VESTIN FUND III LLC - FORM 10-Q

Attached files

file	filename
EX-32 - VESTIN FUND III LLC	exhibit32.htm
EX-31.2 - VESTIN FUND III LLC	exhibit312.htm
EX-31.1 - VESTIN FUND III LLC	exhibit311.htm
XML - IDEA: XBRL DOCUMENT - VESTIN FUND III LLC	R9999.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 000-51301

VESTIN FUND III, LLC

(Exact name of registrant as specified in its charter)

NEVADA		87-0693972
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

8880 W. SUNSET ROAD, SUITE 200, LAS VEGAS, NEVADA 89148

(Address of Principal Executive Offices) (Zip Code)

Registrant’s Telephone Number: 702.227.0965

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

Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [ X ] No [ ]

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

Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)	Smaller reporting company [X]

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

Yes [ ] No [X]

As of August 14, 2015 2,024,424 membership units in the Company were outstanding.

Table of Contents

TABLE OF CONTENTS

		Page

Part I	FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	1

	Balance Sheets as of June 30, 2015 and December 31, 2014	1

	Statements of Operations for the Three and Six Months ended June 30, 2015 and 2014	2

	Statements of Cash Flows for the Six Months ended June 30, 2015 and 2014	3

	Notes to Financial Statements	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11

Item 4.	Controls and Procedures	16

Part II	OTHER INFORMATION

Item 1.	Legal Proceedings	16

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16

Item 6.	Exhibits	18

	SIGNATURES	19

	Exhibit 31.1

	Exhibit 31.2

	Exhibit 32

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PART I - FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

VESTIN FUND III, LLC

BALANCE SHEETS
(UNAUDITED)
	June 30, 2015		December 31, 2014
ASSETS
Assets
Cash and cash equivalents	$	382,000	$	485,000
Notes receivable, net of allowance of $298,000 at June 30, 2015 and $305,000 at December 31, 2014		--		--
Marketable securities – related party		388,000		588,000
Due from related parties		625,000		681,000

Total assets	$	1,395,000	$	1,754,000

LIABILITIES AND MEMBERS' EQUITY

Liabilities
Accounts payable and accrued liabilities	$	3,000	$	5,000
Deferred gain		628,000		685,000
Total liabilities		631,000		690,000

Commitments and contingencies

Members' equity
Members' units - authorized 10,000,000 units, 2,024,424 units issued and outstanding at June 30, 2015 and December 31, 2014		764,000		1,064,000

Total members' equity		764,000		1,064,000

Total liabilities and members' equity	$	1,395,000	$	1,754,000

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

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VESTIN FUND III, LLC

STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2015			2014			2015			2014
Revenues
Recovery of allowance for doubtful notes receivable	$	3,000		$	--		$	7,000		$	--
Total revenues		3,000			--			7,000			--

Operating expenses
Professional fees		20,000			14,000			40,000			34,000
Other		8,000			8,000			16,000			20,000
Total operating expenses		28,000			22,000			56,000			54,000

Loss from operations		(25,000	)		(22,000	)		(49,000	)		(54,000	)

Non-operating income
Recovery from settlement with loan guarantor		--			--			--			16,000
Other income		78,000			--			135,000			--
Gain from former loan defeasance		--			15,000			--			15,000
Dividend income		8,000			10,000			18,000			19,000
Total non-operating income, net		86,000			25,000			153,000			50,000

Discontinued Operations
Income from equity method investee held for sale		--			22,000			--			42,000
Net loss on sale of real estate held for sale		--			(14,000	)		--			(14,000	)
Expenses related to real estate held for sale		(2,000	)		(3,000	)		(4,000	)		(16,000	)
Total income (loss) from discontinued operations		(2,000	)		5,000			(4,000	)		12,000

NET INCOME	$	59,000		$	8,000		$	100,000		$	8,000

Net income allocated to members	$	59,000		$	8,000		$	100,000		$	8,000

Net income allocated to members per weighted average membership units	$	0.03		$	0.01		$	0.05		$	0.01

Weighted average membership units		2,024,424			2,024,424			2,024,424		$	2,024,424

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

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VESTIN FUND III, LLC

STATEMENTS OF CASH FLOWS
	For the Six Months Ended June 30,
	2015			2014
Cash flows from operating activities:
Net income	$	100,000		$	8,000
Adjustments to reconcile net income to net cash provided by operating activities:
Recovery of allowance for doubtful notes receivable		(7,000	)		--
Dividend income – related party		(18,000	)		(19,000	)
Gain from former loan defeasance					(15,000	)
Deferred income		(57,000	)		--
Loss on sale of real estate held for sale		--			14,000
Income from equity method investee held for sale		--			(42,000	)
Change in operating assets and liabilities:
Accounts payable and accrued liabilities		(2,000	)		(2,000	)
Due from related parties		63,000			115,000
Other assets		--			5,000
Net cash provided by operating activities	$	79,000		$	64,000

Cash flows from investing activities:
Proceeds from former loan defeasance		--			15,000
Proceeds from real estate held for sale					235,000
Proceeds from distribution from investment in equity method investee		--			37,000
Proceeds for sale of marketable securities-related party to be sold		200,000			--
Proceeds related to dividend income		18,000			--
Net cash provided by investing activities	$	218,000		$	287,000

Cash flows from financing activities:
Liquidating distributions		(400,000	)		(600,000	)
Net cash used in financing activities	$	(400,000	)	$	(600,000	)

NET CHANGE IN CASH		(103,000	)		(249,000	)

Cash, beginning of period		485,000			409,000
Cash, end of period	$	382,000		$	160,000
Non-cash investing and financing activities:
Adjustment to note receivable and related allowance	$	7,000		$	--

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

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VESTIN FUND III, LLC

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2015

(Unaudited)

NOTE A — ORGANIZATION

Vestin Fund III, LLC was organized in April 2003 as a Nevada limited liability company for the purpose of investing in commercial real estate loans (hereafter referred to as “real estate loans”) and income-producing real property. In this report, we refer to Vestin Fund III, LLC as “the Company,” “our Company,” the “Fund,” “we,” “us,” or “our”.

We commenced operations in February 2004. Prior to March 2007, we invested in revenue-generating commercial real estate and loans secured by real estate through deeds of trust or mortgages (hereafter referred to collectively as “deeds of trust” and as defined in our Operating Agreement as “Mortgage Assets”). On March 5, 2007, a majority of our members approved the Third Amended and Restated Operating Agreement, which limited the Company’s investment objectives to investments in real estate loans.

At a special meeting of our members held on July 2, 2009, a majority of the members voted to approve the dissolution and winding up of the Fund, in accordance with the Plan of Complete Liquidation and Dissolution (the “Plan”) as set forth in Annex A of the Fund’s proxy statement filed with the Securities and Exchange Commission (the “SEC”) on May 11, 2009. The Plan became effective upon its approval by the members on July 2, 2009. As a result, we have commenced an orderly liquidation and we no longer invest in new real estate loans. We had anticipated that the liquidation would be substantially completed by the second half of 2014. However, the orderly sale of each of our remaining assets will take longer to complete than we had anticipated. As a result, we will not complete the liquidation before the end of this year, and are now targeting completion by the end of 2016. The exact timing for completion of the liquidation will be impacted by the payment of Vestin Group’s indemnity obligation and other matters beyond our control. In addition, other events and conditions may arise that may impact our ability and timing to complete the liquidation. Thus, no assurances can be given that we will be able to complete the liquidation within a particular date or by the anticipated time frame.

Because the liquidation of the Fund was not imminent, as of June 30, 2015, the financial statements are presented assuming the Fund will continue as a going concern. Pursuant to the Plan, we will make liquidating distributions to members as funds become available, subject to a reasonable reserve established to provide for payment of the Company’s ongoing expenses and contingent liabilities. Our members no longer have the right to have their units redeemed by us and we no longer honor any outstanding redemption requests effective as of July 2, 2009.

On May 13, 2015, we made liquidation distributions to all Fund Members in the aggregate amount of approximately $0.4 million, in accordance with the Plan. These distributions follow liquidation distributions we made on January 26, 2010, April 8, 2010, September 17, 2010, May 25, 2011, June 15, 2012, January 14, 2014, June 30, 2014, and September 15, 2014 in the aggregate amount of approximately $1.0 million, $0.9 million, $0.3 million, $0.3 million, $0.4 million, $0.3 million, $0.3 million and $1.1 million, respectively, in accordance with the Plan. The amounts distributed to each Member of the Fund were calculated based upon the percentage ownership interest of such Member in the Fund. See Note G – Members’ Equity

We are not a mutual fund or an investment company within the meaning of the Investment Company Act of 1940, nor are we subject to any regulation thereunder.

Michael Shustek owns a significant majority of Vestin Mortgage, LLC, a Nevada limited liability company, which is our manager (the “manager” or “Vestin Mortgage”). The business of brokerage and placement of real estate loans has been performed by affiliated or non-affiliated mortgage brokers, including Advant Mortgage, LLC (“MVP Mortgage”), a licensed Nevada mortgage broker, which is indirectly wholly owned by Michael V. Shustek.

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Pursuant to our Operating Agreement and the Plan of Complete Liquidation and Dissolution approved by a majority of our members on July 2, 2009, our manager will continue to manage our operations during the liquidation process. Consequently, the orderly liquidation of our assets and our operating results are dependent upon our manager’s ability and performance in managing our liquidation.

Vestin Mortgage is also the manager of Vestin Realty Mortgage I, Inc. (“VRM I”), as the successor by merger to Vestin Fund I, LLC, (“Fund I”) and Vestin Realty Mortgage II, Inc. (“VRM II”), as the successor by merger to Vestin Fund II, LLC, (“Fund II”). These entities have been formed to invest in real estate loans and direct investments in real estate.

NOTE B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The financial statements of the Company have been prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, all normal recurring adjustments considered necessary to give a fair presentation of operating results for the periods presented have been included. The information included in this Form 10-Q should be read in conjunction with information included in the 2014 annual report filed on Form 10-K.

Management Estimates

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

Cash and Cash Equivalents

Cash and cash equivalents include interest-bearing and non-interest-bearing bank deposits, money market accounts, short-term certificates of deposit with original maturities of three months or less, and short-term instruments with a liquidation provision of one month or less.

Revenue Recognition

Revenue recognition – The Company recognizes revenue when persuasive evidence of an arrangement exists, services have been provided, the sales price charged is fixed or determinable, and collectability is reasonably assured. This generally means that revenue is recognized when services have been provided to the customers.

Deferred Revenue Recognition

Deferred income supports the amount of sales proceeds withheld on a sale of our building during November 2006, with which we were required to establish an irrevocable stand by letter of credit in favor of the purchaser of the building. See Note F – Related Party Transactions.

Classification of Operating Results from Real Estate Held for Sale

Generally, operating results and cash flows from long-lived assets held for sale are to be classified as discontinued operations as a separately stated component of net income. Our operations related to real estate held for sale are separately identified in the accompanying statements of operations.

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Fair Value Disclosures

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. “the exit price”) in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various valuation approaches, including quoted market prices and discounted cash flows. The established hierarchy for inputs used, in measuring fair value, maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs that reflect a company’s judgment concerning the assumptions that market participants would use in pricing the asset or liability developed based on the best information available under the circumstances. The fair value hierarchy is broken down into three levels based on the reliability of inputs as follows:

Level 1 – Valuations based on quoted prices in active markets for identical instruments that the Company is able to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

Level 2 – Valuations based on quoted prices in active markets for instruments that are similar, or quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement, which utilize the Company’s estimates and assumptions.

If the volume and level of activity for an asset or liability have significantly decreased, we will still evaluate our fair value estimate as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. In addition, since we are a public reporting company, we are required to make our fair value disclosures for interim reporting periods.

Net Income (Loss) Allocated to Members Per Weighted Average Membership Unit

Net income (loss) allocated to members per weighted average membership unit is computed by dividing net income (loss) calculated in accordance with GAAP by the weighted average number of membership units outstanding for the period.

Segments

We operate as one business segment.

Income Taxes

Limited liability companies (“LLCs”) are not liable for federal or state income taxes and, therefore, no provision for income taxes is made in the accompanying financial statements. Rather, a proportionate share of the LLC’s income, deductions, credits and tax preference items are reported to the individual members for inclusion in their tax returns.

NOTE C — FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK

Financial instruments consist of cash, notes receivable, accounts payable and accrued liabilities, and due to/from related parties. The carrying value of these instruments approximates their fair values due to their short-term nature.

Financial instruments with concentration of credit and market risk include cash, notes receivable, accounts payable and accrued liabilities, and due to/from related parties.

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We maintain cash deposit accounts and certificates of deposit, which, at times, may exceed federally insured limits. To date, we have not experienced any losses. As of June 30, 2015 and 2014, we had approximately $0.1 million and no funds, respectively, in excess of the federally insured limits.

NOTE D — REAL ESTATE HELD FOR SALE

At June 30, 2015, we held one property with no carrying value, which was acquired through foreclosure and recorded as investment in REO. Expenses incurred during the six months ended June 30, 2015 and 2014 related to our present and past REO totaled approximately $4,000 and $16,000, respectively. Our REO is 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. We seek to sell properties acquired through foreclosure as quickly as circumstances permit taking into account current economic conditions.

NOTE F — RELATED PARTY TRANSACTIONS

Transactions with the Manager

Our manager is entitled to receive from us a management (acquisition and advisory) fee up to 2.5% of the gross offering proceeds and up to 3% of our rental income. No management fees were recorded during the six months ended June 30, 2015 and 2014.

In 2006, in connection with the sale of an office building located in Las Vegas, Nevada, we arranged for a $985,000 letter of credit in favor of the purchaser of the building (the “Purchaser”), which could be drawn upon by the Purchaser should Vestin Group default on its lease obligations and was supported by our restricted cash. Vestin Group did not pay certain amounts allegedly due under its lease. In 2009, $285,000 of the letter of credit was drawn by the Purchaser. In November 2010, the Purchaser drew the final $700,000 from the letter of credit. As of June 30, 2015, we have a receivable from Vestin Group and deferred gain of approximately $628,000. In February 2015, Mr. Shustek and the Company entered into an Extension Agreement extending the due date of the obligation until August 31, 2016. Mr. Shustek paid to the Company an extension fee of $10,120, which is equal to one and one-half percent (1.50%) of the outstanding obligation. In addition, Mr. Shustek agreed to pay interest on the outstanding balance at the rate of one percent (1%) per month, retroactive to September 2014. As of June 30, 2015, Mr. Shustek has paid interest in the amount of $68,789 in connection with the Extension Agreement. Mr. Shustek has assigned all future liquidating distributions for the 292,681 of our units that he holds directly and indirectly to the Company to commence paying such obligation. In May 2015, distributions payable directly and indirectly to Mr. Shustek in the amount of approximately $57,000 were applied to decrease the receivable discussed above. In January 2014, June 2014 and September 2014, distributions payable directly and indirectly to Mr. Shustek in the amounts of approximately $42,000, $42,000 and $157,000, respectively, were applied to decrease the receivable discussed above. See also “Transactions with Other Related Parties” below.

As of June 30, 2015 and December 31, 2014, our manager owned 54,863 of our units. During the six months ended June 30, 2015 and 2014, we made liquidating distributions to our manager of approximately $11,000 and $57,000, respectively. These distributions were returned to the Company as partial repayment of the letter of credit mentioned above.

As of June 30, 2015 and December 31, 2014, we had receivables from our manager totaling approximately $0.6 million, primarily related to the withdrawal of the letter of credit referred to above.

Transactions with Other Related Parties

As of June 30, 2015 and December 31, 2014, we owed VRM II approximately $3,000.

The net changes in the amounts due to/from related parties have been classified as operating activities on the accompanying statements of cash flows. These activities are primarily related to expenses being incurred from operations and maintenance of investments that are co-owned by related parties. These balances are satisfied in subsequent periods under terms consistent with the underlying vendor terms.

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As of June 30, 2015 and December 31, 2014, inVestin Nevada Inc., a company wholly owned by our manager’s CEO, (“inVestin”), owned 34,856 of our membership units representing approximately 1.7% of our total membership units. During the six months ended June 30, 2015 and 2014, we made liquidating distributions to inVestin of approximately $7,000 and $10,000, respectively. These distributions were returned to the Company as partial repayment of the letter of credit mentioned above.

As of June 30, 2015 and December 31, 2014, Shustek Investments, Inc., a company wholly owned by our manager’s CEO, owned 200,000 of our membership units representing approximately 9.9% of our total membership units. During the six months ended June 30, 2015 and 2014, we made liquidating distributions to inVestin of approximately $40,000 and $60,000, respectively. These distributions were returned to the Company as partial repayment of letter of credit mentioned above.

As of June 30, 2015, Mr. Shustek’s spouse owned 2,963 of our membership units, representing less than 1.0% of our total membership units. During the six months ended June 30, 2015 and 2014, we made liquidating distributions to inVestin of approximately $500 and $800, respectively.

During March 2015, we sold 22,690 shares of our investment in MVP REIT, Inc. (“MVP REIT”), a non-traded REIT, to JNL Parking for $200,000. The principals of JNL Parking are officers of an affiliate of MVP REIT. The shares were not transferred to the principals of JNL Parking until April 2015. There was no gain or loss recognized with this sale. The transaction was entered into to increase our holdings of cash, and the proceeds from the sale were included in the distribution made to Fund Members in May 2015.

Accounting services

During the six months ended June 30, 2015 and 2014, Accounting Solutions, an entity owned by Ms. Gress, the Company’s Chief Financial Officer, received fees of approximately $6,000 and $5,000, respectively, for accounting services.

During the six months ended June 30, 2015, Strategix Solutions, an entity owned by Ms. Gress, the Company’s Chief Financial Officer, received fees of approximately $12,000, for accounting services. There were no fees paid during the six months ended June 30, 2014.

NOTE G — MEMBERS’ EQUITY

Allocations and Distributions

In accordance with our Operating Agreement, profits, gains and losses are to be credited to and charged against each member’s capital account in proportion to their respective capital accounts as of the close of business on the last day of each calendar month.

Distributions were paid monthly to members; however, on August 27, 2008, we suspended payment of distributions as a result of our current losses.

Contingency Reserve

In accordance with the Plan, we attempt to maintain a contingency reserve of approximately $300,000 for the payment of ongoing expenses, any contingent liabilities or to account for loan or other investment losses: however, the amount of the reserve may fluctuate based on cash expenditure requirements. Our manager has the discretion to increase or decrease the amount of the reserve, but will endeavor to ensure that the reserve is adequate to pay our outstanding obligations. The amount of the contingency reserve is based upon estimates and opinions of our manager or through consultation with an outside expert, if our manager determines that it is advisable to retain such expert. In determining the size of the reserve, our manager reviewed among other things, the value of our non-performing assets and the likelihood of repayment, our estimated contingent liabilities and our estimated expenses, including without limitation, estimated professional, legal and accounting fees, rent, payroll and other taxes, miscellaneous office expenses, facilities costs and expenses accrued in our financial statements.

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Value of Members’ Capital Accounts

In accordance with Section 7.8 of our Operating Agreement, our manager reviewed the value of our assets during the three months ended June 30, 2015. Based on this review, the value of members’ capital accounts was adjusted from $0.55 per unit to $0.38 per unit, as of July 1, 2015. The change in valuation is primarily for tax and capital account purposes and does not reflect the change in the value of the units calculated in accordance with GAAP. Accordingly, unit prices calculated under GAAP may be different than the adjusted price per unit.

Liquidating Distributions

Redemption Limitation

In accordance with the Plan, our members no longer have the right to have their units redeemed by us and we no longer honor any outstanding redemption requests effective as of July 2, 2009.

NOTE H — INVESTMENT IN MARKETABLE SECURITIES – RELATED PARTY

As of June 30, 2015 and December 31, 2014, we owned 44,212 and 66,902 shares of common stock, respectively, of MVP REIT. The shares were assigned to us by SERE Holdings, LLC in consideration of the cancellation of certain unsecured notes. During the six months ended June 30, 2015 and 2014 we received approximately $18,000 and $19,000, respectively, in dividend income.

NOTE I — RECENT ACCOUNTING PRONOUNCEMENTS

No new accounting pronouncements have been defined that would materially impact our financial statements.

NOTE J— LEGAL MATTERS INVOLVING THE MANAGER

The United States Securities and Exchange Commission (the “Commission”), conducted an investigation of certain matters related to us, our manager, Vestin Capital, VRM I, and VRM II. We fully cooperated during the course of the investigation. On September 27, 2006, the investigation was resolved through the entry of an Administrative Order by the Commission (the “Order”). Our manager, Vestin Mortgage and its Chief Executive Officer, Michael Shustek, as well as Vestin Capital (collectively, the “Respondents”), consented to the entry of the Order without admitting or denying the findings therein.

In the Order, the Commission found that the Respondents violated Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 through the use of certain slide presentations in connection with the sale of our units and units in Fund II, the predecessor to VRM II. The Respondents consented to the entry of a cease and desist order, the payment by Mr. Shustek of a fine of $100,000 and Mr. Shustek’s suspension from association with any broker or dealer for a period of six months, which expired in March 2007. In addition, the Respondents agreed to implement certain undertakings with respect to future sales of securities. We are not a party to the Order.

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Our manager believes that it is not a party to any other pending legal or arbitration proceedings that would have a material adverse effect on our manager’s financial condition or results of operations or cash flows, although it is possible that the outcome of any such proceedings could have a material impact on the manager’s net income in any particular period.

NOTE K — LEGAL MATTERS INVOLVING THE COMPANY

From time to time, we may become involved in litigation in the ordinary course of business. We do not believe that any pending legal proceedings are likely to have a material adverse effect on our financial condition or results of operations or cash flows. It is not possible to predict the outcome of any such proceedings.

NOTE L — SUBSEQUENT EVENTS

The following subsequent events have been evaluated through the date of this filing with the SEC.

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a financial review and analysis of our financial condition and results of operations for the three and six months ended June 30, 2015 and 2014. This discussion should be read in conjunction with our financial statements and accompanying notes and other detailed information regarding us appearing elsewhere in this report on Form 10-Q and our report filed on Form 10-K, Part II, Item 7 for the year ended December 31, 2014.

FORWARD-LOOKING STATEMENTS

Certain statements in this report, including, without limitation, matters discussed under this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” should be read in conjunction with the financial statements, related notes, and other detailed information included elsewhere in this report on Form 10-Q. We are including this cautionary statement to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical fact are forward-looking statements. Certain of these forward-looking statements can be identified by the use of words such as “believes,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “estimates,” “assumes,” “may,” “should,” “will,” or other similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors, which could cause actual results, performance or achievements to differ materially from future results, performance or achievements. These forward-looking statements are based on our current beliefs, intentions and expectations. These statements are not guarantees or indicative of future performance. Important assumptions and other important factors that could cause actual results to differ materially from those forward-looking statements include, but are not limited to, those factors, risks and uncertainties described in this Quarterly Report on Form 10-Q, our annual report on Form 10-K and in our other securities filings with the Securities and Exchange Commission (“SEC”). Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and involve inherent risks and uncertainties. Our estimates of the value of collateral securing our loans may change, or the value of the underlying property could decline subsequent to the date of our evaluation. As a result, such estimates are not guarantees of the future value of the collateral. The forward-looking statements contained in this report are made only as of the date hereof. We undertake no obligation to update or revise information contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

RESULTS OF OPERATIONS

OVERVIEW

Because the liquidation of the Fund was not imminent, as of June 30, 2015, the financial statements are presented assuming the Fund will continue as a going concern.

Stated Unit Value Adjustment: In accordance with Section 7.8 of our Operating Agreement, our manager reviewed the value of our assets during the three months ended June 30, 2015. Based on this review, the value of members’ capital accounts was adjusted from $0.55 per unit to $0.38 per unit, as of July 1, 2015. The periodic review of the estimated net unit value includes an analysis of unrealized gains that our manager reasonably believes exist at the time of the review, but that cannot be added to net asset value under GAAP. The change in valuation is primarily related to the liquidating distributions of $0.4 million or $0.20 per unit.

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We currently have no outstanding loans. In addition, we will attempt to convert our other non-cash assets into cash which may be distributed under the Plan. Pursuant to the Plan, we will make liquidating distributions to members as funds become available, subject to a reasonable reserve established to provide for payment of the Company’s ongoing expenses and contract liabilities. Our manager has established a reserve to cover our ongoing expenses and future obligations. As of June 30, 2015, our cash was approximately $0.4 million.

During April 2015, we sold 22,690 shares of our investment in MVP REIT to JNL Parking for $200,000. The principals of JNL Parking are officers of an affiliate of MVP REIT. There was no gain or loss recognized with this sale. The transaction was entered into in order to increase our holdings of cash, and the proceeds from the sale were included in the distribution made to Fund Members in May 2015.

Under the terms of the Plan adopted by a majority of our members, our members no longer have the right to have their units redeemed by us and we no longer honor any outstanding redemption requests effective as of July 2, 2009.

Prior to the approval of the Plan, our primary business objective was to generate income while preserving principal by investing in loans secured by real estate. The loan underwriting standards utilized by our manager and Vestin Originations were less strict than those used by many institutional real estate lenders. In addition, one of our competitive advantages was our ability to approve loan applications more quickly than many institutional lenders. As a result, in certain cases, we made real estate loans that were riskier than real estate loans made by many institutional lenders such as commercial banks. However, in return, we sought a higher interest rate and our manager took steps to mitigate the lending risks such as imposing a lower loan-to-value ratio. While we may have assumed more risk than many institutional real estate lenders, in return, we sought to generate higher yields from our real estate loans.

SUMMARY OF FINANCIAL RESULTS

Comparison of Operating Results for the three months ended June 30, 2015, to the three months ended June 30, 2014.

Total Revenue:	2015		2014		$ Change		% Change
Recovery of allowance for doubtful notes receivable	$	3,000	$	--	$	3,000		100	%
Total	$	3,000	$	--	$	3,000		100	%

As we have liquidated all of our loans and/or foreclosed on the underlying properties, we do not expect any future interest income from loans.

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Total Operating Expenses:	2015		2014		$ Change		% Change
Professional fees	$	20,000	$	14,000	$	6,000		43	%
Other		8,000		8,000		--		--
Total	$	28,000	$	22,000	$	6,000		27	%

Total Non-operating income:	2015		2014		$ Change			% Change
Other income	$	78,000	$	--	$	78,000			100	%
Gain from former loan defeasance		--		15,000		(15,000	)		(100	%)
Dividend income – related party		8,000		10,000		(2,000	)		(20	%)
Total	$	86,000	$	25,000	$	61,000			260	%

During the three months ended June 30, 2015, we received approximately $21,000 in interest and fees from Michael Shustek based on the extension agreement related to the letter of credit and approximately $57,000 was recorded as a recovery of deferred revenue. Additionally, during the three months ended June 30, 2015 and 2014, we received dividend income of approximately $8,000 and $10,000 on our shares in MVP REIT, respectively.

For additional information see Note F – Related Party Transactions of the Notes to the Financial Statements included in Part I, Item I Financial Statements of this Quarterly Report on Form 10-Q.

Total Discontinued Operations	2015			2014			$ Change			% Change
Income from equity method investee held for sale	$	--		$	22,000		$	(22,000	)		(100	%)
Net loss on sale of real estate held for sale		--			(14,000	)		14,000			100	%
Expenses related to real estate held for sale		(2,000	)		(3,000	)		1,000			33	%
Total	$	(2,000	)	$	5,000		$	(7,000	)		(140	%)

Decrease in income from equity method investee is due to the sale of this investment in August 2014. The decrease in expenses related to real estate held for sale is due to the stabilization of the markets where our real estate owned are located and a decrease in upkeep and litigation of the properties, along with the disposal of properties in 2014.

Comparison of Operating Results for the six months ended June 30, 2015, to the six months ended June 30, 2014.

Total Revenue:	2015		2014		$ Change		% Change
Recovery of allowance for doubtful notes receivable	$	7,000	$	--	$	7,000		100	%
Total	$	7,000	$	--	$	7,000		100	%

As we have liquidated all of our loans and/or foreclosed on the underlying properties, we do not expect any future interest income from loans.

Total Operating Expenses:	2015		2014		$ Change			% Change
Professional fees	$	40,000	$	34,000	$	6,000			18	%
Other		16,000		20,000		(4,000	)		(20	%)
Total	$	56,000	$	54,000	$	2,000			4	%

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Total Non-operating income:	2015		2014		$ Change			% Change
Recovery from settlement with loan guarantor	$	--	$	16,000	$	(16,000	)		(100	%)
Other income		135,000		--		135,000			100	%
Gain from former loan defeasance		--		15,000		(15,000	)		(100	%)
Dividend income – related party		18,000		19,000		(1,000	)		(5	%)
Total	$	153,000	$	50,000	$	103,000			206	%

During January 2011, we, VRM I and VRM II were awarded unsecured claims up to $3.6 million from a bankruptcy settlement with a guarantor of certain loans. Pursuant to the terms of the settlement, we received payment of approximately $16,000 during the six months ended June 30, 2014. Additionally, during the six months ended June 30, 2015, we received approximately $78,000 in interest and fees from Michael Shustek based on the extension agreement related to the letter of credit and approximately $57,000 was recorded as a recovery of deferred revenue. During the six months ended June 30, 2015 and 2014, we received dividend income of approximately $18,000 and $19,000 on our shares in MVP REIT, respectively.

For additional information see Note F – Related Party Transactions of the Notes to the Financial Statements included in Part I, Item I Financial Statements of this Quarterly Report on Form 10-Q.

Total Discontinued Operations	2015			2014			$ Change			% Change
Income from equity method investee held for sale	$	--		$	42,000		$	(42,000	)		(100	%)
Net loss on sale of real estate held for sale		--			(14,000	)		14,000			100	%
Expenses related to real estate held for sale		(4,000	)		(16,000	)		12,000			75	%
Total	$	(4,000	)	$	12,000		$	(16,000	)		(133	%)

Redemptions: At a special meeting of our members held on July 2, 2009, a majority of the members voted to approve the dissolution and winding up of the Fund, in accordance with the Plan as set forth in Annex A of the Fund’s proxy statement filed with the SEC on May 11, 2009. The Plan became effective upon its approval by the members on July 2, 2009. Our members no longer have the right to have their units redeemed by us and we no longer honor any outstanding redemption requests effective as of July 2, 2009. As of July 2, 2009, the total redemptions made from inception were approximately $10.4 million. For additional information regarding members redemptions, see Note G – Members’ Equity of the Notes to the Financial Statements included in Part I, Item I Financial Statements of this Quarterly Report on Form 10-Q.

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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 general operating purposes. As a result of the decision to liquidate the Company, we no longer invest in new loans. Hence, subject to retaining sufficient funds to meet our obligations and conduct wind down operations, all available funds will be paid out to our members. We do not anticipate the need for hiring any employees, acquiring fixed assets such as office equipment or furniture, or incurring material office expenses during the next twelve months because our manager will manage our affairs.

During the six months ended June 30, 2015, net cash flows provided by operating activities totaled approximately $0.1 million. Cash flows provided by investing activities for the six months ended June 30, 2015 totaled approximately $0.2 million and include proceeds from the partial sale of shares in MVP REIT, which were transferred in April 2015.

At June 30, 2015, we had approximately $0.4 million in unrestricted cash and approximately $1.4 million in total assets. We believe we have sufficient working capital to meet our operating needs during the next 12 months.

Investments in Real Estate Loans Secured by Real Estate Portfolio

As of June 30, 2015 and December 31, 2014, we had no investments in real estate loans. In accordance with the Plan, we will no longer invest in new loans.

RELATED PARTY TRANSACTIONS

In 2006, in connection with the sale of an office building located in Las Vegas, Nevada, we arranged for a $985,000 letter of credit in favor of the Purchaser, which could be drawn upon by the Purchaser should Vestin Group default on its lease obligations and was supported by our restricted cash. Vestin Group did not pay certain amounts allegedly due under its lease. In 2009, $285,000 of the letter of credit was drawn by the Purchaser. In November 2010, the Purchaser drew the final $700,000 from the letter of credit. In February 2015, Mr. Shustek and the Company entered into an Extension Agreement extending the due date of the obligation until August 31, 2016. Mr. Shustek paid to the Company an extension fee of $10,120, which is equal to one and one-half percent (1.50%) of the outstanding obligation. In addition, Mr. Shustek agreed to pay interest on the outstanding balance at the rate of one percent (1%) per month, retroactive to September 2014. As of June 2015, Mr. Shustek has paid interest in the amount of $68,789 in connection with the Extension Agreement. Mr. Shustek has assigned all future liquidating distributions for the 292,681 of our units that he holds directly and indirectly to the Company to commence paying such obligation. In May 2015, distributions payable directly and indirectly to Mr. Shustek in the amount of approximately $57,000, were applied to decrease the receivable discussed above. In January 2014, June 2014 and September 2014, distributions payable directly and indirectly to Mr. Shustek in the amounts of approximately $42,000, $42,000 and $157,000, were applied to decrease the receivable discussed above.

For additional information regarding this and other related party transactions, please see Note F – Related Party Transactions of the Notes to the Financial Statements included in Part I, Item I Financial Statements of this Quarterly Report on Form 10-Q.

OFF-BALANCE SHEET ARRANGEMENTS

As of June 30, 2015, we do not have any interests in off-balance sheet special purpose entities nor do we have any interests in non-exchange traded commodity contracts.

CRITICAL ACCOUNTING ESTIMATES

The carrying value of Due from Related Parties and Investment in Marketable Securities – related party are reported at their historical cost and fair market value, respectively, however actual results of these assets could differ from these values.

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RECENT ACCOUNTING PRONOUNCEMENTS

See Note I – Recent Accounting Pronouncements of the Notes to the Financial Statements included in Part I, Item I Financial Statements of this Quarterly Report on Form 10-Q.

ITEM 4.

CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer has evaluated the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of the end of the period covered by this report, and they have concluded that these controls and procedures are effective.

(b) Changes in Internal Control over Financial Reporting

There have been no changes in internal control over financial reporting during the second quarter of 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

Please refer to Note J – Legal Matters Involving the Manager and Note K – Legal Matters Involving the Company in the notes to the financial statement under Part I, Item I Financial Statements of this Quarterly Report on Form 10-Q, for information regarding our legal proceedings, which are incorporated herein by reference.

ITEM 2.

UNREGISTERED SALES OF EQUITY AND USE OF PROCEEDS

Market Information

There is no established public trading market for the trading of units.

Holders

As of June 30, 2015, 512 unit holders held 2,024,424 units in the Company.

Liquidation Distribution Policy

We intend to make liquidating distributions in accordance with the Plan as set forth in Annex A of the Fund’s proxy statement filed with the SEC on May 11, 2009. We will distribute to our members the net proceeds we receive from the sale of our real estate held for sale, less a reasonable reserve established to provide for payment of the Company’s ongoing expenses and contingent liabilities. A final liquidating distribution will be made after we have completed the winding up of our business operations and made appropriate provision for any remaining obligations.

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We are now targeting completion of the liquidation by the end of 2016. The exact timing for completion of the liquidation will be impacted by real estate market conditions and other matters beyond our control. In addition, other events and conditions may arise that may impact our ability and timing to complete the liquidation. Thus, no assurances can be given that we will be able complete the liquidation within a particular date or by the anticipated time frame. Because the liquidation of the Fund was not imminent, as of June 30, 2015, the financial statements are presented assuming the Fund will continue as a going concern.

There are a number of factors that could delay our anticipated timetable, including the following:

•

Delays in the disposition of our shares of MVP REIT common stock and other non-cash assets;

•

Payment of Vestin Group’s indemnity obligations as described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Related Party Transactions.”

•

Lawsuits or other claims asserted by or against us;

•

Unanticipated legal, regulatory or administrative requirements; and

•

Delays in settling our remaining obligations.

Recent Sales of Unregistered Securities

None.

Equity Compensation Plan Information

None.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

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ITEM 6.

EXHIBITS

EXHIBIT INDEX

Exhibit No.		Description of Exhibits
2.1(1)		Plan of Complete Liquidation and Dissolution
3.1(2)		Articles of Organization
3.2(3)		Certificate of Amendment to Articles of Organization
3.3(4)		Amended and Restated Operating Agreement (included as Exhibit A to the prospectus)
31.1*		Section 302 Certification of Michael V. Shustek
31.2*		Section 302 Certification of Tracee Gress
32*		Certification Pursuant to 18 U.S.C. Sec. 1350
101**		The following material from the Company's quarterly report on Form 10-Q for the six months ended June 30, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) Balance Sheets as of June 30, 2015 and December 31, 2014 (unaudited), (ii) Statements of Operations for the three and six months ended June 30, 2015 and 2014 (unaudited) (iii) Statements of Cash Flows for the six months ended June 30,2015 and 2014 (unaudited) and (iv) Notes to the Financial Statements (unaudited)

(1)		Incorporated herein by reference to our Schedule 14A Definitive Proxy Statement filed on May 11, 2009 (File No. 000-51301)
(2)		Incorporated herein by reference to our Pre-Effective Amendment No. 3 to Form S-11 Registration Statement filed on September 2, 2003 (File No. 333-105017)
(3)		Incorporated herein by reference to our Form 10-Q filed on August 16, 2004 (File No. 333-105017)
(4)		Incorporated herein by reference to our Schedule 14A Definitive Proxy Statement filed on January 29, 2007 (File No. 000-51301)
*		Filed concurrently herewith.
**		As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Section 11 an d 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934..

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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 III, LLC
	By:		Vestin Mortgage, LLC., its sole Manager

	By:		/s/ Michael V. Shustek
			Michael V. Shustek
			Chief Executive Officer and Sole Director of the Manager
			(Principal Executive Officer of Manager)

	By:		/s/ Tracee Gress
			Tracee Gress
			Chief Financial Officer of the Manager
			(Principal Financial and Accounting Officer of the Manager)

Date: August 14, 2015

VESTIN FUND III LLC - FORM 10-Q - August 14, 2015

Attached files

VESTIN FUND III LLC Reports