U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 333-32800
VESTIN FUND I, LLC
(Exact Name of Registrant as Specified in Its Charter)
NEVADA 88-0446244
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2901 EL CAMINO AVENUE, SUITE 206, LAS VEGAS, NEVADA 89102
(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: 702.227.0965
Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report.
Indicate by check whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
As of April 30, 2003, the Issuer had 9,552,984 of its Units outstanding.
TABLE OF CONTENTS
PAGE
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Balance sheets as of March 31, 2003 (unaudited),
and September 30, 2002........................................... 3
Statements of income for the three and six months ended
March 31, 2003 and 2002 (unaudited).............................. 4
Statement of members' equity for the six months ended
March 31, 2003 (unaudited)....................................... 5
Statements of cash flows for the six months ended
March 31, 2003 and 2002 (unaudited).............................. 6
Notes to financial statements (unaudited).......................... 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................ 12
PART II OTHER INFORMATION
Item 1. Legal Proceedings.................................................. 19
Item 2. Changes in Securities and Use of Proceeds.......................... 19
Item 3. Defaults Upon Senior Securities.................................... 19
Item 4. Submission of Matters to a Vote of Security Holders................ 19
Item 6. Exhibits and Reports on Form 8-K................................... 19
SIGNATURES................................................................. 20
2
VESTIN FUND I, LLC
BALANCE SHEETS
ASSETS
(UNAUDITED)
MARCH 31, 2003 SEPTEMBER 30, 2002
-------------- ------------------
Cash $ 1,132,742 $ 2,762,334
Certificates of deposit 1,825,000 2,775,000
Interest and other receivables 1,018,062 1,175,972
Note receivable from Manager 723,763 --
Real estate held for sale 21,471,784 1,541,258
Investment in mortgage loans, net of allowance for loan
losses of $300,000 and $100,000, respectively 70,998,595 91,091,308
Assets under secured borrowing 11,144,379 6,637,370
Deferred bond offering costs 115,943 83,631
------------ ------------
Total assets $108,430,268 $106,066,873
============ ============
LIABILITIES AND MEMBERS' EQUITY
Liabilities
Accounts payable $ 16,666 $ --
Due to Manager -- 430,447
Due to related parties 99,370 --
Secured borrowing 11,144,379 6,637,370
------------ ------------
Total liabilities 11,260,415 7,067,817
------------ ------------
Members' equity - authorized 10,000,000 units
9,715,872 and 9,928,052 units issued and oustanding
at $10 per unit at March 31, 2003 and
September 30, 2002, respectively 97,169,853 98,999,056
------------ ------------
Total members' equity 97,169,853 98,999,056
------------ ------------
Total liabilities and members' equity $108,430,268 $106,066,873
============ ============
The accompanying notes are an integral part of these statements.
3
VESTIN FUND I, LLC
STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
MARCH 31, MARCH 31,
---------------------------- ----------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
Revenues
Interest income from investment in
mortgage loans $ 2,475,401 $ 3,399,990 $ 4,991,929 $ 6,691,406
Loan fees -- -- 104,788 --
Other income 36,743 29,557 71,674 162,660
------------ ------------ ------------ ------------
Total revenues 2,512,144 3,429,547 5,168,391 6,854,066
------------ ------------ ------------ ------------
Operating expenses
Interest expense 181,911 -- 358,214 --
Management fees to Manager 62,852 62,101 125,508 185,768
Provision for loan losses 100,000 -- 200,000 --
Other 50,809 304 80,894 304
------------ ------------ ------------ ------------
Total operating expenses 395,572 62,405 764,616 186,072
------------ ------------ ------------ ------------
NET INCOME $ 2,116,572 $ 3,367,142 $ 4,403,775 $ 6,667,994
============ ============ ============ ============
Net income allocated to members $ 2,116,572 $ 3,367,142 $ 4,403,775 $ 6,667,994
============ ============ ============ ============
Net income allocated to members per
weighted average membership units $ 0.22 $ 0.33 $ 0.45 $ 0.66
============ ============ ============ ============
Weighted average membership units 9,838,467 10,246,023 9,879,811 10,114,150
============ ============ ============ ============
The accompanying notes are an integral part of these statements.
4
VESTIN FUND I, LLC
STATEMENT OF MEMBERS' EQUITY
(UNAUDITED)
UNITS AMOUNT
------------ ------------
Members' equity at September 30, 2002 9,928,052 $ 98,999,056
Distributions -- (5,711,177)
Capital contribution from Manager -- 1,600,000
Reinvestments of distributions 125,752 1,257,523
Members' withdrawals (337,932) (3,379,324)
Net income -- 4,403,775
------------ ------------
Members' equity at March 31, 2003 9,715,872 $ 97,169,853
============ ============
The accompanying notes are an integral part of these statements.
5
VESTIN FUND I, LLC
STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS ENDED
MARCH 31
----------------------------
2003 2002
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,403,775 $ 6,667,994
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 200,000 --
Change in operating assets and liabilities:
Due to Manager (56,637) 303,328
Due to related parties 99,370 --
Interest and other receivables 157,910 (1,451)
Accounts payable 16,666 --
Deferred bond offering costs (32,312) (43,560)
------------ ------------
Net cash provided by operating activities 4,788,772 6,926,311
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments in mortgage loans (21,327,843) (53,908,196)
Purchase of investments in mortgage loans from:
Vestin Fund II, LLC (12,575,000) --
Vestin Group Inc. (3,700,000) --
Other related party (295,000) --
Private investor (230,403) --
Proceeds received from sale of mortgage loans to:
Vestin Fund II, LLC 13,300,263 --
Vestin Group Inc. 4,500,000 --
Other related party 290,938 --
Proceeds from loan paid off 19,401,659 53,336,850
Proceeds from sale of investment in real estate
held for sale to Manager 1,100,000 --
Proceeds from certificates of deposit 950,000 --
------------ ------------
Net cash provided by (used in) investing activities 1,414,614 (571,346)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of membership units -- 383,394
Members' withdrawals (3,379,324) (1,186,858)
Members' distributions, net of reinvestments (4,453,654) (5,498,974)
------------ ------------
Net cash used in financing activities (7,832,978) (6,302,438)
------------ ------------
NET (DECREASE) INCREASE IN CASH (1,629,592) 52,527
CASH, BEGINNING 2,762,334 398,262
------------ ------------
CASH, ENDING $ 1,132,742 $ 450,789
============ ============
The accompanying notes are an integral part of these statements.
6
VESTIN FUND I, LLC
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(CONTINUED)
FOR THE SIX MONTHS ENDED
MARCH 31
----------------------------
2003 2002
------------ ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Non-cash investing and financing activities:
Reinvestment of members' distributions $ 1,257,523 $ 1,435,162
============ ============
Real estate held for sale acquired through foreclosure $ 19,930,526 $ --
============ ============
Investment in mortgage loans in real estate acquired for
investments in real estate held for sale $ 478,829 $ --
============ ============
Loans funded through secured borrowing $ 4,507,009 $ --
============ ============
Note receivable related to capital contribution by Manager $ 723,763 $ --
============ ============
In substance payoff of payable to Manager related to
capital contribution by Manager $ 876,237 --
============ ============
Sale of rights to receive proceeds of guarantee $ 3,084,000 $ --
============ ============
Conversion of deferred offering costs to membership units $ -- $ 1,000,000
============ ============
The accompanying notes are an integral part of these statements.
7
VESTIN FUND I, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2003
(Unaudited)
NOTE A -- ORGANIZATION
Vestin Fund I, LLC, a Nevada Limited Liability Company, (the "Company") is
primarily engaged in the business of mortgage lending. The Company invests in
loans secured by real estate through deeds of trust and mortgages. The Company
was organized in December 1999 and will continue until December 31, 2019 unless
dissolved prior thereto or extended by vote of the members under the provisions
of the Company's Operating Agreement.
The Manager of the Company is Vestin Mortgage, Inc. (the "Manager" or "Managing
Member"), a Nevada corporation engaged in the business of brokerage, placement
and servicing of commercial loans secured by real property. The Manager is a
wholly owned subsidiary of Vestin Group, Inc., a Delaware Corporation, whose
common stock is publicly held and traded on the Nasdaq National Market under the
symbol "VSTN." Through its subsidiaries, Vestin Group, Inc. is engaged in asset
management, real estate lending and other financial services and has managed
over $1 billion in real estate loans. The Operating Agreement provides that the
Manager has control over the business of the Company; including the power to
assign duties, to determine how to invest the Company's assets, to sign bills of
sale, title documents, leases, notes, security agreements, mortgage investments
and contracts, and to assume direction of the business operations. The Operating
Agreement also provides that the members have certain rights, including the
right to terminate the Manager subject to a majority vote of the members.
Vestin Mortgage, Inc. is also the Manager of Vestin Fund II, LLC, ("Fund II")
and inVestin Nevada, Inc., entities in the same business as the Company. The
financial statements have been prepared in accordance with Securities and
Exchange Commission requirements for interim financial statements. Therefore,
they do not include all of the information and footnotes required by accounting
principles generally accepted in the United States for complete financial
statements. The financial statements should be read in conjunction with the
financial statements and notes thereto contained in the Company's annual report
on Form 10-K for the transition period ended September 30, 2002.
The results of operations for the interim periods shown in this report are not
necessarily indicative of results to be expected for the full year. In the
opinion of management, the information contained herein reflects all adjustments
necessary to make the results of operations for the interim periods a fair
statement of such operation. All such adjustments are of a normal recurring
nature.
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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.
2. 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 Manager'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
8
the allowance for loan losses. Subsequent recoveries of amounts previously
charged off are added back to the allowance.
3. REAL ESTATE HELD FOR SALE
Real estate held for sale includes real estate acquired through foreclosure and
is carried at the lower of cost or the property's estimated fair value, less
estimated costs to sell, based on appraisals and local market knowledge.
4. INVESTMENTS IN MORTGAGE LOANS
Investments in mortgage loans are secured by trust deeds and mortgages.
Generally, all of the Company's mortgage loans require interest only payments
with a balloon payment of the principal at maturity. The Company has both the
intent and ability to hold mortgage loans until maturity and therefore, mortgage
loans are classified and accounted for as held for investment and are carried at
cost. 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.
5. SECURED BORROWING
Certain loans that have been participated to third party investors ("Investor")
through an intercreditor agreement ("Agreement") are accounted for as secured
borrowing in accordance with SFAS No. 140, ACCOUNTING FOR TRANSFERS AND
SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES ("SFAS No.
140"). Under the Agreement, investors may participate in certain loans with
Vestin Mortgage, Fund II, and the Company (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 participation amount; (ii) substitute an alternative loan
acceptable to the Investor; or (iii) repurchase the participation from the
Investor for the outstanding balance of the participation plus accrued interest.
Consequently, the Investor is in a priority lien position against the
collateralized loans and mortgage loan financing under the participation
arrangement is accounted for as a secured borrowing in accordance with SFAS No.
140.
Assets under secured borrowing have been segregated in the accompanying balance
sheet and as of March 31, 2003 include loans outstanding of $11.1 million and
real estate acquired through foreclosure of $58,250.
NOTE C -- INVESTMENTS IN MORTGAGE LOANS
Investments in mortgage loans are as follows:
March 31, 2003
NUMBER
LOAN OF AVERAGE PORTFOLIO LOAN
TYPE LOANS BALANCE INTEREST RATE PERCENTAGE TO VALUE*
---- ----------- ----------- ------------- ----------- -----------
Acquisition and development .. 4 $10,705,666 14.71% 15.02% 43.27%
Bridge ....................... 5 7,313,006 13.59% 10.26% 65.95%
Commercial ................... 21 28,348,646 12.77% 39.76% 62.61%
Construction ................. 7 12,130,132 13.85% 17.01% 54.88%
Land ......................... 6 12,322,316 12.95% 17.28% 43.02%
Residential .................. 3 478,829 12.50% 0.67% 70.00%
----------- ----------- ----------- ----------- -----------
46 $71,298,595 13.36% 100.00% 55.40%
=========== =========== =========== =========== ===========
9
September 30, 2002
NUMBER
LOAN OF AVERAGE PORTFOLIO LOAN
TYPE LOANS BALANCE INTEREST RATE PERCENTAGE TO VALUE*
---- ----------- ----------- ------------- ----------- -----------
Acquisition and development .. 11 $17,379,074 13.66% 19.06% 50.89%
Bridge ....................... 3 9,129,025 13.17% 10.01% 69.20%
Commercial ................... 10 28,181,705 13.20% 30.90% 57.40%
Construction ................. 11 26,241,223 14.09% 28.78% 51.93%
Land ......................... 4 10,260,281 13.19% 11.25% 32.33%
----------- ----------- ----------- ----------- -----------
39 $91,191,308 13.58% 100.00% 52.54%
=========== =========== =========== =========== ===========
* 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 no greater than 12 months prior to 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.
MARCH 31, 2003 PORTFOLIO SEPTEMBER 30, 2002 PORTFOLIO
LOAN TYPE BALANCE PERCENTAGE BALANCE PERCENTAGE
--------- ----------- ----------- ----------- -----------
First mortgages ....... $71,293,101 99.99% $91,180,814 99.99%
Second mortgages** .... 5,494 0.01% 10,494 0.01%
----------- ----------- ----------- -----------
$71,298,595 100.00% $91,191,308 100.00%
=========== =========== =========== ===========
** All of the Company's second mortgages are junior to a first trust deed
position held by either the Company or the Company's Manager.
The following is a schedule of maturities of investments in mortgage loans as of
March 31, 2003:
2003................................... $ 66,459,933
2004................................... 4,838,662
-------------
$ 71,298,595
=============
The following is a schedule by geographic location of investments in mortgage
loans as of:
MARCH 31, 2003 PORTFOLIO SEPTEMBER 30, 2002 PORTFOLIO
BALANCE PERCENTAGE BALANCE PERCENTAGE
----------- ---------- ----------- ----------
Arizona ........ $ 9,556,502 13.40% $16,225,981 17.79%
California ..... 7,353,182 10.31% 1,247,876 1.37%
Colorado ....... 1,263,333 1.77% 983,217 1.08%
Florida ........ 115,450 0.16% -- 0.00%
Hawaii ......... 9,938,662 13.94% 11,750,000 12.88%
Nevada ......... 26,485,436 37.15% 43,288,748 47.47%
New Mexico ..... 478,829 0.67% 1,157,505 1.27%
Texas .......... 11,298,191 15.85% 11,568,971 12.69%
Utah ........... 3,369,010 4.73% 3,369,010 3.69%
Washington ..... 1,440,000 2.02% 1,600,000 1.76%
----------- ---------- ----------- ----------
$71,298,595 100.00% $91,191,308 100.00%
=========== ========== =========== ==========
The Company has six mortgage loan products consisting of bridge, commercial,
construction, acquisition and development, land, and residential loans. The
effective interest rates on all product categories range from 10% to 17%.
Revenue by product will fluctuate based upon relative balances during the
period.
10
At March 31, 2003, five of the Company's loans totaling $10.8 million were
non-performing (more than 90 days past due on interest payments) and past due on
principal. The Company has commenced foreclosure proceedings on these loans. One
of these loans totaling $250,000 is included in the participation pool related
to secured borrowing. Pursuant to the terms of an intercreditor agreement, the
Company has continued to remit to the investor the interest due on the
participated amounts. The Company's Manager evaluated all of these loans and
concluded that the underlying collateral was sufficient to protect the Company
against a loss of principal or interest. Accordingly, no specific allowance for
loan losses was deemed necessary for these loans.
In addition to the above-mentioned loans, as of the quarter ended March 31,
2003, the Company's Manager had granted extensions on 12 loans pursuant to the
terms of the original loan agreements, which permit extensions by mutual
consent. Such extensions are generally provided on loans where the original term
was 12 months or less and where a borrower requires additional time to complete
a construction project or negotiate take out financing. The aggregate amount due
to the Company from borrowers whose loans had been extended as of the quarter
ended March 31, 2003 was approximately $15.9 million. The Company's Manager
concluded that no allowance was necessary with respect to these loans.
The Company's Manager 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. The Company's Manager believes that
the allowance for loan losses totaling $300,000 included in the accompanying
balance sheet as of March 31, 2003 is adequate to address estimated credit
losses in the Company's investment in mortgage loan portfolio as of that date.
Decisions regarding an allowance for loan losses require management's judgment.
As a result, there is an inherent risk that such judgment will prove incorrect.
In such event, actual losses may exceed (or be less than) the amount of any
allowance. To the extent that the Company experiences losses greater than the
amount of its allowance, the Company may incur a charge to its earnings that
will adversely affect its operating results and the amount of any distributions
payable to its members.
NOTE D -- RELATED PARTY TRANSACTIONS
For the three and six months ended March 31, 2003 and 2002, the Company recorded
management fees to the Company's Manager of approximately $62,852 and $125,508,
respectively, compared to $62,101 and $185,768 for the same periods in 2002.
Additionally, for the three and six months ended March 31, 2003, the Company
recorded pro rata distributions owed to the Company's Manager of $27,017 and
$56,033 based upon the total of 100,000 units owned by the Company's Manager.
As of March 31, 2003, the Company recorded a note receivable from its Manager
totaling $723,763. The note is unsecured, bears interest at 6%, matures on
September 30, 2003, and requires five equal monthly payments totaling $147,668
beginning on May 31, 2003. The note constitutes a capital contribution made by
the Manager to restore the value of the members' capital account in Fund I to
approximately $10 per unit. No units were issued to the Manager in consideration
of this capital contribution.
During the six months ended March 31, 2003, the Company purchased $12,575,000 in
investments in mortgage loans from Vestin Fund II, LLC, $3,700,000 from Vestin
Group, Inc., $478,829 from the Manager and $295,000 from other related parties.
For the same period, the Company sold $13,300,263 in investments in mortgage
loans to Vestin Fund II, LLC, $4,500,000 to Vestin Group Inc., and $290,938 to
other related parties.
During the six months ended March 31, 2003, the Company sold real estate held
for sale of $1.6 million to Vestin Group. No gain or loss was recorded on this
sale.
During the quarter ended March 31, 2003, the Company received a capital
contribution from the Company's Manager of $1.6 million to increase the members'
capital account to approximately $10 per unit. The contribution includes a note
receivable totaling $723,763, which bears interest at 6% and requires five equal
monthly payments totaling $147,668 beginning on May 31, 2003. The contribution
also includes the forgiveness of management fees and other awards payable to the
Manager and other accounts payable of $876,237.
NOTE E -- REAL ESTATE HELD FOR SALE
At March 31, 2003, the Company had seven properties with a total carrying value
of $21.5 million, which were acquired through foreclosure and recorded as
investments in real estate held for sale. The Company may share ownership of
such properties with Fund II, the Manager, or other unrelated parties. The
summary below includes the Company's percentage ownership in each property.
These investments in real estate held for sale are accounted for at the lower of
cost or fair value less costs to sell with fair value based on appraisals and
knowledge of local market conditions. It is not the Company's intent to invest
in or own real estate as a long-term investment. The Company seeks to sell
properties acquired through foreclosure as quickly as circumstances permit. The
following is a summary of real estate held for sale as of March 31, 2003:
11
Description % of ownership Carrying value
----------- -------------- --------------
Raw land in Mesquite, Nevada 58% $ 2,961,029
40 acres of land containing 381 RV lots in Las Vegas, Nevada 69% 12,141,886
A 36-unit apartment complex located in Las Vegas, Nevada, 13% 215,432
65 acres of raw land in Mesquite, Nevada 59% 1,839,607
A custom residential property located in Santa Fe, New Mexico 96% 1,191,055
An uncompleted golf course in Mesquite, Nevada 64% 3,019,484
An approximate 200-unit apartment complex located in Las Vegas,
Nevada 2% 103,291
-----------
Total $21,471,784
===========
Based on management's estimate of fair value of these assets, no impairment
charge was required as of March 31, 2003.
Through foreclosure, the Company assumed an approximate 2% ownership of a
200-unit apartment complex as described above. The other 98% is owned by Fund
II. The Company has engaged an outside management company to manage the
apartment complex, pending its sale. The Company's share of income from
operations for the three months ended March 31, 2003 totaled $80 which is
included in other income on the accompanying statements of income.
NOTE F -- SECURED BORROWING
As of March 31, 2003, the Company had $11.1 million in secured borrowings
pursuant to an intercreditor agreement with the related amounts included in
assets under secured borrowing. For the three and six month periods ended March
31, 2003, the Company recorded interest expense of $181,911 and $358,214,
respectively, related to the secured borrowing.
NOTE G -- LITIGATION INVOLVING THE MANAGER
The Manager, Vestin Group, Inc., and Del Mar Mortgage, Inc., a company wholly
owned by Mike Shustek, the largest shareholder and CEO of the Vestin Group, Inc.
(collectively, the "defendants"), are defendants in a civil action (the
"Action"). On April 10, 2003, the United States District Court for the District
of Nevada (the "Court") entered a judgment in the Action for $5.0 million, plus
interest accruing from March 26, 2003, jointly and severally against the
defendants. 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, Inc. has indemnified Vestin Group, Inc. and the Manager for any
losses and expenses in connection with the 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. In management's opinion after
consultation with legal counsel, the judgment against Vestin Group, Inc. and the
Manager will be vacated and will have no effect on the operating results and
financial condition of the Company. The defendants are appealing the rating by
the District Court.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
BACKGROUND
Vestin Fund I, LLC (the "Company") was organized in December 1999 as a Nevada
limited liability company, for the purpose of investing in mortgage loans. The
Company invests in loans secured by real estate through deeds of trust and
mortgages. Prior to September 1, 2000, the Company was a development stage
company.
The Company's manager is Vestin Mortgage, Inc., a licensed mortgage company in
the State of Nevada (the "Manager" or "Managing Member"). Vestin Mortgage is a
wholly-owned subsidiary of Vestin Group, Inc., a Delaware corporation, whose
common stock is traded on the Nasdaq National Market under the ticker symbol
"VSTN." Vestin Mortgage, Inc. is also the manager of Vestin Fund II, LLC, and
inVestin Nevada, Inc. which are entities similar to Vestin Fund I, LLC.
The following is a financial review and analysis of the Company's financial
condition and results of operations for the three and six month periods ended
March 31, 2003. This discussion should be read in conjunction with the Company's
financial statements and accompanying notes and other detailed information
regarding the Company appearing elsewhere in this Form 10-Q and the Company's
report on Form 10-K for the transition period ended September 30, 2002.
FORWARD LOOKING STATEMENTS
When used in this Quarterly Report on Form 10-Q the words or phrases "will
likely result," "are expected to," "is anticipated," or similar expressions are
intended to identify "forward looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
certain risks and uncertainties, including but not limited to changes in
interest rates, and fluctuations in operating results. Such factors which are
discussed in Management's Discussion and Analysis of Financial Condition and
Results of Operations, could affect the Company's financial performance and
could cause the Company's actual results for future periods to differ materially
from any opinion or statements expressed herein with respect to future periods.
As a result, the Company wishes to caution readers not to place undue reliance
on any such forward looking statements, which speak only as of the date made.
12
OVERVIEW
The Company commenced raising funds through the sale of its units in September
2000. By June 2001, the Company had sold all of the 10,000,000 units offered
pursuant to the Company's registration statement. No additional units will be
sold, however, current members may continue to participate in the Company's
Distribution Reinvestment Plan whereby the member's distribution may be used to
purchase additional units at $10.00 per unit. As of March 31, 2003, an
additional 562,332 units have been purchased under this plan. Additionally, in
connection with the Company's organization, the Company issued approximately
100,000 units to its Manager for offering costs paid by them to unrelated third
parties on the Company's behalf.
SUMMARY OF FINANCIAL RESULTS
THREE MONTHS ENDED MARCH 31, SIX MONTHS ENDED MARCH 31,
---------------------------- ----------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
Total revenues ........................................ $ 2,512,144 $ 3,429,547 $ 5,168,391 $ 6,854,066
Total expenses ........................................ 395,572 62,405 764,616 186,072
------------ ------------ ------------ ------------
Net income ............................................ $ 2,116,572 $ 3,367,142 $ 4,403,775 $ 6,667,994
============ ============ ============ ============
Earnings per unit:
Net income allocated to members per weighted average
membership units .................................... $ 0.22 $ 0.33 $ 0.45 $ 0.66
============ ============ ============ ============
Annualized rate of return to members (a) .............. 8.6% 13.1% 8.9% 13.2%
============ ============ ============ ============
Weighted average membership units ..................... 9,838,467 10,246,023 9,879,811 10,114,150
============ ============ ============ ============
(a) The annualized rate of return to members is calculated based upon the net
income allocated to members per weighted average units as of March 31, 2003
and 2002 divided by the number of months during the period and multiplied by
twelve (12) months, then divided by ten (the $10 cost per unit).
THREE AND SIX MONTHS ENDED MARCH 31, 2003 COMPARED TO THREE AND SIX MONTHS ENDED
MARCH 31, 2002
Total Revenues. For the three and six months ended March 31, 2003, revenues
totaled $2.5 million and $5.2 million, respectively, compared to $3.4 million
and $6.9 million for the same period in 2002, a decrease of $0.9 million and
$1.7 million or 26% and 25%. The decrease in revenue was primarily due to an
increase in non-earning assets. The Company's non-earning assets at March 31,
2003 were approximately $32.5 million, an increase of $32.5 million for the
three and six months ended March 31, 2003, compared to the same periods in 2002.
Consequently, interest earned on our investments in mortgage loans during the
six months in 2003 decreased compared to the same period in 2002. Our Manager
believes that the increase in non-earning assets is primarily the result of the
individual circumstances of the borrowers involved. Our revenues will continue
to suffer until we are able to convert a significant portion of the non-earning
assets into interest paying mortgage loans. We attempt to accomplish this by
working with the borrower where possible and by foreclosing on the underlying
property where necessary. We intend to sell properties acquired through
foreclosure as soon as practicable, consistent with our objective of avoiding a
loss of principal on our loans. However, we cannot predict how quickly we will
be able to sell foreclosed properties.
Total Expenses. For the three and six months ended March 31, 2003, expenses
totaled $395,572 and $764,616, respectively, compared to $62,405 and $186,072
for the same period in 2002, an increase of $333,167 and $578,544, respectively.
Increase in total expenses for 2003 primarily related to the provision for loan
losses totaling $200,000, and interest expense totaling $358,214 related to
secured borrowing as further discussed in Note F in the footnotes to the
attached financial statements. Although our Manager believes the current
provision for loan losses is adequate, it is possible that this provision will
need to be increased to reflect difficulties encountered in recovering our
investment in defaulted loans. In such event, our expenses may materially
increase. Management fees for the three and six months ended March 31, 2003
totaled $62,852 and $125,508, respectively. Management fees are an annual
recurring expense based upon an amount up to 0.25% of aggregate outstanding
capital.
Net Income. Overall, net income for the three and six months ended March 31,
2003 totaled $2.1 million and $4.4 million compared to $3.4 million and $6.7
million, respectively, for the same period in 2002, a decrease of $1.3 million
and $2.3 million or 38% and 34%, respectively.
13
Annualized Rate of Return to Members. For the three and six months ended March
31, 2003, annualized rate of return to members totaled 8.6% and 8.9%,
respectively, as compared to 13.1% and 13.2%, respectively for the same periods
in 2002. The decrease in annualized rate of return to members was primarily the
result of the increase in non-earning assets of $32.5 million as of March 31,
2003 compared to $0 as of March 31, 2002.
Our operating results are affected primarily by (i) the amount of capital we
have to invest in mortgage loans, (ii) the level of real estate lending activity
in the markets we service, (iii) our ability to identify and work with suitable
borrowers, (iv) the interest rates we are able to charge on our loans and (v)
the level of delinquencies, foreclosures and related loan losses which we
experience. The amount of capital we have to invest in mortgage loans has been
reduced by the increase in non-earning assets discussed above and redemptions
during the past six months of approximately $3.4 million.
Although the US economy has suffered from a mild recession over the recent past,
we have not experienced a material slowdown in commercial real estate lending in
the markets we service. However, a prolonged recession may dampen real estate
development activity, thereby diminishing the market for our loans. In addition,
the continuing decline in interest rates, which is largely attributable to the
weak economy, may be expected to diminish the interest rates we can charge on
our loans. The average interest rate on our loans at March 31, 2003 was 13.36%,
as compared to 13.11% at March 31, 2002. Moreover, a prolonged recession or poor
credit decisions by our Manager may continue the increase in non-earning assets.
This increase in non-earning assets has contributed to the decline in our
annualized rate of return to members from 13.2% at March 31, 2002 to 8.9% for
the six months ended March 31, 2003.
INVESTMENTS IN MORTGAGE LOANS SECURED BY REAL ESTATE PORTFOLIO
As of March 31, 2003, the Company invested in mortgage loans secured by real
estate totaling $71,298,595, including 46 loans with an aggregate principal
value of $71,293,101 secured by first deeds of trust. Two of these loans are
also secured by second deeds of trust totaling $5,494. All of the Company's
second mortgages are junior to a first trust deed position held by either the
Company or the Company's Manager.
As of March 31, 2003, the weighted average contractual interest yield on the
Company's investment in mortgage loans is 13.36%. These mortgage loans mature
within the next 24 months.
Losses may occur from investing in mortgage loans. The amount of losses will
vary as the loan portfolio is affected by changing economic conditions and the
financial position of borrowers. There is no precise method of predicting
potential losses.
The conclusion that a mortgage loan is uncollectible or that collectibility is
doubtful is a matter of judgment. On a quarterly basis, the Manager evaluates
the Company's mortgage loan portfolio for impairment. The fact that a loan is
temporarily past due does not necessarily mean that the loan is impaired.
Rather, all relevant circumstances are considered by the Manager to determine
impairment and the need for specific reserves. This evaluation considers among
other matters:
o prevailing economic conditions;
o historical experience;
o the nature and volume of the loan portfolio;
o the borrowers' financial condition and adverse situations that may
affect the borrowers' ability to pay;
o evaluation of industry trends;
o review and evaluation of loans identified as having loss potential;
and
o estimated net realizable value of any underlying collateral.
Based upon this evaluation the Company's Manager believes that the allowance for
loan losses totaling $300,000 included in the accompanying balance sheet as of
March 31, 2003 is adequate to address estimated credit losses.
Decisions regarding an allowance for loan losses require judgment about the
probability of future events. As a result, there is an inherent risk that such
judgment will prove incorrect. In such event, actual losses may exceed (or be
less than) the amount of any allowance. To the extent that the Company
14
experiences losses greater than the amount of its allowance, the Company may
incur a charge to its earnings that will adversely affect its operating results
and the amount of any distributions payable to its members.
CRITICAL ACCOUNTING POLICIES
REVENUE RECOGNITION
Interest income on loans 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.
REAL ESTATE HELD FOR SALE
Real estate held for sale includes real estate acquired through foreclosure and
is carried at the lower of cost or the property's estimated fair value, less
estimated costs to sell.
INVESTMENTS IN MORTGAGE LOANS
Investments in mortgage loans are secured by trust deeds and mortgages.
Generally, all of the Company's mortgage loans require interest only payments
with a balloon payment of the principal at maturity. The Company has both the
intent and ability to hold mortgage loans until maturity and therefore, mortgage
loans are classified and accounted for as held for investment and are carried at
cost. 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 no greater than 12 months prior to the date of
loan origination. Appraisals are also based on either an "as is basis" or "as-if
developed basis". These appraised values do not reflect immediate sales values,
which may be substantially different.
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 Manager'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.
SECURED BORROWING
Loans that have been participated to third party investors through an
intercreditor agreement ("Agreement") are accounted for as secured borrowing in
accordance with SFAS No. 140, ACCOUNTING FOR TRANSFERS AND SERVICING OF
FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES ("SFAS No. 140"). Under the
Agreement, investors may participate in certain loans with Vestin Mortgage, Fund
II, and the Company (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
participation amount; (ii) substitute an alternative loan acceptable to the
investor; or (iii) repurchase the participation from the investor for the
outstanding balance of the participation plus accrued interest. Consequently,
the Investor is in a priority lien position against the collateralized loans and
mortgage loan financing under the participation arrangement is accounted for as
a secured borrowing in accordance with SFAS No. 140.
CAPITAL AND LIQUIDITY
Liquidity is a measure of a company's ability to meet potential cash
requirements, including ongoing commitments to fund lending activities and for
general operational purposes. The Company believes that interest earned from
both investment loans and cash held at bank institutions in the next twelve
months will be sufficient to meet the Company's capital requirements. The
Company does not anticipate the need for hiring any employees, acquiring fixed
assets such as office equipment or furniture, or incurring material office
15
expenses during the next twelve months because the Manager will continue to
manage the Company's affairs. The Company may pay the Manager an annual
management fee of up to 0.25% of the Company's aggregate capital contributions.
Pursuant to the Company's Operating Agreement, the Company recorded management
fees to the Manager during the three and six months ended March 31, 2003 of
$62,852 and $125,508, respectively.
During the six months ended March 31, 2003, cash flows provided by operating
activities approximated $4.8 million. Investing activities consisted of cash
provided by sales of investments in mortgage loans approximating $0.5 million
(net of proceeds from investments in mortgage loans) and the maturity of
certificates of deposit approximating $0.9 million. Financing activities
consisted of members' withdrawals in the amount of $3.4 million and
distributions of $4.4 million (net of reinvestments).
As of March 31, 2003, members holding approximately 19% of our outstanding units
have elected to reinvest their dividends. The level of dividend reinvestment
will depend upon our performance as well as the number of our members who prefer
to reinvest rather than receive current distributions of their income.
Any significant level of defaults on our outstanding loans could reduce the
funds we have available for investment in new loans. Foreclosure proceedings may
not generate full repayment of our loans and may result in significant delays in
the return of invested funds. This would diminish our capital resources and
would impair our ability to invest in new loans. In addition, any significant
level of withdrawals by our Members would reduce the capital we have available
for investment. Such withdrawals, which totaled approximately $3.4 million for
the six months ended March 31, 2003, are limited by the terms of our Operating
Agreement to not more than 10% per year and are subject to other conditions.
Non-earning assets, which include loans on non-accrual (discussed in Note C) and
real estate held for sale (discussed in Note E), totaled $32.5 million at March
31, 2003. It is possible that no earnings will be recognized from these assets
until they are disposed of, and the time it will take to dispose of these assets
cannot be predicted.
Our Manager believes that total non-earning assets at March 31, 2003 have
increased since September 30, 2002, primarily as a result of factors unique to
specific borrowers. Because of the estimated value of the underlying properties,
the Company does not believe that any losses will be incurred from these assets
upon final disposition. However, it is possible that the Company will not be
able to realize the full estimated values upon disposition, particularly if
continuing economic weakness results in declining real estate values.
At March 31, 2003, the Company had $1.1 million in cash, $1.8 million in
certificates of deposit, and $108.4 million in total assets. It appears the
Company has sufficient working capital to meet its operating needs in the near
term.
As of March 31, 2003, the Company had liabilities totaling $11.1 million as
secured borrowings related to an intercreditor agreement. Pursuant to the
intercreditor agreement, the Investor may participate in certain loans with
Vestin Mortgage, Fund I, and the Company (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 participation amount; (ii) substitute an alternative loan
acceptable to the investor; or (iii) repurchase the participation from the
investor for the outstanding balance of the participation plus accrued interest.
Consequently, mortgage loan financing under the participation arrangement is
accounted for as a secured borrowing in accordance with SFAS No. 140.
The Company maintains working capital reserves of approximately 3% of aggregate
members' capital accounts in cash and cash equivalents, and certificates of
deposit. This reserve is available to pay expenses in excess of revenues,
satisfy obligations of underlying security properties, expend money to satisfy
unforeseen obligations and for other permitted uses of the working capital.
Working capital reserves of up to 3% are included in the funds committed to loan
investments in determining what proportion of the offering proceeds and
reinvested distributions have been invested in mortgage loans.
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:
RISKS OF INVESTING IN MORTGAGE LOANS
o 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.
16
o The Company approves mortgage loans more quickly then other mortgage
lenders. Due to the nature of loan approvals, there is a risk that the
credit inquiry the Company's Manager performs will not reveal all
material facts pertaining to the borrower and the security.
o Appraisals may be performed on an "as-if developed" basis. Therefore
there is a risk that the borrower will not complete development of the
project which may affect the expected value of the property and the
loan to value ratio.
o The Company's results of operations will vary with changes in interest
rates and with the performance of the relevant real estate markets.
o 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 the Company's
revenues and the distributions to members.
o If, at a time of relatively low interest rates, a borrower should
prepay 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 any compensation for their loss.
This in turn could harm the Company's reputation and make it more
difficult for the Company to attract investors willing to acquire
interest in mortgage loans.
RISK OF DEFAULTS
The Company's performance will be directly impacted by any defaults on the loans
in its portfolio. As noted above, the Company may experience a higher rate of
defaults than conventional mortgage lenders. The Company seeks to mitigate the
risk by estimating the value of the underlying collateral and insisting on low
loan to value ratios. However, no assurance can be given that these efforts will
fully protect the Company against losses on defaulted loans. Moreover, during
the period of time when a defaulted loan is the subject of foreclosure
proceedings, it is likely that the Company will earn less (if any) income from
such loans, thereby reducing the Company's earnings.
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 higher fees and rates than those
charged by conventional lenders and mortgage loans 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 does.
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.
EFFECT OF FLUCTUATIONS IN THE ECONOMY
The Company's sole business, making loans secured by real estate, is
particularly vulnerable to changes in macroeconomic conditions. Any significant
decline in economic activity, particularly in the geographical markets in which
the Company concentrates its loans, could result in a decline in the demand for
real estate development loans. In order to stay fully invested during a period
of declining demand for real estate loans, the Company may be required to make
loans on terms less favorable to the Company or to make loans involving greater
risk to the Company. Declines in economic activity are often accompanied by a
decline in prevailing interest rates. Although the Company's lending rates are
not directly tied to the Federal Reserve Board's discount rate, a sustained and
widespread decline in interest rates will impact the interest the Company is
able to earn on its loans. Since the Company's loans generally do not have
prepayment penalties, declining interest rates may also cause the Company's
borrowers to prepay their loans and the Company may not be able to reinvest the
amounts prepaid in loans generating a comparable yield. Moreover, any
significant decline in economic activity could adversely impact the ability of
the Company's borrowers to complete their projects and obtain take out
financing. This in turn could increase the level of defaults the Company may
experience.
17
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk, primarily from changes in interest rates.
The Company does not have any assets or liabilities denominated in foreign
currencies nor does it own any options, futures or other derivative instruments.
Most of the Company's assets consist of mortgage loans, including those which
are financed under the intercreditor agreement. At March 31, 2003, the Company's
aggregate investment in mortgage loans was $82,384,724 with a weighted average
contractual yield of 13.33%. Loans financed under the intercreditor agreement
totaled $11,086,129 at March 31, 2003 and are classified as assets under secured
borrowing. Such financing is at a weighted average contractual interest rate of
12%. These mortgage loans mature within the next 24 months. All of the
outstanding mortgage loans at March 31, 2003 are fixed rate loans. All of the
mortgage loans are held for investment purposes. None of the mortgage loans have
prepayment penalties.
As of March 31, 2003, the Company had cash and investments in certificates of
deposit and other short-term deposit accounts totaling $3.0 million. The Company
anticipates that approximately 3% of its assets will be held in such accounts as
a cash reserves. Additional deposits in such accounts will be made as funds are
received by the Company from new investors and repayment of loans pending the
deployment of such funds in new mortgage loans. The Company believes that these
financial assets do not give rise to significant interest rate risk due to their
short-term nature.
ITEM 4. CONTROLS 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 quarterly report on Form 10-Q (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
Vestin Mortgage, Inc., the Company's Manager, who function as the equivalent of
the CEO and 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.
18
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders, through the solicitation
of proxies or otherwise, during the second quarter ended March 31, 2003.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1 Articles of Organization*
10.1 Operating Agreement**
99.1 Certification Pursuant to U.S.C. 18 Section 1350
- ----------
* Previously filed as an exhibit to the Registration Statement on Form S-11
(File No. 333-32800) on March 17, 2000.
** Previously filed as an exhibit to the Amendment No. 4 to the Registration
Statement on Form S-11/A (File No. 333-32800) on August 7, 2000.
(b) Reports on Form 8-K
None.
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VESTIN FUND I, LLC
By: Vestin Mortgage, Inc., its sole manager
BY: /s/ LANCE K. BRADFORD
------------------------------------
LANCE K. BRADFORD
DIRECTOR, SECRETARY AND TREASURER
(CHIEF ACCOUNTING OFFICER OF THE
MANAGER AND DULY AUTHORIZED OFFICER)
Dated: May 15, 2003
20
CERTIFICATIONS
I, Steven J. Byrne, as the Chief Executive Officer of Vestin Mortgage, Inc., the
sole Manager of Vestin Fund I, LLC, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Vestin Fund I, LLC
2. Based on my knowledge, this quarterly report 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, 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
quarterly report;
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 quarterly
report 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 quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report 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 performing the
equivalent functions):
(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
quarterly report whether or not 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.
Date: May 15, 2003
/s/ Steven J Byrne
- ----------------------------------
Steven J Byrne
Chief Executive Officer*
Vestin Mortgage, Inc., sole
Manager of Vestin Fund I, LLC
* Steven J. Byrne functions as the equivalent of the Chief Executive Officer
of the registrant
21
I, Lance K. Bradford, as the Chief Accounting Officer of Vestin Mortgage, Inc.,
the sole Manager of Vestin Fund I, LLC, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Vestin Fund I, LLC;
2. Based on my knowledge, this quarterly report 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, 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
quarterly report;
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 quarterly
report 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 quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report 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 performing the
equivalent functions):
(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
quarterly report whether or not 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.
Date: May 15, 2003
/s/ Lance K Bradford
- ----------------------------------
Lance K Bradford
Chief Financial Officer*
Vestin Mortgage, Inc., sole
Manager of Vestin Fund I, LLC
* Lance K. Bradford functions as the equivalent of the Chief Accounting
Officer of the Manager
22