<PAGE>

================================================================================

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q/A

                                 AMENDMENT NO.1

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

FOR THE QUARTERLY PERIOD ENDED:  JUNE 30, 2001

                                       OR

[ ]     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:  333-44860

                         SPECIALTY MORTGAGE TRUST, INC.
             (Exact name of Registrant as specified in its Charter)

              MARYLAND                                  88-0382463
  (State or other jurisdiction of                    (I.R.S. Employer
  Incorporation or organization)                    Identification No.)

           6160 PLUMAS ST.
             RENO, NEVADA                                 89509
(Address of principal executive offices)                (Zip Code)

                                 (775) 826-0809
              (Registrant's telephone number, including area code)

        Indicate by check mark whether the Registrant (1) has filed all
documents and 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 [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

        Indicate the number of shares outstanding of each of the issuer's
classes of stock, as of the last practicable date.

Common Stock ($.01 par value)                  5,026,846 as of November 13, 2001

================================================================================


<PAGE>

                                      INDEX

                          PART I. FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                              Page
                                                                              ----
<S>                                                                           <C>
Item 1. Financial Statements -- Specialty Mortgage Trust, Inc.                  3

        Balance Sheets                                                          3

        Statement of Earnings                                                   4

        Statement  of Stockholders' Equity                                      5

        Statements of Cash Flows                                                6

        Notes to the Financial Statements                                       7


Item 2. Management's Discussion and Analysis of Financial Condition And

        Results of Operations                                                   9


Item 3  Quantitative and Qualitative Disclosures about Market Risk              15



                           PART II. OTHER INFORMATION

Item 1  Legal Proceedings                                                       16

Item 2  Changes in Securities and Use of Proceeds                               16

Item 3  Defaults upon Senior Securities                                         16

Item 4  Submission of Matters to Vote of Securityholders                        16

Item 5  Other Information                                                       16

Item 6  Exhibits and Reports on Form 8-K                                        17
</TABLE>



                                       2
<PAGE>

                         PART I. FINANCIAL INFORMATION

SPECIALTY MORTGAGE TRUST, INC.
BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                                                      JUNE 30, 2001        DECEMBER 31,
ASSETS                                                                                 (UNAUDITED)            2000
                                                                                       ------------        ------------
<S>                                                                                    <C>                 <C>
       Cash and cash equivalents                                                       $  8,567,601        $  2,619,717
       Accrued interest receivable                                                          622,050             518,340
       Investments                                                                               --             248,517
       Real estate owned                                                                  2,734,129                  --
       Mortgage loans held for investment, net of
        allowance for loan losses of $775,000, and $750,000
        at June 30, 2001 and December 31, 2000, respectively                             56,330,203          55,113,036
       Deferred charges                                                                     315,788             167,633
       Prepaid expenses                                                                       5,419                  --
                                                                                       ------------        ------------
            Total assets                                                               $ 68,575,190        $ 58,667,243
                                                                                       ============        ============
                                        LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

       Dividends payable                                                               $         --        $  1,387,283
       Accounts payable                                                                      18,012              25,545
       Deposits                                                                                  --             923,406
       Accrued interest payable                                                              22,428              26,077
       Lines of credit                                                                           --           4,452,500
       Collateralized notes                                                               9,084,353           5,663,505
       Collateralized notes - related party                                               1,087,823             889,955
       Deferred revenue                                                                       6,502               8,186
                                                                                       ------------        ------------
            Total liabilities                                                            10,219,118          13,376,457
                                                                                       ------------        ------------
STOCKHOLDERS' EQUITY

       Class A Convertible Preferred Stock; $0.01 par value; 10,000,000 and
         5,000,000 shares authorized as of June 30, 2001 and December 31, 2000,
         respectively; 5,711,952 and 4,624,276 shares issued and outstanding as
         of June 30, 2001 and December 31, 2000, respectively                                57,119              46,243
       Common stock; $0.01 par value; 40,000,000 and 45,000,000 shares
         authorized as of June 30, 2001 and December 31, 2000, respectively;
         340,400 and 334,400 shares issued and outstanding as of June 30,
         2001 and December 31, 2000, respectively                                             3,404               3,344
       Additional paid-in capital                                                        57,026,259          45,242,156
       Retained earnings                                                                  1,269,290
       Accumulated other comprehensive gain (loss)                                               --                (957)
                                                                                       ------------        ------------
            Total stockholders' equity                                                   58,356,072          45,290,786
                                                                                       ------------        ------------
            Total liabilities and stockholders' equity                                 $ 68,575,190        $ 58,667,243
                                                                                       ============        ============
</TABLE>

The accompanying notes are an integral part of the statements.


                                       3
<PAGE>

SPECIALTY MORTGAGE TRUST, INC.
STATEMENT OF EARNINGS

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED                      SIX MONTHS ENDED
                                                           ---------------------------------        ------------------------------
                                                           JUNE 30, 2001       JUNE 30, 2000        JUNE 30,2001      JUNE 30,2000
                                                            (UNAUDITED)         (UNAUDITED)         (UNAUDITED)        (UNAUDITED)
                                                           -------------       -------------        ------------      ------------
<S>                                                        <C>                 <C>                  <C>               <C>
REVENUE

       Interest and dividend income
             Mortgage loans                                 $ 1,729,039         $ 1,227,184         $ 3,455,957        $ 2,206,056
             Cash accounts                                       11,119              29,447              11,583            118,678
             Discount on loans                                    3,542               8,392               7,485             15,764
             Investment gain                                     10,392                  --              10,392                 --
             Dividends                                               --               7,097               7,097              7,097
                                                            -----------         -----------         -----------        -----------
                  Total interest and dividend income          1,754,092           1,272,120           3,492,514          2,347,595
                                                            -----------         -----------         -----------        -----------
       Interest expense

             Lines of credit                                     10,612              24,336              51,160             24,336
             Collateralized notes                               207,929              96,282             362,518            183,700
                                                            -----------         -----------         -----------        -----------
                  Total interest expense                        218,541             120,618             413,678            208,036
                                                            -----------         -----------         -----------        -----------
                  Net interest and dividend income            1,535,551           1,151,502           3,078,836          2,139,559
       Provision for loan losses                                125,000              75,000             250,000            150,000
                                                            -----------         -----------         -----------        -----------
                  Net revenues                                1,410,551           1,076,502           2,828,836          1,989,559
                                                            -----------         -----------         -----------        -----------
EXPENSES

       General and administrative                               131,465              38,513             209,680             64,547
       Management and directors' fees                             9,796               3,250              44,466              6,500
                                                            -----------         -----------         -----------        -----------
                  Total expenses                                141,261              41,763             254,146             71,047
                                                            -----------         -----------         -----------        -----------
                  Earnings before income taxes                1,269,290           1,034,739           2,574,690          1,918,512
       Income taxes                                                  --                  --                  --                 --
                                                            -----------         -----------         -----------        -----------
                  NET EARNINGS                              $ 1,269,290         $ 1,034,739         $ 2,574,690        $ 1,918,512
       Preferred stock dividend                               1,401,521           1,149,047           1,401,521          1,149,047
                                                            -----------         -----------         -----------        -----------
                  NET EARNINGS
                  ATTRIBUTABLE TO
                  COMMON STOCK                              $  (132,231)        $  (114,308)        $ 1,173,169        $   769,465

Basic earnings per share                                          (0.39)              (0.36)               3.47               2.40
                                                            ===========         ===========         ===========        ===========
Diluted earnings per share                                          .25                 .24                 .51                .45
                                                            ===========         ===========         ===========        ===========
</TABLE>


The accompanying notes are an integral part of the statements.



                                       4
<PAGE>

SPECIALTY MORTGAGE TRUST, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                              ADDITIONAL
                                     PREFERRED STOCK       COMMON STOCK         PAID-IN      RETAINED  COMPREHENSIVE
                                    SHARES     AMOUNT    SHARES     AMOUNT      CAPITAL      EARNINGS      INCOME        TOTAL
                                --------------------------------------------------------------------------------------------------
<S>                                <C>         <C>       <C>        <C>       <C>           <C>        <C>            <C>
Balance, December 31, 1999         3,799,700   $37,997   320,200    $3,202    $37,527,205           --         --     $37,568,404
Comprehensive income:
   Net earnings                                                                             $4,543,772      $  --       4,543,772
   Net unrealized loss
    on investment
    available-for-sale                                                                              --       (957)           (957)
                                                                                         -----------------------------------------
Total comprehensive income                                                                   4,543,772       (957)      4,542,815
                                                                                         -----------------------------------------
Stock options exercised                   --        --    14,200       142         22,291           --         --          22,433
Preferred stock issued               569,890     5,699        --        --      5,679,812           --         --       5,685,511
Collateralized notes received
for preferred stock                  119,430     1,194        --        --      1,193,106           --         --       1,194,300
Dividends reinvested for
  preferred stock                    135,256     1,353        --        --      1,346,933           --         --       1,348,286
Dividends Declared                        --        --        --        --       (527,191)  (4,543,772)        --      (5,070,963)
                                --------------------------------------------------------------------------------------------------
Balance, December 31, 2000         4,624,276   $46,243   334,400    $3,344    $45,242,156    $      --     $(957)     $45,290,786
                                ==================================================================================================
Comprehensive income:
   Net earnings                                                                              2,574,690         --       2,574,690
   Net unrealized loss
    on investment
    available-for-sale                                                                              --     11,349          11,349
   Reclassification adjustment                                                                      --    (10,392)        (10,392)
                                                                                         -----------------------------------------
Total comprehensive income                                                                   2,574,690        957       2,575,647
Stock options exercised                   --        --     6,000        60         12,475           --         --          12,535
Non-employee stock option
  expense                                 --        --        --        --         36,178           --         --          36,178
Dividends reinvested for
  preferred stock                     87,676       876        --        --        874,636           --         --         875,512
Preferred stock issued net of
  offering costs                   1,000,000    10,000        --        --     10,956,935           --         --      10,966,935
Dividends declared                        --        --        --        --        (96,121)  (1,305,400)        --      (1,401,521)
                                --------------------------------------------------------------------------------------------------
Balance, June 30, 2001
  (unaudited)                      5,711,952   $57,119   340,400    $3,404    $57,026,259   $1,269,290     $    --    $58,356,072
                                ==================================================================================================
</TABLE>


The accompanying notes are an integral part of these statements.



                                       5
<PAGE>

SPECIALTY MORTGAGE TRUST, INC.
STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                  SIX MONTHS ENDED
                                                                           ------------------------------
                                                                           JUNE 30, 2001    JUNE 30, 2000
                                                                           (UNAUDITED)       (UNAUDITED)
                                                                           -------------    -------------
<S>                                                                        <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

 Net earnings                                                              $  2,574,690     $  1,918,512
                                                                           ------------     ------------
 Adjustment to reconcile net earnings to net cash provided by operating
 activities:

      Amortization                                                               34,934           22,414
      Provision for loan losses                                                 250,000          150,000
      Non-cash collateralized notes interest reinvested                         300,348          133,210
      Non-cash stock compensation                                                36,178               --
      Gain on sale of investments                                               (10,392)              --
      Changes in assets and liabilities:
          Accrued interest receivable                                          (103,710)         (54,679)
          Prepaid expenses                                                       (5,419)           1,642
          Accounts payable                                                       (7,533)          (5,598)
          Deposits                                                             (923,406)        (225,000)
          Accrued interest payable                                               (3,649)          24,336
          Deferred revenue                                                       (1,684)          (1,396)
                                                                           ------------     ------------
              Total adjustments                                                (434,333)          44,929
                                                                           ------------     ------------
              Net cash provided by operating activities                       2,140,357        1,963,441
                                                                           ------------     ------------
CASH FLOWS FROM INVESTING ACTIVITIES:

 Purchase of investments                                                             --         (249,474)
 Investment in real estate owned                                                (68,565)              --
 Proceeds received from sale of investments                                     259,866               --
 Purchase of mortgage loans held for investment                             (12,588,564)     (23,825,891)
 Principal repayments of mortgage loans held
 for investment                                                               8,455,833        9,042,051
                                                                           ------------     ------------
              Net cash provided by/(used in) investing activities            (3,941,430)     (15,033,314)
                                                                           ------------     ------------
CASH FLOWS FROM FINANCING ACTIVITIES:

 Proceeds from Preferred Stock Offering, net                                  7,993,807               --
 Prepayment of Preferred Stock Offering                                              --        4,065,500
 Proceeds from common stock options exercised                                    12,535               --
 Cash dividends paid                                                         (1,913,292)      (1,599,478)
 Net (payments)/proceeds on line of credit                                   (4,452,500)       5,985,627
 Proceeds on collateralized notes                                             8,515,458        1,977,985
 Principal payments on collateralized notes                                  (2,223,962)      (1,235,631)
 Loan issue costs                                                              (183,089)         (18,750)
                                                                           ------------     ------------
              Net cash provided by/(used in) financing activities             7,748,957        9,175,253
                                                                           ------------     ------------
              NET INCREASE IN CASH AND CASH EQUIVALENTS                       5,947,884       (3,894,620)
                                                                           ------------     ------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                2,619,717        7,998,709
                                                                           ============     ============
CASH AND CASH EQUIVALENTS AT END OF YEAR                                      8,567,601        4,104,089
                                                                           ============     ============
</TABLE>



                                       6
<PAGE>

SPECIALTY MORTGAGE TRUST, INC.
STATEMENT OF CASH FLOWS - CONTINUED

<TABLE>
<CAPTION>
                                                                                     SIX MONTHS ENDED
                                                                               -----------------------------
                                                                                  2001               2000
                                                                               ----------         ----------
<S>                                                                            <C>                <C>
SUPPLEMENTAL CASH FLOW INFORMATION:
   Cash paid for interest                                                      $   74,092         $  239,297
                                                                               ==========         ==========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
 FINANCING ACTIVITIES:

   Collateralized notes exchanged for issuance of preferred stock              $2,973,128         $1,119,300
                                                                               ==========         ==========
   Collateralized notes refinanced at maturity                                 $3,860,542         $5,124,000
                                                                               ==========         ==========
   Collateralized notes interest reinvested                                    $  300,348         $  133,210
                                                                               ==========         ==========
   Dividends reinvested for preferred stock                                    $  875,512         $  633,720
                                                                               ==========         ==========
   Mortgage loans held for investment transferred to real estate owned         $2,665,564         $       --
                                                                               ==========         ==========
</TABLE>

The accompanying notes are an integral part of these statements

SPECIALTY MORTGAGE TRUST, INC.
NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2001
(UNAUDITED)

NOTE 1.  THE COMPANY

Specialty Mortgage Trust, Inc. ("SMT") is a Maryland corporation, which acquires
and holds mortgage loans secured by property located in Nevada, California,
Arizona, Utah and Colorado. Our strategy is to focus on land loans, construction
loans, commercial building loans and nonconforming single-family and small
multifamily residential loans. SMT has elected to be a real estate investment
trust (REIT) under the Internal Revenue Code of 1986, as amended. The mortgage
loans are originated and serviced by Specialty Financial, formerly Gonzo
Financial (the Manager), a private mortgage finance business operating in Nevada
and wholly owned by Nello Gonfiantini III, SMT's President and Chairman of the
Board of Directors. SMT was incorporated on October 21, 1997 and began
operations on January 31, 1998 following the closing of SMT's initial private
placement.

SMT operates as one business segment. SMT has evaluated the applicability of
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, which requires reporting business segments and information,
including how the segments are determined, products and services provided, and
changes in the measurement of segment accounting from period to period.

The accompanying financial statements for the three-month and six-month periods
ended June 30, 2001 and 2000 are unaudited. In the opinion of management, all
adjustments, consisting of normal recurring adjustments necessary for a fair
presentation of the Company's financial position and results of operations for
such periods have been included. The accompanying unaudited financial statements
should be read in conjunction with the Company's audited financial statements
for the years ended December 31, 2000 and 1999 included in SMTs Form 10-K for
the year ended December 31, 2000. The results for the three months and six-month
periods ended



                                       7
<PAGE>

June 30, 2001 are not necessarily indicative of the results that may be expected
for the year ending December 31, 2001 or for any other period.

NOTE 2.  COLLATERALIZED NOTES

Prior to August 22, 2000, SMT issued in private placements its Class A
collateralized notes (the "Class A notes"). The Class A notes were
collateralized by SMT's mortgage loans in an aggregate principal amount of at
least two times the aggregate principal amount outstanding on the Class A notes.
On January 18, 2001, SMT's registration statement covering the public sale of up
to $250,000,000 of collateralized investment notes (the "collateralized
investment notes") was declared effective by the Securities and Exchange
Commission. The collateralized investment notes are secured by at least one and
one-half times the aggregate principal amount outstanding on the collateralized
investment notes. The Class A notes and the collateralized investment notes are
referred to collectively as the "collateralized notes." The collateralized notes
have maturities ranging from one month to twelve months from the date of issue
and bear a fixed rate of interest (6.25% to 8.75% at June 30, 2001 and 6.25% to
8.50% at June 30, 2000). At June 30, 2001 and June 30, 2000, the collateralized
notes were secured by $23,845,991 and $12,957,393 of mortgage loans pledged as
collateral, respectively.

NOTE 3. DELINQUENT LOANS

On June 30, 2001, three loans totaling $2,937,850 were delinquent for interest.
A commercial land loan for $1,579,850 was delinquent for interest and is secured
by a second trust deed, behind an $8 million loan from a commercial bank. A
second commercial building loan for $950,000 was also delinquent for interest
and secured by a first deed of trust, and a third commercial building loan for
$408,000 was delinquent for interest, and is in foreclosure.

NOTE 4. REAL ESTATE OWNED

Real estate owned includes real estate acquired through foreclosure and is
carried at the lower of the recorded investment in the loan, inclusive of any
senior indebtedness, or the property's estimated fair value, less estimated
costs to sell.

In accordance with Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-lived Assets and Long-lived Assets to Be
Disposed Of, the Company periodically compares the carrying value of real estate
to expected future cash flows for the purpose of assessing the recoverability of
the recorded amounts. If the carrying value exceeds future cash flows, the
assets are reduced to fair value. There were no required reductions to the
carrying value of real estate owned for the three months ended June 30, 2001.

On June 30, 2001, SMT real estate owned totaled $2,734,129. The total increased
by $67,979 since March 31, 2001 because expenses related to ownership of the
property were capitalized. The properties owned consist of four finished
residential lots with foundations, 15 finished residential lots, and 102
undeveloped lots, which were transferred from mortgage loans to real estate
owned upon foreclosure.

NOTE 5.  RELATED PARTY

On October 23, 1997, SMT entered into a Management Agreement with the Manager.
The Manager is responsible for the day-to-day operations of SMT and will perform
such services and activities relating to the assets and operations of SMT as are
provided for in the Management Agreement. The Manager originates the mortgage
loans in the name of the Manager, and sells the loans to SMT. The Manager
retains the servicing of the mortgage loans.

The Manager receives the mortgage placement fees or points, usually charged to
the borrower for and upon origination, extension or refinancing of loans, up to
2.5% of the loan balance with any additional fees or points paid to SMT
effectively discounting the purchase price of the loan from the Manager. The
Manager will also



                                       8
<PAGE>

receive a fee for loan servicing equal to one-half of one percent per annum of
the total mortgage loans serviced and any late payment charges. These fees are
earned directly by the Manager and deducted from the interest or late payments
to cover costs to manage the portfolio, effectively reducing the yield to SMT.
In addition, the Manager will receive, as incentive compensation for each fiscal
quarter, an amount equal to 50% of the taxable net income before the dividend
deduction of SMT in excess of an annualized return to SMT equal to 12%. For the
quarters ended June 30, 2001 and 2000, the Manager earned the following:

<TABLE>
<CAPTION>
                                       2001             2000
                                     --------         --------
<S>                                  <C>              <C>
Loan origination fees                $408,700         $446,435
Loan servicing fees                    63,510           55,880
Late payment charges                    5,316            4,680
Incentive compensation bonus            4,605               --
</TABLE>

On June 29, 2001, Nello Gonfiantini III, the holder of a 7.23% beneficial
interest in SMT preferred and common stock, purchased a loan from SMT that was
being foreclosed for a price equal to the outstanding principal balance of
$625,000, plus uncollected accrued interest of $18,750, and reimbursed the
foreclosure costs of $5,216.

NOTE 6 -- RECENT ACCOUNTING PRONOUNCEMENTS

On July 20, 2001 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 141, Business Combinations,
and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is effective for all
business combinations completed after June 30, 2001. SFAS 142 is effective for
fiscal years beginning after December 15, 2001; however, certain provisions of
this Statement apply to goodwill and other intangible assets acquired between
July 1, 2001 and the effective date of SFAS 142. Major provisions of these
Statements and their effective dates for the Company are as follows:

        -       All business combinations initiated after June 30, 2001 must use
                the purchase method of accounting. The pooling of interest
                method of accounting is prohibited except for transactions
                initiated before July 1, 2001.

        -       Intangible assets acquired in a business combination must be
                recorded separately from goodwill if they arise from contractual
                or other legal rights or are separable from the acquired entity
                and can be sold, transferred, licensed, rented, exchanged,
                either individually or as part of a related contract, asset or
                liability.

        -       Goodwill, as well as intangible assets with indefinite lives,
                acquired after June 30, 2001, will not be amortized. Effective
                January 1, 2002, all previously recognized goodwill and
                intangible assets with indefinite lives will no longer be
                subject to amortization.

        -       Effective January 1, 2002, goodwill and intangible assets with
                indefinite lives will be tested for impairment annually and
                whenever there is an impairment indicator.

        -       All acquired goodwill must be assigned to reporting units for
                purposes of impairment testing and segment reporting.

Although it is still reviewing the provisions of these Statements, management's
preliminary assessment is that these Statements will not have a material impact
on the Company's financial position or results of operations.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATION

        The following discussion should be read in conjunction with the
        Financial Statements and Notes.

        SAFE HARBOR STATEMENT

        "Safe Harbor" Statement under the Private Securities Litigation Reform
        Act of 1995: Statements in this discussion regarding Specialty Mortgage
        Trust, Inc., and our business, which are not historical facts are
        "forward-looking statements" that involve risks and uncertainties. For a



                                       9
<PAGE>

        discussion of such risks and uncertainties, which could cause actual
        results to differ from those contained in the forward-looking
        statements, we refer you to "Risk Factors" commencing on Page 13 of our
        Prospectus included in the Registration Statement on Form S-11 (File No.
        333-44860) relating to our collateralized investment notes.

        COMPANY OVERVIEW

        The Company is a mortgage finance company specializing in acquiring
        nonconforming residential and commercial real estate mortgage loans for
        the purpose of holding the loans in its portfolio. We fund our loans
        chiefly through equity and to a lesser degree with short-term debt. This
        short-term debt is in the form of secured bank lines of credit or
        collateralized notes.

        Our business objective and strategy is to build and hold a portfolio of
        mortgage loans for investment that generates net income for distribution
        to stockholders. Loans are made principally to borrowers in the States
        of Nevada, Arizona, Colorado, Utah, and California whose needs are
        generally not being served by traditional financial institutions. Our
        strategy is to focus on land loans, construction loans, commercial
        building loans and nonconforming single-family and small multifamily
        residential loans. We generally limit the amount of our investment in
        any single mortgage loan or in mortgage loans to one borrower to $5
        million, although the board of directors may approve exceptions. Most
        loans will have terms of two to three years. Our mortgage loans may be
        secured by mortgages on unimproved as well as improved real property and
        non-income producing as well as income-producing real property. Some
        mortgage loans may be secured by borrower's leasehold interest in real
        property. Our loans generally produce higher yields than are obtained on
        traditional single-family residential mortgage loans, but are subject to
        higher risks of default and loss.

        We are structured as a real estate investment trust (REIT), thereby
        generally eliminating federal taxes at the corporate level on income we
        distribute to stockholders. Because we are not structured as a
        traditional lender that accepts deposits, we are subject to
        substantially less regulatory oversight and incur lower compliance
        expenses compared to banks, thrifts and many other holders of mortgage
        loans.

        Specialty Financial, formerly Gonzo Financial, serves as our manager and
        is responsible for loan originations, loan servicing and our day-to-day
        operations, subject to the supervision of our board of directors.

        SIGNIFICANT ASPECTS OF SECOND QUARTER 2001 AND YEAR END 2000

        In connection with the preparation of the September 30, 2001 10Q, the
        company found that the basic earnings per share as of June 30, 2001 did
        not consider the preferred stock dividend paid in the second quarter. As
        a result, the basic earnings per share should have been recorded as
        (0.39) and (0.36) for the three months ended June 30, 2001 and June 30,
        2000, respectively and 3.47 and 2.40 for the six months ended June 30,
        2001 and June 30, 2000, respectively. The company is filing this amended
        10Q for the period ended June 30, 2001, concurrently with its filing of
        the September 30, 2001 10Q.

        At June 30, 2001, we owned $56.3 million of mortgage loans and $2.7
        million of real estate owned. Our total assets were $68.6 million. The
        assets were financed with $10.2 million of recourse short-term debt, and
        $58.4 million of preferred and common equity.

        As reported on our June 30, 2001 balance sheet, our equity-to-assets
        ratio was 85.1% and our debt-to-equity ratio was 17.5%. For the quarter
        ended June 30, 2001, our return on equity was 12.1%.



                                       10
<PAGE>

        At December 31, 2000, we owned $55.1 million of mortgage loans and $.2
        million of mortgage securities. Our total assets were $58.7 million. The
        assets were financed with $6.6 million in recourse short-term debt, $4.5
        million in short-term collateralized lines of credit and $45.3 million
        of preferred and common equity. Our equity-to-asset ratio was 77.2%; our
        debt-to-equity ratio was 24.3%, and our average quarterly return on
        equity for the year ended December 31, 2000 was 11.5%.

        The increase in assets was the result of cash receipts of $11.0 million
        from the sale of preferred stock on June 30, 2001. The decrease in
        liabilities was the result of dividends not being declared until after
        quarter end, whereas at December 31, 2000 the dividend payable totaled
        approximately $1.4 million. Also, we did not hold deposits on June 30,
        2001 whereas we had a $.9 million deposit on December 31, 2000. There
        was also a net decrease in short-term debt of $.8 million. The increase
        in stockholders' equity was the result of stockholders reinvesting
        dividends from earnings in the dividend reinvestment program for the six
        months ended June 30, 2001, and the private placement of preferred
        stock.

        CHANGES IN FINANCIAL CONDITION

        ASSETS

        Cash and Cash Equivalents. As of June 30, 2001, cash and cash
        equivalents were $8,567,601, an increase of $5,947,884 from December 31,
        2000. The timing of loan funding and the timing of debt or equity issues
        generally determine the amount of cash held by the Company. It is our
        goal to keep cash invested in loans or other financial instruments and
        therefore keep cash balances low whenever possible.

        Accrued Interest Receivable. As of June 30, 2001, accrued interest
        receivable increased $103,710 over December 31, 2000. The account
        represents interest due from accruing loans that were outstanding at
        period end, plus collectible past due interest on such loans from prior
        months. On June 30, 2001, past due collectible interest amounted to
        $64,982 whereas on December 31, 2000 past due collectible interest was
        $10,330. Additionally, the balance of accruing loans outstanding on June
        30, 2001 was approximately $6.7 million higher than during December 31,
        2000, which resulted in a higher interest receivable.

        Real Estate Owned. On June 30, 2001, the Company owned property, which
        is in various stages of development. The carrying value was $2,734,129.
        The property includes four residential lots with foundations that are
        being completed, 15 finished residential lots that are for sale and 102
        undeveloped lots that are tentatively mapped and will be fully developed
        and offered for sale.

        Mortgage Loans. Mortgage loans held for investment net of allowance for
        loan losses have increased by $1,217,167 as of June 30, 2001, compared
        to December 31, 2000. This increase in mortgage loans was due primarily
        to new loans being underwritten and funded faster than loans were
        maturing.

        Deferred Charges. As of June 30, 2001, SMT had incurred $321,869 in
        costs relating to the issuance of up to $250,000,000 of collateralized
        notes to the public. The costs will be amortized proportionately as
        notes are sold.

        LIABILITIES

        Dividends Payable. At June 30, 2001, there were no unpaid declared
        dividends, as the Directors did not declare a dividend for the second
        quarter until the Board meeting in July. At year-end 2000, we had a
        dividend payable of $1,387,283. This represents a dividend declared in
        December 2000, as required by law, that was paid in January 2001.



                                       11
<PAGE>

        Lines of Credit. Lines of credit decreased $4,452,500 as of June 30,
        2001 from December 31, 2000. This line item represents collateralized
        short-term borrowings from banks and will fluctuate over time due to
        loan funding needs, loan prepayments and other debt and equity issues.
        Use of lines of credit was minimal during the quarter because we sold
        collateralized notes to fund loans rather than use higher cost lines of
        credit.

        Collateralized Notes. On June 30, 2001, collateralized notes increased
        $3,618,716 over December 31, 2000 primarily because the notes could be
        offered at a lower interest rate than the interest rates on our lines of
        credit to fund loans. Our collateralized notes were approved for public
        sale January 19, 2001.

        RESULTS OF OPERATIONS

        The rate volume analysis set forth in the following table analyzes
        changes in net interest income for the periods indicated by their rate
        and volume components.

<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED                               SIX MONTHS ENDED
                                               JUNE 30, 2001                                   JUNE 30, 2001
                                                 OVER/UNDER                                      OVER/UNDER
                                               JUNE 30, 2000                                    JUNE 30, 2000
                               --------------------------------------------       --------------------------------------------
                                   NET                                               NET
                                 CHANGE            RATE            VOLUME           CHANGE            RATE            VOLUME
                               ----------       ----------       ----------       ----------       ----------       ----------
<S>                            <C>              <C>              <C>              <C>              <C>              <C>
INTEREST INCOME

     Mortgage Loans               501,855          188,191          313,664        1,249,901          449,931          799,970
     Cash Accounts                (18,328)         (28,468)          10,140         (107,095)         (64,884)         (42,211)
                               ----------       ----------       ----------       ----------       ----------       ----------
           Total                  483,527          159,723          323,804        1,142,806          385,047          757,759
                               ==========       ==========       ==========       ==========       ==========       ==========

INTEREST EXPENSE

     Line of Credit               (13,724)           7,620          (21,344)          26,824           26,571              253
     Collateralized Notes         111,647            5,494          106,153          178,818           13,123          165,695
                               ----------       ----------       ----------       ----------       ----------       ----------
           Total                   97,923           13,114           84,809          205,642           39,694          165,948
                               ==========       ==========       ==========       ==========       ==========       ==========

     Change in net
     interest income              385,604          146,609          238,995          937,164          345,353          591,811
                               ==========       ==========       ==========       ==========       ==========       ==========
</TABLE>


        Our operating results include all of the reported income of our mortgage
        finance operation. The comparison of the six and three months ended June
        30, 2001 and June 30, 2000, respectively, is as follows:

        Interest Income, Mortgage Assets.

        Interest income for the six and three months ended June 30, 2001
        increased $1,249,901 and $501,855, respectively, over the comparable
        period in 2000. In each case, these increases were



                                       12
<PAGE>

        due primarily to additional funds invested in mortgage loans as a result
        of increased cash available from the private placement of new preferred
        stock on June 30, 2000 and dividend reinvestments during the period, and
        the use of short-term borrowings to fund a corresponding increase in
        loan demand.

        Interest Income, Cash Accounts.

        Interest earned on cash deposits during the six and three months ended
        June 30, 2001 decreased $107,095 and $18,328, respectively, from the
        comparable period in 2000 because cash was used to fund new loans that
        earned a higher rate of interest.

        Total Interest Expense.

        For the six and three months ended June 30, 2001, interest expense
        increased $205,642 and $97,923, respectively, over the comparable prior
        year period. In each case, these increases were primarily due to higher
        average borrowings outstanding as the Company utilized its ability to
        issue collateralized notes and used lines of credit to fund the
        increased loan demand.

        Provision for Loan Losses.

        The provision for loan losses for the six months and three months ended
        June 30, 2001 was $100,000 and $50,000, respectively, higher than for
        the comparable prior year periods because the board of directors
        approved an increase in July 2000 from $75,000 to $125,000 per quarter
        in order to more adequately reserve for a larger mortgage loan
        portfolio.

        General and Administrative Expenses.

        Expenses increased by $145,133 and $92,952 for the six months and three
        months ended June 30, 2001, respectively, as compared to the comparable
        prior year periods primarily due to advertising costs for sale of
        collateralized notes, non cash compensation expense resulting from
        exercise of common stock options and professional fees in conjunction
        with SEC reporting. General and Administrative expenses are a small
        portion of our net revenues since the Manager pays for most expenses
        directly.

        INTEREST RATE/MARKET/CREDIT RISK

        We seek to manage the interest rate, credit and market risk of our
        portfolio. By originating short-term loans (generally less than three
        years), we can significantly reduce the risk of changing interest rates.
        Additionally, we continue to stress the quality of our borrowers through
        our underwriting guidelines and loss mitigation through our servicing
        procedures. In this way we seek to control credit risk. Since the
        majority of our loans are in the state of Nevada, we are beginning to
        acquire loans in California, Arizona, Utah, and Colorado. This will help
        diversify the portfolio and reduce the risk of investing in one market.

        The following table sets forth the weighted average yield earned on our
        assets and the weighted average expense of our liabilities for the
        periods shown.



                                       13
<PAGE>

<TABLE>
<CAPTION>
                                                    ANNUALIZED                     ANNUALIZED
                                                THREE MONTHS ENDED              SIX MONTHS ENDED
                                             ------------------------       ------------------------
                                             6/30/2000      6/30/2001       6/30/2000      6/30/2001
                                             ---------      ---------       ---------      ---------
<S>                                          <C>            <C>             <C>            <C>
INTEREST INCOME

            Mortgage Loans                     10.98%         12.53%         10.77%         12.74%
             Cash Accounts                      4.26%          1.08%          5.40%          1.10%

INTEREST EXPENSE

            Line of Credit                      4.88%          6.95%          4.88%         10.15%
              Collateralized Notes              7.16%          7.55%          7.16%          7.65%

                Net Interest Spread             4.05%          4.22%          3.46%          4.42%
</TABLE>


        LIQUIDITY AND CAPITAL RESOURCES

        We manage our short-term liquidity (that is, our funding needs to cover
        commitments and anticipated uses occurring over the next 12 months) in a
        number of ways. First, the scheduled interest payments from our mortgage
        portfolio produce monthly cash flow, which can be used to originate new
        loans or to pay dividends to stockholders. This source provides
        approximately $6.0 million on an annual basis. We generally have the
        ability to apply this cash flow as needed.

        Secondly, the payoff and prepayment of loans provides additional
        liquidity to our portfolio. Historically, we have experienced annual
        loan payoffs and prepayments of approximately 30% to 35% of our
        outstanding portfolio. Since our loan terms are usually one to three
        years, the rate of principal payoffs is significant. With a current
        portfolio of approximately $56 million we would anticipate annual cash
        flows from principal pay downs of approximately $14.0 million. As we
        continue to issue collateralized notes, our portfolio will increase as
        will the cash flow from principal pay downs. Again, normally these funds
        are used to originate new mortgage loans, but can be used in other ways.

        Lastly, we have three lines of credit with commercial banks to provide
        another level of liquidity. We can borrow up to $5 million on two of the
        lines to provide funding for new loans and $2.5 million on the third,
        for an aggregate of $12.5 million. The two $5 million lines extend
        through July 1, 2002 and October 1, 2001, respectively, and the $2.5
        million line extends through July 1, 2002. All of the lines are
        collateralized by mortgage loans and borrowings under the lines bear
        interest at the applicable bank's prime or reference rate. We are
        required to comply with various operating and financial covenants in the
        lines. Such covenants include restrictions on (i) any change in business
        activities from those we are presently engaged in, and (ii) any change
        in executive and management personnel that would result in reduced
        qualifications and experience compared to present personnel. Such
        covenants also contain requirements for (i) minimum tangible net worth,
        (ii) minimum liquidity (cash and available borrowings), (iii) minimum
        quarterly net earnings, and (iv) maximum debt-to-equity ratio. We
        reserve at least $2.5 million of the lines unused for liquidity needs.

        We believe the combination of these three sources of capital allows us
        to manage our short-term liquidity needs in virtually any business
        situation and thereby efficiently use our capital resources.



                                       14
<PAGE>

        With respect to our long-term liquidity (funding needs during periods
        beyond the next 12 months), our only commitments that require funding
        are those arising from our construction loans. We do not have any
        commitments for material capital expenditures or payments due on
        long-term debt obligations. We believe the same three sources we rely on
        for short-term liquidity needs will be sufficient to fund our long-term
        needs as well.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        Market risk includes risks that arise from changes in interest rates,
        foreign currency exchange rates, commodity prices, equity prices and
        other market changes that affect market sensitive instruments. We are a
        party to various financial instruments that are subject to market risk.
        These instruments include commercial mortgage loans, land loans,
        nonconforming single-family and small multifamily residential mortgage
        loans, lines of credit and collateralized notes. Our financial
        instruments involve elements of interest rate risk. Our loan portfolio
        is also subject to real estate market risk.

        None of our financial instruments have been entered into for trading
        purposes. We have not entered into, nor do we intend to enter into, any
        financial instruments for trading or speculative purposes. As we have no
        investments outside of the United States, we are not subject to foreign
        currency exchange rate risk. We do not hedge our exposure to changes in
        the fair value of our loans through the use of derivative instruments.
        Instead, we have managed these exposures through careful underwriting
        and servicing of our loans. Further, we target as potential customers
        borrowers with relatively significant equity value in their property.

        Loans provide for either monthly payments of interest only and a payment
        of principal in full at the end of the loan term, principal and interest
        payments with a balloon payment at the end of the loan term, or interest
        only with principal payments upon lot releases and principal in full at
        the end of the loan term. Because of the high yield of our loans, we do
        not believe that a 10% increase or decrease in general interest rates
        (from those prevailing at June 30, 2001) would have a significant impact
        on the fair value of our fixed rate loan portfolio. A significant
        increase in interest rates could, however, make it more difficult for
        our borrowers to sell or refinance their respective properties. This
        could have a material adverse effect on us, either through loan defaults
        or the need to grant extensions of the maturity dates, thereby delaying
        repayment. Additionally, a real estate market decline in Nevada, Arizona
        or California could have a material adverse impact on us. If real estate
        values were to decline, borrowers might find it difficult, if not
        impossible, to repay some or all of the principal and accrued interest
        in connection with a sale or refinancing of the underlying properties. A
        number of factors could lead to a real estate market decline including,
        but not limited to, a slowdown in the growth of the economy, increasing
        commercial interest rates and supply and demand factors. It is not
        possible for us to quantify the potential loss in earnings or cash flows
        that might result from a real estate market decline.

        We have attempted to mitigate these risk exposures by carefully
        underwriting and servicing our loans. The underwriting decision to
        provide a loan to an applicant is based primarily upon the loan-to-value
        ratio for the underlying collateral. Thereafter, our manager uses early
        intervention, aggressive collection and loss mitigation techniques in
        the servicing process. While we have attempted to mitigate these risk
        exposures, there can be no assurance that these efforts will be
        successful.



                                       15
<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

        At June 30, 2001, other than litigation by the Company in the ordinary
        course of business involving foreclosures or other exercise of its
        rights as a creditor, there were no material pending proceedings to
        which the Company was a party or of which any of its property was
        subject.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

        On June 30, 2001, Specialty Mortgage Trust conducted the first closing
        of a private placement of 1,000,000 shares of Class A Convertible
        Preferred Stock at $11.00 per share for $11 million. There were 92
        investors, 77 of whom were accredited pursuant to Regulation D. In the
        placement, 735,580 shares were issued to individuals (including
        self-directed retirement accounts and estate planning entities such as
        family trusts), 124,420 shares were issued to pension plans and 140,000
        shares were issued to corporate or partnership business entities.

        The sale of stock was exempt from the registration requirements of the
        Securities Act of 1933 pursuant to Section 4(2) thereof. Appropriate
        legends were placed on each stock certificate. No underwriters were
        involved and no underwriting commissions were paid. No form of general
        solicitation or general advertising was used in any of the transactions.
        Each investor signed a subscription agreement which included
        representations that they had sufficient investment experience or
        received sufficient investment advice to be capable of evaluating the
        merits and risks of their investment in our stock, and that they were
        able to bear the economic risk of the investment.

        The preferred stock will convert to Specialty Mortgage Trust's common
        stock, par value $0.01 per share: (a) upon the closing of a firm
        commitment underwritten public offering of the common stock resulting in
        aggregate gross proceeds to Specialty Mortgage Trust of at least $20
        million and at a price per share of at least $10.00 or such lesser
        amount of proceeds and/or lower price per share as may be approved by
        two-thirds of the preferred stock; or (b) after March 31, 2001 when and
        if the return on equity for the previous four quarters exceeds 12%.
        Management currently expects a conversion to occur pursuant to clause
        (b) following the end of the third quarter of this year (September 30,
        2001).

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

        Not applicable

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.

        Not applicable

ITEM 5. OTHER INFORMATION.

        None



                                       16
<PAGE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

        (a)     Exhibits

                Exhibit No.    Document

                3.1*           Articles of Incorporation

                3.2*           Articles Supplementary

                3.2a           Articles of Amendment of Articles Supplementary

                3.3*           Bylaws

                3.3.1*         Amendment to Bylaws

                10.1a          First Amendment, dated as of May 22, 2001, to
                               Amended and Restated Management Agreement

                11            Statement Regarding Computation of per share
                              earnings for the three months ended June 30,
                              2001 and June 30, 2000

        -------------------

        *       Incorporated by reference to the correspondingly numbered
                exhibit to the Registration Statement on Form S-11 (Registration
                No. 333-44860) filed by Specialty Mortgage Trust, Inc. with the
                Securities and Exchange Commission on August 30, 2000.

        (b)     Reports on Form 8-K

                None



                                       17
<PAGE>

                                   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.

                                            SPECIALTY MORTGAGE TRUST, INC.



Dated: August 13, 2001                      By:
                                               ---------------------------------
                                               Nello Gonfiantini III
                                               Chairman, President, Secretary
                                               and Chief Financial Officer

                                               (Signed in the capacity of (i)
                                               duly authorized officer of the
                                               registrant and (ii) principal
                                               Financial Officer of the
                                               registrant)



                                       18