44 |       |  | Chairman of the Board, Chief Executive Officer and Director              
|Lance K. Bradford    |  |     | 36 |       |  | President, Treasurer and Director                                        
|John W. Alderfer     |  |     | 58 |       |  | Chief Financial Officer                                                  
|Ira S. Levine        |  |     | 42 |       |  | Executive Vice President of Legal and Corporate Affairs and Secretary    
|Stephen J. Byrne     |  |     | 45 |       |  | Chief Operations Officer and Director                                    
|Michael J. Whiteaker |  |     | 53 |       |  | Vice President of Regulatory Affairs                                     
|Peggy S. May         |  |     | 34 |       |  | President of Vestin Mortgage, a subsidiary of Vestin Group               
|Daniel Stubbs        |  |     | 41 |       |  | Executive Vice President of Vestin Mortgage, a subsidiary of Vestin Group
|Robert J. Aalberts   |  |     | 52 |       |  | Director                                                                 
|John E. Dawson       |  |     | 45 |       |  | Director                                                                 
|Robert L. Forbuss    |  |     | 54 |       |  | Director                                                                 
|Robert A. Groesbeck  |  |     | 42 |       |  | Director                                                                 
|James C. Walsh       |  |     | 62 |       |  | Director                                                                 
|Steven Ducharme      |  |     | 55 |       |  | Director                                                                 
|Jan Jones            |  |     | 55 |       |  | Director                                                                 

All the directors of Vestin Group hold office until the next annual meeting
of shareholders. The last annual meeting of Vestin Group shareholders was
August 21, 2002. Michael Shustek can cause a change in the Board of
Directors of Vestin Group by virtue of his controlling ownership interest in
Vestin Group. Vestin Group, which is a reporting company under the
Securities Exchange Act of 1934, as amended, has established an audit
committee consisting of three independent directors and requires that its
audit committee be comprised of independent directors. The By-laws of Vestin
Group provide for up to 10 directors and permit the Board of Directors to
fill any vacancy on the Board of Directors. Officers of the company serve at
the discretion of the Board of Directors.

The principal occupation and business experience for each of our officers and
directors and key employees, for at least the last five years, are as follows:

Robert J. Aalbertshas been a director of Vestin Group since April
1999. Since 1991, Mr. Aalberts has held the Ernst Lied Professor of Legal
Studies professorship at the University of Nevada, Las Vegas. From 1984 to
1991, Mr. Aalberts was an Associate Professor of Business Law at Louisiana
State University in Shreveport, Louisiana. From 1982 through 1984, he served
as an attorney for Gulf Oil Company. Mr. Aalberts has co-authored a book
relating to the regulatory environment, law and business of real estate; and
he is the author of numerous legal articles, dealing with various aspects of
real estate, business and the practice of law. Mr. Aalberts received his
Juris Doctor degree from Loyola University, in New Orleans, Louisiana and
received a Master of Arts from the University of Missouri. He is a member of
the State Bar of Louisiana.

John W. Alderferwas appointed the Chief Financial Officer of Vestin
Group in September 2002. From October 1998 to September 2002, Mr. Alderfer
was retired. From September 1996 to October 1998, Mr. Alderfer was a
Director, Vice President, Treasurer, and Chief Financial Officer of
Interactive Flight Technologies, Inc. From September 1990 to June 1996, Mr.
Alderfer was Senior Vice President, Treasurer, and Chief Financial Officer
of Alliance Gaming Corporation. Mr. Alderfer is the former Senior Vice
President, Corporate Controller and Chief Accounting Officer of Summa
Corporation and The Hughes Corporation, 100% owned by the Estate of Howard
R. Hughes. Mr. Alderfer received his BBA degree in accounting from Texas
Tech University. He is a Certified Public Accountant.

19



---



##### Table of Contents



Lance K. Bradfordhas been the President of Vestin Group since January
2001. In addition, Mr. Bradford has been a director, Chief Financial
Officer, Treasurer and Secretary of Vestin Mortgage and Treasurer and a
director of Vestin Group since April 1999. Mr. Bradford also acts as the
functional equivalent of a Chief Financial Officer for both Vestin Fund I
and Vestin Fund II. Mr. Bradford was also the Chief Financial Officer of
Vestin Group from 1999 to September 2002 and the Corporate Secretary of
Vestin Group from 1999 to 2000. Since 1992, Mr. Bradford has been a partner
in L.L. Bradford & Company, Las Vegas, Nevada, a Certified Public Accounting
firm that he founded. From 1988 to 1991, Mr. Bradford served as an
accountant with Ernst & Young International. Mr. Bradford received a
Bachelor of Science degree in Accounting from the University of Nevada, in
Reno, Nevada.

Stephen J. Byrnehas been the Chief Executive Officer of Vestin
Mortgage and the Chief Operations Officer of Vestin Group since January
2001. Mr. Byrne has also been a director of Vestin Mortgage since 1997 and
of Vestin Group since April 1999. From its inception in 1997 to 2000, Mr.
Byrne was the President of Vestin Mortgage. From 1999 to 2000, Mr. Byrne
also served as the President of Vestin Group. Mr. Byrne joined Del Mar
Mortgage in June 1998 as its Senior Lending Officer. In 1997, Mr. Byrne
founded Capsource, Inc., a predecessor of Vestin Mortgage, which he owned
and operated before joining Del Mar Mortgage. From 1991 to 1997, Mr. Byrne
served as Vice President of Wells Fargo Bank and of its predecessor First
Interstate Bank of Nevada. Mr. Byrne served in various capacities with First
Interstate Bank, including Manager of the Diversified Asset Group based in
Las Vegas and the commercial Diversified Asset Group in Houston, Texas. Mr.
Byrne received a Bachelor of Science degree in Business Administration from
Hastings College, Hastings, Nebraska.

John E. Dawsonhas been a director of Vestin Group since March 2000.
Since 1995, Mr. Dawson has been a partner at the law firm of Marquis &
Aurbach. Before joining Marquis & Aurbach, Mr. Dawson was affiliated with
the law firm of Jeffrey L. Burr & Associates. Mr. Dawson co-authored the
Asset Protection Guidebook for Attorneys and Accountants and has presented
seminars on asset protection. Mr. Dawson received his Bachelors Degree from
Weber State and his Juris Doctor from Brigham Young University. Mr. Dawson
received his Masters of Law (L.L.M.) in Taxation from the University of San
Diego in 1993. Mr. Dawson was admitted to the Nevada Bar in 1988 and the
Utah Bar in 1989.

Steven Ducharmehas been a director of Vestin Group since August 2001.
Mr. DuCharme served as a member of the Nevada Gaming Control Board (the
Board) for 10 years including two years as Chairman. First appointed to
the Board on January 2, 1991 by Nevada Governor Bob Miller, he was
reappointed to a second term in January 1995. He served as the law
enforcement representative on the three-member Board. Mr. DuCharme was named
Chairman of the Board on September 19, 1998 by Governor Miller and served
two years as Chairman. With his retirement from the Board in January 2001,
he concluded more than 30 years of public service in Nevada. Mr. DuCharme
began his career in law enforcement in 1970 as a Deputy Sheriff with the
Clark County Sheriffs Office, which later became the Las Vegas Metropolitan
Police Department (the LVMPD). During 20 years with the LVMPD, he spent 12
years working undercover investigating vice and narcotic activities. As a
Sergeant, he was the supervising detective in the Fraud Unit and later the
Sexual Assault Unit. Mr. DuCharmes last assignment with the LVMPD was as
the departments spokesman through the Office of Public Information as well
as being the Commander of the Crime Prevention Bureau. He retired from the
LVMPD to accept the Governors appointment to the Board. Mr. DuCharme holds
a B.A. degree in Criminal Justice from the University of Nevada, Las Vegas
and an associates degree in Law Enforcement from Clark County Community
College. He is also a graduate of the Southern Police Institute at the
University of Louisville in Kentucky. Mr. DuCharme is currently an advisor
to the faculty of the National Judicial College and also serves as an
instructor. He is the past Chairman of the International Association of
Gaming Regulators and past President of the Board of Trustees for the Nevada
Treatment Center, a non-profit service for substance abuse.

Robert L. Forbusshas been a director of Vestin Group since March 2000.
Since February 1999, Mr. Forbuss has been the President of Strategic
Alliances, a business and government affairs consulting organization. From
March 1998 through February 1999, he was the President of Medical
Transportation of America. From February 1997 to March 1998, Mr. Forbuss was
the Chief Executive Officer of the Southwest Division of American Medical
Response. From March 1994 to February 1997, he was Senior Vice President of
Laidlaw Medical Transportation, which had acquired Mercy Medical Services,
Inc., a company that Mr. Forbuss founded, owned and managed for 22 years.
The latter four companies are all in the business of providing emergency
ambulance and transportation services. Mr. Forbuss received his Bachelor of
Arts in Public Administration and Political Science from the California
State University at Long Beach, California.

20



---



##### Table of Contents



Robert A. Groesbeckhas been a director of Vestin Group since August
2000. Mr. Groesbeck received his Bachelor of Arts in Criminal Justice from
the University of Nevada in 1985, his Juris Doctor from Thomas S. Cooley
School of Law in 1990 and his Masters of Business Administration from
National University in 1993. Mr. Groesbeck is the founder of Home Works, a
full service home services company. From 1994 to June 2000, Mr. Groesbeck
was the General Counsel of Republic Silver State Disposal, Inc. From 1993 to
1997, Mr. Groesbeck was the Mayor of Henderson, Nevada. Mr. Groesbeck
currently serves on numerous charitable boards.

Jan Joneshas been a director of Vestin Group since January 2002. Ms.
Jones currently serves as Senior Vice President of Communications and
Government Relations for Harrahs Entertainment, Inc., a $3 billion company,
publicly traded on the New York Stock Exchange. In her capacity, Ms. Jones
oversees government relations, public relations, community relations,
employee communications and financial communications for 25 casinos across
the country under the Harrahs, Showboat, Rio and Harveys brand names. She
is responsible for communicating the companys position on critical issues
facing both Harrahs and the gaming industry. Prior to joining the company
in November 1999, Ms. Jones held the elected public office of Mayor of the
City of Las Vegas from 1991 until 1999. During her tenure as Mayor, Las
Vegas was the fastest growing city in America. Ms. Jones is a graduate of
Stanford University with a bachelor of arts degree in English. Ms. Jones has
an extensive background in business administration, marketing, and business
development.

Ira S. Levinehas been the Executive Vice President of Legal and
Corporate Affairs since September 2000. Mr. Levine has also been the
Corporate Secretary of Vestin Group since January 2001. Mr. Levine received
his BS in Business Administration specializing in accounting from the
University of Nevada in 1982, his Juris Doctor from Pepperdine University
School of Law in 1985 and his Masters of Legal Letters in Taxation from New
York University in 1986. Mr. Levine is a member of the state bars of both
Nevada and California. Since 1997, Mr. Levine has been a partner in the law
firm of Berkley, Gordon, Levine, Goldstein & Garfinkel, LLP. Prior to that
he was a shareholder in the law firm of Levine, McBride & Garfinkel, LLP.
From 1995 to 1997, Mr. Levine was a shareholder in the law firm of Quartes &
Brady LLP, formerly known as Streich Lang. Prior to that, Mr. Levine was
senior vice president, secretary and general counsel of United Gaming, Inc.
now known as Alliance Gaming, Inc. Mr. Levine started his legal career with
the law firm of McKenna Long & Aldridge LLP formerly known as McKenna,
Conner & Cuneo in Los Angeles, California.

Peggy S. Mayhas been with Vestin Group since September 1995, and has
been the President of Vestin Mortgage since January 2001. From 1997 to 2000,
Ms. May was the Senior Vice President of Vestin Mortgage. Ms. May is
responsible for all new and existing clients, loan packages and manages
investor relationships and serves as the administrator of the corporate
offices. Ms. May has over ten years of experience in title, escrow and
private lending.

Michael V. Shustekhas been a director of Vestin Mortgage and Chairman
of the Board of Directors, Chief Executive Officer and a director of Vestin
Group since April 1999. In 1995, Mr. Shustek founded Del Mar Mortgage, and
has been involved in various aspects of the real estate industry in Nevada
since 1990. In 1993, he founded Foreclosures of Nevada, Inc.
(Foreclosures), a company specializing in non-judicial foreclosures. Mr.
Shustek, however, no longer has any interest or involvement with
Foreclosures. The Company occasionally uses the services provided by
Foreclosures in its operations. In 1993, Mr. Shustek also started Shustek
Investments, a company that originally specialized in property valuations
for third-party lenders or investors and which continues today as the
primary vehicle for his private investment portfolio. In 1997, Mr. Shustek
was involved in the initial founding of Nevada First Bank, with the largest
initial capital base of any new state charter in Nevadas history. In 2000,
Mr. Shustek co-authored a book, Trust Deed Investments, on the topic of
private mortgage lending. Mr. Shustek is a guest lecturer at the University
of Nevada, Las Vegas, where he also has taught a course in Real Estate Law
and Ethics. Mr. Shustek received a Bachelor of Science degree in Finance at
the University of Nevada, Las Vegas.

On March 26, 1999, Del Mar Mortgage, a company controlled by Mr.
Shustek, entered into a stipulated court order (the Order) with the State
of Nevada, Department of Business and Industry, Financial Institutions
Division (the Division) resolving a dispute regarding Del Mar Mortgages
alleged noncompliance with various Nevada regulatory statutes. Without
admitting any facts, and solely to settle these matters, Del Mar Mortgage
agreed to assure compliance with applicable Nevada law in its advertising
solicitation of mortgage borrowers and in its making and servicing of
mortgage loans. Vestin Group and Vestin Mortgage, as successors to the
mortgage company business of Del Mar Mortgage, agreed to adhere to the terms
of the Order. Del Mar Mortgage paid the Division an aggregate of $50,000 to
cover the Divisions costs. The Order contained no findings of wrongful
conduct by Del Mar Mortgage.

Daniel B. Stubbshas been the Executive Vice President and Underwriting
Administrator of Vestin Mortgage since January 2000. Mr. Stubbs is
responsible for analyzing the risks of each loan as well as prescribing
Title Insurance coverage for each

21



---



##### Table of Contents



individual transaction. In addition, Mr. Stubbs serves on the loan committee
and acts as a liaison between Vestin Mortgage and the various banks that
carry its lines of credit. Mr. Stubbs has over 13 years experience in the
Title Insurance industry. Mr. Stubbs received his Bachelor of Arts in
Communications Studies from the University of Nevada, in Las Vegas, Nevada.
For the three years prior to January 2000, Mr. Stubbs was a title officer
with United Title Company in Las Vegas, Nevada.

James C. Walshhas been a director of Vestin Group since January 2001.
Mr. Walsh has practiced law in New York City since 1966, after receiving his
law degree from the University of Alabama. Mr. Walsh specializes in the
representation of professional athletes and entertainers. Mr. Walsh has been
the exclusive attorney, agent and business manager of Joe Namath since 1969.
Mr. Walsh is a member of the New York and Louisiana Bar Association.

Michael J. Whiteakerhas been Vice President of Regulatory Affairs of
Vestin Group since May 14, 1999 and is experienced in the banking and
finance regulatory fields, having most recently served with the State of
Nevada, Financial Institution Division from 1982 to 1999 as its Supervisory
Examiner, responsible for the financial and regulatory compliance audits of
all financial institutions in Nevada. Mr. Whiteaker has worked extensively
on matters pertaining to both state and federal statutes, examination
procedures, policy determination and credit administration for commercial
and real estate loans. From 1973 to 1982, Mr. Whiteaker was Assistant Vice
President of Nevada National Bank, responsible for a variety of matters
including loan review.




ITEM 10. EXECUTIVE COMPENSATION

Summary Compensation Table

|                            |                            |      |      |      |  |     |                     |         |                        |     |              |         |          |     |              |     |         |  |              |   |            |  |           |         |  |  |   |   |  |  |   |   | 
|--------------------------- | -------------------------- | ---- | ---- | ---- |  | --- | ------------------- | ------- | ---------------------- | --- | ------------ | ------- | -------- | --- | ------------ | --- | ------- |  | ------------ | - | ---------- |  | --------- | ------- |  |  | - | - |  |  | - | - | 
|                            |                            |      |      |      |  |     | Annual Compensation |         | Long-Term Compensation |     |              |         |         
|                            |                            |      |      |      |  |     |                     |         |                        |     |              |         |         
|                            |                            |      |      |      |  |     |                     |         |                        |     |              |         |          |     |              |     |         |  | Awards       |   | Payouts    |  |           |         | 
|                            |                            |      |      |      |  |     |                     |         |                        |     |              |         |          |     |              |     |         |  |              |   |            |  |           |         | 
|                            |                            |      |      |      |  |     |                     |         |                        |     |              |         |          |     |              |     |         |  | Restricted   |   | Securities |  |           |         |  |  |   |   | 
|                            |                            |      |      |      |  |     |                     |         |                        |     |              |         |          |     | Other Annual |     | Stock   |  | Underlying   |   | LTIP       |  | All Other
|                            |                            |      |      |      |  |     | Salary              |         | Bonus                  |     | Compensation |         | Award(s) |     | Options/SARs |     | Payouts |  | Compensation
|Name and Principal Position |                            | Year |      | ($)  |  | ($) |                     | ($)(2)  |                        | ($) |              | (#)     |          | ($) |              | ($)
|                            |                            |      |      |      |  |     |                     |         |                        |     |              |         |          |     |              |    
|Michael V. Shustek          |                            |      | 2002 |      |  |     | 793,500             |         |                        |     | 0            |         |          |     | 0            |     |         |  | 0            |   |            |  | 500,000   |         |  |  | 0 |   |  |  | 0 |  
|                            | Chief Executive Officer    |      |      | 2001 |  |     |                     | 852,000 |                        |     |              | 20,529  |          |     |              | 0   |         |  |              | 0 |            |  |           | 500,000 |  |  |   | 0 |  |  |   | 0 | 
|                            | of the
Company             |      |      | 2000 |  |     |                     | 884,500 |                        |     |              | 40,000  |          |     |              | 0   |         |  |              | 0 |            |  |           | 500,000 |  |  |   | 0 |  |  |   | 0 | 
|Stephen J. Byrne            |                            |      | 2002 |      |  |     | 361,100             |         |                        |     | 14,175       |         |          |     | 0            |     |         |  | 0            |   |            |  | 100,000   |         |  |  | 0 |   |  |  | 0 |  
|                            | Chief Executive Officer of |      |      | 2001 |  |     |                     | 332,908 |                        |     |              | 22,406  |          |     |              | 0   |         |  |              | 0 |            |  |           | 0       |  |  |   | 0 |  |  |   | 0 | 
|                            | Vestin Mortgage            |      |      | 2000 |  |     |                     | 240,000 |                        |     |              | 142,081 |          |     |              | 0   |         |  |              | 0 |            |  |           | 100,000 |  |  |   | 0 |  |  |   | 0 | 
|Lance K. Bradford           |                            |      | 2002 |      |  |     | 302,160             |         |                        |     | 0            |         |          |     | 0            |     |         |  | 0            |   |            |  | 200,000   |         |  |  | 0 |   |  |  | 0 |  
|                            | President of the Company   |      |      | 2001 |  |     |                     | 296,500 |                        |     |              | 2,597   |          |     |              | 0   |         |  |              | 0 |            |  |           | 0       |  |  |   | 0 |  |  |   | 0 | 
|                            |                            |      | 2000 |      |  |     | 228,994             |         |                        |     | 0            |         |          |     | 0            |     |         |  | 0            |   |            |  | 0         |         |  |  | 0 |   |  |  | 0 |  
|Peggy S. May                |                            |      | 2002 |      |  |     | 176,100             |         |                        |     | 62,009       |         |          |     | 0            |     |         |  | 0            |   |            |  | 63,334    |         |  |  | 0 |   |  |  | 0 |  
|                            | President of Vestin        |      |      | 2001 |  |     |                     | 132,667 |                        |     |              | 29,000  |          |     |              | 0   |         |  |              | 0 |            |  |           | 35,000  |  |  |   | 0 |  |  |   | 0 | 
|                            | Mortgage(1)                |      |      | 2000 |  |     |                     | 118,800 |                        |     |              | 13,500  |          |     |              | 0   |         |  |              | 0 |            |  |           | 10,000  |  |  |   | 0 |  |  |   | 0 | 
|Daniel Stubbs               |                            |      | 2002 |      |  |     | 128,174             |         |                        |     | 70,000       |         |          |     | 0            |     |         |  | 0            |   |            |  | 50,000    |         |  |  | 0 |   |  |  | 0 |  
|                            | Executive Vice President   |      |      | 2001 |  |     |                     | 90,000  |                        |     |              | 49,395  |          |     |              | 0   |         |  |              | 0 |            |  |           | 10,000  |  |  |   | 0 |  |  |   | 0 | 
|                            | of Vestin Mortgage         |      |      | 2000 |  |     |                     | 75,000  |                        |     |              | 20,027  |          |     |              | 0   |         |  |              | 0 |            |  |           | 5,000   |  |  |   | 0 |  |  |   | 0 | 



|(1) |  | The compensation for Ms. May includes compensation for services rendered to Vestin Mortgage and Vestin Capital, Inc. All of Ms. Mays 2002 and 2000 compensation was paid directly by Vestin Mortgage, and Vestin Mortgage
and Vestin Capital each paid 50% of her compensation in 2001.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | None of the Named Officers received other annual compensation exceeding the lesser of $50,000 or 10% of their salary and bonus for the relevant year.                                                                                                                                   

The following Option and Warrant/ SAR Grants Tables set forth the
individual grants of stock options made in fiscal 2002 to Vestin Groups
Chief Executive Officers and the next most highly compensated executive
officers named in the Summary Compensation Table above.

22



---



##### Table of Contents



Option & Warrant/ SAR Grants in Fiscal Year 2002

(Individual Grants)

|                   |  |              |         |                   |  |             |      |            |  |  |      |  |  |  |          | 
|------------------ |  | ------------ | ------- | ----------------- |  | ----------- | ---- | ---------- |  |  | ---- |  |  |  | -------- | 
|                   |  | Number of    |         | Percent of Total  |  |             |      |            |  |  |      | 
|                   |  | Securities   |         | Options/SARs      |  |             |      |            |  |  |      | 
|                   |  | Underlying   |         | Granted to        |  | Exercise or |      |            |  | 
|                   |  | Options/SARs |         | Employees         |  | Base        |      | Expiration
|Name               |  | Granted(#)   |         | in Fiscal 2002(%) |  | Price($/SH) |      | Date      
|                   |  |              |         |                   |  |             |      |           
|Michael V. Shustek |  |              | 500,000 |                   |  |             | 43.9 |            |  |  | 7.02 |  |  |  | 11/27/12 | 
|Stephen J. Byrne   |  |              | 100,000 |                   |  |             | 8.8  |            |  |  | 7.02 |  |  |  | 11/27/12 | 
|Lance K. Bradford  |  |              | 200,000 |                   |  |             | 17.5 |            |  |  | 7.02 |  |  |  | 11/27/12 | 
|Peggy S. May       |  |              | 63,334  |                   |  |             | 5.6  |            |  |  | 7.02 |  |  |  | 11/27/12 | 
|Daniel Stubbs      |  |              | 50,000  |                   |  |             | 4.4  |            |  |  | 7.02 |  |  |  | 11/27/12 | 

Michael V. Shustek entered into an Employment Agreement with Vestin
Group in December 1999 as its Chief Executive Officer. Pursuant to the
agreement, Mr. Shustek is entitled to receive a minimum annual salary of
$720,000 and such additional salary as the Board of Directors deems
appropriate. Mr. Shustek is also entitled to receive an automobile allowance
in the amount of $1,000 per month during the term of the agreement. The
agreement additionally provides that Mr. Shustek is to receive warrants to
purchase up to 500,000 shares of Vestin Groups common stock each year
during the term of the agreement. The agreement terminates on November 30,
2002, but will continue for successive one year periods unless either Vestin
Group or Mr. Shustek provides thirty days notice. In May 2002, Mr. Shustek
voluntarily reduced his annual salary to $150,000 effective the fourth
quarter of 2002. The Company currently anticipates that its Board of
Directors will approve an increase of Mr. Shusteks annual salary to
approximately $850,000 by the end of 2003.

On November 3, 1998, Stephen J. Byrne entered into an Employment
Agreement with Vestin Group (formerly known as Del Mar Mortgage) to serve as
its Chief Loan Officer for the operation of the mortgage broker business in
the State of Nevada. The terms of such employment include an initial annual
salary of $240,000 and performance bonuses as the Board of Directors deems
appropriate. The agreement is terminable by either Vestin Group or Mr. Byrne
with thirty days notice.

Lance K. Bradford entered into an Employment Agreement with Vestin
Group on April 1, 2000 to serve as its Chief Financial Officer. Pursuant to
the agreement, Mr. Bradford is entitled to receive an initial annual salary
of $296,000 and performance bonuses as the Board of Directors deems
appropriate. Mr. Bradford is also entitled to receive an automobile
allowance in the amount of $1,000 per month during the term of the
agreement. The agreement terminates March 31, 2003 but will continue for
successive one year periods unless either Vestin Group or Mr. Bradford
provides thirty days notice.

Peggy S. May entered into an Employment Agreement with Vestin Mortgage,
with an effective date of July 1, 2002, to serve as its President. The term
of the agreement begins on July 1, 2002 and ends on December 31, 2004.
Pursuant to the agreement, Ms. May is entitled to receive an initial annual
salary of $160,000, subject to review by the Board of Directors. Ms. May is
also eligible for bonuses but subject to the discretion of the Board of
Directors. The agreement additionally provides that Ms. May is to receive a
one-year salary if Vestin Mortgage terminates the agreement without cause.




ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Share Ownership

The following table indicates the beneficial ownership of Vestin
Groups voting securities by each person known by Vestin Group to be the
beneficial owner of more than 5% of such securities, as well as the
securities of Vestin Group beneficially owned by all officers and directors
of Vestin Group as of March 1, 2003. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission. In
computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of common stock subject to
options and warrants held by that person that are currently exercisable or
that will become exercisable within 60 days of March 1, 2003, are deemed
outstanding even if they have not actually been exercised. Those shares,
however, are not deemed outstanding for purpose of computing the percentage
ownership of any other person. Unless otherwise indicated, the stockholders
listed possess sole voting and investment power with

23



---



##### Table of Contents



respect to the shares shown.

|                                                                                                                                                       |  |                    |           |              |  |               |      |  
|------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------ | --------- | ------------ |  | ------------- | ---- | -
|                                                                                                                                                       |  |                    |           |              |  | Percentage of
|                                                                                                                                                       |  |                    |           |              |  | Common Stock 
|                                                                                                                                                       |  | Common Stock       |           | Beneficially
|Name                                                                                                                                                   |  | Beneficially Owned |           | Owned(1)(19)
|                                                                                                                                                       |  |                    |           |             
|Michael V. Shustek, Chairman and Chief Executive Officer of Vestin Group                                                                               |  |                    | 4,664,199 | (2)          |  |               | 68.3 | %
|2901 El Camino Avenue                                                                                                                                  |  |                    |           |              |  |               |      |  
|Las Vegas, Nevada 89102                                                                                                                                |  |                    |           |              |  |               |      |  
|Stephen J. Byrne, Chief Operations Officer and Director of Vestin Group and Chief
Executive Officer of Vestin Mortgage                                 |  |                    | 132,900   | (3)          |  |               | 2.5  | %
|2901 El Camino Avenue                                                                                                                                  |  |                    |           |              |  |               |      |  
|Las Vegas, Nevada 89102                                                                                                                                |  |                    |           |              |  |               |      |  
|Ira S. Levine, Executive Vice President of Legal and Corporate Affairs and
Corporate
Secretary of Vestin Group                                         |  |                    | 175,100   | (4)          |  |               | 3.2  | %
|2901 El Camino Avenue                                                                                                                                  |  |                    |           |              |  |               |      |  
|Las Vegas, Nevada 89102                                                                                                                                |  |                    |           |              |  |               |      |  
|Peggy S. May, President of Vestin Mortgage                                                                                                             |  |                    | 89,875    | (5)          |  |               | 1.7  | %
|2901 El Camino Avenue                                                                                                                                  |  |                    |           |              |  |               |      |  
|Las Vegas, Nevada 89102                                                                                                                                |  |                    |           |              |  |               |      |  
|Lance K. Bradford, Director, President and Treasurer of Vestin
Group and Chief Financial Officer, Treasurer, Secretary and Director of Vestin
Mortgage |  |                    | 30,000    |              |  |               | *    |  
|2901 El Camino Avenue                                                                                                                                  |  |                    |           |              |  |               |      |  
|Las Vegas, Nevada 89102                                                                                                                                |  |                    |           |              |  |               |      |  
|Daniel Stubbs, Executive Vice President of Vestin Mortgage                                                                                             |  |                    | 17,660    | (6)          |  |               | *    |  
|2901 El Camino Avenue                                                                                                                                  |  |                    |           |              |  |               |      |  
|Las Vegas, Nevada 89102                                                                                                                                |  |                    |           |              |  |               |      |  
|John W. Alderfer, Chief Financial Officer of Vestin Group                                                                                              |  |                    | 0         |              |  |               | *    |  
|2901 El Camino Avenue                                                                                                                                  |  |                    |           |              |  |               |      |  
|Las Vegas, Nevada 89102                                                                                                                                |  |                    |           |              |  |               |      |  
|Stephen A. Schneider, Vice President of Vestin Mortgage                                                                                                |  |                    | 30,000    | (7)          |  |               | *    |  
|2901 El Camino Avenue                                                                                                                                  |  |                    |           |              |  |               |      |  
|Las Vegas, Nevada 89102                                                                                                                                |  |                    |           |              |  |               |      |  
|Michael J. Whiteaker, Vice President of Regulatory Affairs of Vestin Group                                                                             |  |                    | 50,300    | (8)          |  |               | *    |  
|2901 El Camino Avenue                                                                                                                                  |  |                    |           |              |  |               |      |  
|Las Vegas, Nevada 89102                                                                                                                                |  |                    |           |              |  |               |      |  
|Robert J. Aalberts, Director of Vestin Group                                                                                                           |  |                    | 16,700    | (9)          |  |               | *    |  
|2901 El Camino Avenue                                                                                                                                  |  |                    |           |              |  |               |      |  
|Las Vegas, Nevada 8910                                                                                                                                 |  |                    |           |              |  |               |      |  
|John E. Dawson, Esq., Director of Vestin Group                                                                                                         |  |                    | 25,050    | (10)(11)     |  |               | *    |  
|2901 El Camino Avenue                                                                                                                                  |  |                    |           |              |  |               |      |  
|Las Vegas, Nevada 89102                                                                                                                                |  |                    |           |              |  |               |      |  

24



---



##### Table of Contents



|                                                             |  |                    |           |              |  |               |      |  
|------------------------------------------------------------ |  | ------------------ | --------- | ------------ |  | ------------- | ---- | -
|                                                             |  |                    |           |              |  | Percentage of
|                                                             |  |                    |           |              |  | Common Stock 
|                                                             |  | Common Stock       |           | Beneficially
|Name                                                         |  | Beneficially Owned |           | Owned(1)(19)
|                                                             |  |                    |           |             
|Robert L. Forbuss, Director of Vestin Group                  |  |                    | 15,000    | (12)         |  |               | *    |  
|2901 El Camino Avenue                                        |  |                    |           |              |  |               |      |  
|Las Vegas, Nevada 89102                                      |  |                    |           |              |  |               |      |  
|Robert A. Groesbeck, Director of Vestin Group                |  |                    | 15,000    | (13)         |  |               | *    |  
|2901 El Camino Avenue                                        |  |                    |           |              |  |               |      |  
|Las Vegas, Nevada 89102                                      |  |                    |           |              |  |               |      |  
|James C. Walsh, Director of Vestin Group                     |  |                    | 1,200,000 | (14)         |  |               | 18.4 | %
|2901 El Camino Avenue                                        |  |                    |           |              |  |               |      |  
|Las Vegas, Nevada 89102                                      |  |                    |           |              |  |               |      |  
|Steven Ducharme, Director of Vestin Group                    |  |                    | 10,000    | (15)         |  |               | *    |  
|2901 El Camino Avenue                                        |  |                    |           |              |  |               |      |  
|Las Vegas, Nevada 89102                                      |  |                    |           |              |  |               |      |  
|Jan Jones, Director of Vestin Group                          |  |                    | 10,000    | (16)         |  |               | *    |  
|2901 El Camino Avenue                                        |  |                    |           |              |  |               |      |  
|Bernard Greenblatt Trust U/A/D 7/15/96                       |  |                    | 373,355   | (19)         |  |               | 6.6  | %
|880 Buffwood Avenue                                          |  |                    |           |              |  |               |      |  
|Las Vegas, Nevada 89123                                      |  |                    |           |              |  |               |      |  
|The Redd 1996 Trust, William Si Redd, Trustee                |  |                    | 834,704   | (18)(19)     |  |               | 13.4 | %
|2340 Camero Avenue                                           |  |                    |           |              |  |               |      |  
|Las Vegas, Nevada 89123                                      |  |                    |           |              |  |               |      |  
|All directors and executive officers as a group (16 persons) |  |                    | 6,481,784 | (17)         |  |               | 76.3 | %



---

|*   |  | Less than 1%                                                         
|--- |  | ---------------------------------------------------------------------
|   
|(1) |  | Based upon 5,324,340 shares outstanding on March 1, 2003.            
|   
|(2) |  | Includes warrants to purchase up to 1,500,000 shares of Common Stock.
|   
|(3) |  | Includes options to purchase up to 100,000 shares of Common Stock.   
|   
|(4) |  | Includes options to purchase up to 150,000 shares of Common Stock.   
|   
|(5) |  | Includes options to purchase up to 45,000 shares of Common Stock.    
|   
|(6) |  | Includes options to purchase up to 15,000 shares of Common Stock.    
|   
|(7) |  | Includes options to purchase up to 30,000 shares of Common Stock.    
|   
|(8) |  | Includes options to purchase up to 50,000 shares of Common Stock.    
|   
|(9) |  | Includes options to purchase up to 15,000 shares of Common Stock.    

25



---



##### Table of Contents



|(10) |  | Includes options to purchase up to 15,000 shares of Common Stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(11) |  | Includes 1,850 shares of Common Stock owned by a family partnership
indirectly controlled by Mr. Dawson.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    
|(12) |  | Includes options to purchase up to 15,000 shares of Common Stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    
|(13) |  | Includes options to purchase up to 15,000 shares of Common Stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    
|(14) |  | Includes warrants to purchase up to 1.2 million shares of Common Stock
granted to Planned Licensing, Inc. (PLI). Mr. Walsh is an officer of and
has a majority equity interest in PLI. There is no other affiliation
between PLI and the Company.                                                                                                                                                                                                                                                                                                                                                                                              
|    
|(15) |  | Includes options to purchase up to 10,000 shares of Common Stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    
|(16) |  | Includes options to purchase up to 10,000 shares of Common Stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    
|(17) |  | Includes warrants and options to purchase up to 3,170,000 shares of
Common Stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    
|(18) |  | Includes warrants to purchase 12,336 shares of Common Stock held by the
Millennium 2001 Trust, which has common beneficiaries as the Redd 1996
Trust. The Redd 1996 Trust and the Millennium 2001 Trust are hereinafter
referred to collectively as the Redd 1996 Trust.                                                                                                                                                                                                                                                                                                                                                                       
|    
|(19) |  | The holders of the companys preferred stock are entitled to convert
their preferred shares into common shares at a ratio of $6.08 for one
common share. If all of the preferred shareholders were to convert into
common stock, the Redd 1996 Trust would own approximately 15.7 % of the
total issued and outstanding shares and the Bernard Greenblatt Trust would
own approximately 7.0 %. In addition, the beneficial ownership of the
following shareholders would be reduced as follows: Michael Shustek
58.1%, Stephen Byrne 2.0, Ira Levine 2.6%, Peggy May 1.4%, James C. Walsh
15.5%, and all directors and officers as a group 66.8%.




ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company has entered into a number of transactions with its principal
shareholder and other related parties. Such transactions fall into the
following categories:

Transactions with the Funds

The Company recognizes an annual management fee up to 0.25% of the aggregate
capital contributions to the Funds per annum. 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.

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 Agreement of the
Funds which permits the Funds to acquire loans from the Company if the loans
were acquired to facilitate their acquisition by the Funds and provided that
the price paid 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.

On July 2, 2001, Vestin Mortgage brokered a loan to Arroyo for $10,000,000.
The loan was funded by 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

26



---



##### Table of Contents



was denied by the Nevada State District Court on May 2, 2003. Trial on
this matter is scheduled for July 30, 2003. 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 of satisfy a judgment of
$4.8 million plus interest. However, because of the inherent risks
associated with litigation and enforcement of judgments, the Company elected
to provide a valuation allowance for the entire amount paid for the rights
to receive the proceeds of the judgment and recorded the allowance in 2002.
This write-off is reflected in General and Administrative expenses on the
Consolidated Statement of Income for the year ended December 31, 2002.

Transactions with Officers and Directors and their Affiliates

In 2000, the Company loaned an employee approximately $251,000 to enable him
to operate, develop and grow a California real estate loan fund. The Company
does not have any affiliation with the California real estate loan fund.
The loan is unsecured but is backed by a personal guaranty. The interest
rate of 10% is payable on a semi-annual basis and the principal is due on
the maturity date of April 19, 2004. As of March 31, 2003, the balance on
this note was approximately $118,000.

The Company had an investment in the amount of $153,810 in a mortgage loan
to Del Mar Mortgage, Inc. (Del Mar Mortgage, Inc.), 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. The Company has not
made, and does not contemplate making, any investments in Del Mar Mortage.

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 certain personnel of L.L. Bradford for services
provided to the Company. Also, during 2002, L.L. Bradford assisted in the
preparation of the Companys financial reports and provided bookkeeping
services at no charge to the Company. The Companys Audit Committee
approved the engagement of L.L. Bradford.

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, a law firm in which the Executive Vice President
of Legal and Corporate Affairs of the Company has an equity ownership
interest.

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 the Companys Chief Executive Officer and a stockholder of the
Company related to the use of an airplane for company travel.

27



---



##### Table of Contents






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                                |  | *            
|        |  |                                                                                                                                                        |  |              
|2.2     |  | Asset Acquisition Agreement between the Company and Del Mar Holdings, Inc., dated as of
April 9, 1999                                                  |  | *            
|        |  |                                                                                                                                                        |  |              
|2.3     |  | Asset Acquisition Agreement between the Company and Del Mar Mortgage, Inc., dated as of
April 9. 1999                                                  |  | *            
|        |  |                                                                                                                                                        |  |              
|2.4     |  | Agreement and Plan of Reorganization among the Company, L. L. Bradford & Company and the
Shareholders of L. L. Bradford & Company, dated June 30, 2000 |  | **           
|        |  |                                                                                                                                                        |  |              
|3.1     |  | Certificate of Incorporation                                                                                                                           |  | ***          
|        |  |                                                                                                                                                        |  |              
|3.2     |  | By-laws                                                                                                                                                |  | ***          
|        |  |                                                                                                                                                        |  |              
|10.1    |  | Employment Agreement between Del Mar Mortgage, Inc. and Steve Byrne, dated November 3, 1998                                                            |  | ***          
|        |  |                                                                                                                                                        |  |              
|10.2    |  | Transition Agreement between Del Mar Mortgage, Inc. and Capsource, Inc., dated April 27,
1999 and First Amendment thereto                              |  | ****         
|        |  |                                                                                                                                                        |  |              
|10.3    |  | Employment Agreement between Del Mar Mortgage and Mike Whiteaker, dated May 3, 1999                                                                    |  | ****         
|        |  |                                                                                                                                                        |  |              
|10.4    |  | The 2000 Stock Option Plan of Sunderland Corporation                                                                                                   |  | ****         
|        |  |                                                                                                                                                        |  |              
|10.5    |  | Employment Agreement between the Company and Michael V. Shustek, dated December 1, 1999                                                                |  | ****         
|        |  |                                                                                                                                                        |  |              
|10.6    |  | Employment Agreement between the Company and Ira S. Levine, dated September 1, 2000                                                                    |  | ******       
|        |  |                                                                                                                                                        |  |              
|10.7    |  | Employment Agreement between the Company and Lance K. Bradford, dated April 1, 2000                                                                    |  | *******      
|        |  |                                                                                                                                                        |  |              
|10.8    |  | Third Amended and Restated Operating Agreement of DM Mortgage Investors, LLC, dated as of
November 2, 2000                                             |  | *****        
|        |  |                                                                                                                                                        |  |              
|99.1    |  | Certification Pursuant to U.S.C. 18 Section 1350                                                                                                       |  | 24           
|        |  |                                                                                                                                                        |  |              
|99.2    |  | Consent of Independent Auditors                                                                                                                        |  | 25           
|        |  |                                                                                                                                                        |  |              
|99.3    |  | Consent of Independent Auditors                                                                                                                        |  | 26           



---

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

(b)  Reports on Form 8-K.

Current Reports on Form 8-K filed with the Commission on April 25, 2002 and
June 4, 2002, which report the following items:

(i)  Item 4  Changes in Registrants Certifying Accountant; and

(ii)  Item 7  Exhibits.

28



---



##### Table of Contents






PART IV




ITEM 14. CONTROL AND PROCEDURES

The Company has evaluated the effectiveness of the design and operation of
its disclosure controls and procedures as of a date within 90 days prior to
the filing of this transition report on Form 10-KSB (the Evaluation Date).
Such evaluation was conducted under the supervision and with the
participation of the Chief Executive Officer (CEO) and the Chief Financial
Officer (CFO) of the Company. Based upon such evaluation, the Companys
CEO and CFO have concluded that, as of the Evaluation Date, the Companys
disclosure controls and procedures were effective. There have been no
significant changes in the Companys internal controls or other factors that
could significantly affect these controls subsequent to the date of their
most recent evaluation.




SIGNATURES

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

| |  |                                           | 
| |  | ----------------------------------------- | 
| |  | VESTIN GROUP, INC.                       
| |  |                                          
| |  | /s/ John W. Alderfer                     
| |  |                                          
| |  | John W. Alderfer, Chief Financial Officer

Dated: June 2, 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 Officer |  | Chief Financial Officer,                                                                 |  | June 2, 2003
|                                                                 
|/s/ Michael V. ShustekMichael V. Shustek                          |  | Chairman of the Board,
Chief Executive Officer and
*Principal Executive Director Officer |  | June 2, 2003

29



---



##### Table of Contents






CERTIFICATION PURSUANT TO




SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John W. Alderfer, Chief Financial Officer of Vestin Group, Inc., certify
that:



|(1) |  | I have reviewed this annual report on Form 10-KSB/A-1 (this Form
10-KSB) of Vestin Group, Inc.;                                                                                                                                                                                                                   
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Based on my knowledge, this Form 10-KSB does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this Form 10-KSB;
|   
|(3) |  | Based on my knowledge, the financial statements, and other financial
information included in this Form 10-KSB, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this Form 10-KSB;                   
|   
|(4) |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                              



| | (a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this Form 10-KSB is
being prepared;
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this Form 10-KSB (the Evaluation Date); and                                                                                                  
|
| | (c) |  | presented in this Form 10-KSB our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|(5) |  | The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the
audit committee of registrants board of directors (or persons
fulfilling the equivalent function):
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weaknesses
in internal controls; and
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|(6) |  | The registrants other certifying officers and I have indicated in
this Form 10-KSB whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                               | 
|-------------------------------------------------------------- | 
|/s/ John W. Alderfer

John W. Alderfer
Chief Financial Officer

Dated: June 2, 2003

30



---



##### Table of Contents



CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael V. Shustek, Chief Executive Officer and Director of Vestin Group,
Inc., certify that:



|(1) |  | I have reviewed this annual report on Form 10-KSB/A-1 (this Form
10-KSB) of Vestin Group, Inc.;                                                                                                                                                                                                                   
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Based on my knowledge, this Form 10-KSB does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this Form 10-KSB;
|   
|(3) |  | Based on my knowledge, the financial statements, and other financial
information included in this Form 10-KSB, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this Form 10-KSB;                   
|   
|(4) |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                              



| | (a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this Form 10-KSB is
being prepared;
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this Form 10-KSB (the Evaluation Date); and                                                                                                  
|
| | (c) |  | presented in this Form 10-KSB our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|(5) |  | The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the
audit committee of registrants board of directors (or persons
fulfilling the equivalent function):
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weaknesses
in internal controls; and
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|(6) |  | The registrants other certifying officers and I have indicated in
this Form 10-KSB whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                | 
|------------------------------------------------------------------------------- | 
|/s/ Michael V. Shustek

Michael V. Shustek
Chief Executive Officer and Director

Dated: June 2, 2003

31