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

**FORM 10-Q**

| x | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|---|---------------------------------------------------------------------------------------------|

**For the quarterly period ended:  June 30, 2003**

**OR**

| o | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|---|----------------------------------------------------------------------------------------------|

**For the transition period from _______________ to _______________**

**Commission file number:  1-13563**

| **LASER MORTGAGE MANAGEMENT, INC.**                                |
|--------------------------------------------------------------------|
| **(Exact name of registrant as specified in its charter)**         |
|                                                               |   |   |
| **DELAWARE**                                                       |   | **22-3535916** |
| **(State or other jurisdiction of incorporation or organization)** |   | **(I.R.S. Employer Identification No.)** |

**c\o Mariner Investment Group,Inc.780 Third Avenue, 16th FloorNew York, NY 10017****(Address of principal executive offices)(Zip Code)**

**(212) 758-2024****(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 theSecurities 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  o |
|------------------|-----------------|

               Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).  

| Yes  o | No  x |
|------------------|-----------------|

               Indicate the number of shares outstanding of each of the issuer’s classes of stock, as of the last practicable date: 14,038,983shares of common stock, $0.001 par value, outstanding as of August 11, 2003.

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LASER MORTGAGE MANAGEMENT, INC.

FORM 10-Q

INDEX

PART I.    FINANCIAL INFORMATION

1

 

 

 

 

 

 

Item 1.

Financial Statements

1

 

 

 

 

 

 

 

 

Statements of Net Assets in Liquidation as of June 30, 2003 (Unaudited) and December 31, 2002 (Liquidation Basis)

1

 

 

 

 

 

 

 

 

Statements of Changes in Net Assets in Liquidation for the Three and Six Months Ended June 30, 2003 and June 30, 2002 (Liquidation Basis) (Unaudited)

2

 

 

 

 

 

 

 

 

Statements of Cash Flows for the Three and Six Months Ended June 30, 2003 and June 30, 2002 (Liquidation Basis) (Unaudited)

3

 

 

 

 

 

 

 

 

Notes to Financial Statements (Unaudited)

4

 

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

9

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

11

 

 

 

 

 

 

Item 4.

Controls and Procedures

11

 

 

 

 

 

PART II.    OTHER INFORMATION

12

 

 

 

 

 

 

Item 1.

Legal Proceedings

12

 

 

 

 

 

 

Item 6.

Exhibits and Reports on Form 8-K

12

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**PART I.**               **FINANCIAL INFORMATION**

**Item 1.**   **Financial Statements**

**LASER Mortgage Management, Inc.**

**STATEMENT OF NET ASSETS IN LIQUIDATION(LIQUIDATION BASIS)**

 

 

**AS OF**

 

 

 

 

 

 

**JUNE 30,2003**

 

**DECEMBER 31, 2002**

 

 

 

 

 

 

 

**(UNAUDITED)**

 

 

 

 

**Assets**

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

9,797,530

 

$

18,941,547

 

Investment in security

 

 

2,954,375

 

 

—  

 

Interest receivable

 

 

539

 

 

594

 

 

 

 

 

Total assets

 

 

12,752,444

 

 

18,942,141

 

 

 

 

 

**Liabilities**

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

 

105,528

 

 

197,444

 

Reserve for estimated liquidation costs

 

 

396,726

 

 

410,759

 

 

 

 

 

Total liabilities

 

 

502,254

 

 

608,203

 

 

 

 

 

**Net assets in liquidation**

 

$

12,250,190

 

$

18,333,938

 

 

 

 

 

See notes to financial statements.

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**LASER Mortgage Management, Inc.**

**STATEMENTS OF CHANGES IN NET ASSETS INLIQUIDATION(LIQUIDATION BASIS) (UNAUDITED)**

 

 

**FOR THE**

 

 

 

 

 

 

**THREE MONTHS ENDED**

 

**SIX MONTHS ENDED**

 

 

 

 

 

 

 

**JUNE 30, 2003**

 

**JUNE 30, 2002**

 

**JUNE 30, 2003**

 

**JUNE 30, 2002**

 

 

 

 

 

 

 

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities and mortgage loans

 

$

—  

 

$

43,981

 

$

—  

 

$

174,757

 

Cash and cash equivalents

 

 

38,943

 

 

84,602

 

 

94,555

 

 

148,446

 

 

 

 

 

 

 

Total interest income

 

 

38,943

 

 

128,583

 

 

94,555

 

 

323,203

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Repurchase agreement

 

 

—  

 

 

7,708

 

 

—  

 

 

19,662

 

 

 

 

 

 

 

Net interest income

 

 

38,943

 

 

120,875

 

 

94,555

 

 

303,541

 

Net gain on securities

 

 

—  

 

 

78,202

 

 

2,026,836

 

 

245,352

 

General and administrative expenses

 

 

164,328

 

 

229,785

 

 

1,185,647

 

 

502,430

 

 

 

 

 

 

 

(Decrease) increase in net assets in liquidation from operating activities

 

 

(125,385

)

 

(30,708

)

 

935,744

 

 

46,463

 

Cash liquidation distribution

 

 

—  

 

 

—  

 

 

(7,019,492

)

 

—  

 

Net assets in liquidation at beginning of period

 

 

12,375,575

 

 

18,520,404

 

 

18,333,938

 

 

18,443,233

 

 

 

 

 

 

 

Net assets in liquidation at end of period

 

$

12,250,190

 

$

18,489,696

 

$

12,250,190

 

$

18,489,696

 

 

 

 

 

 

 

See notes to financial statements.

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**LASER Mortgage Management, Inc.**

**STATEMENTS OF CASH FLOWS(LIQUIDATION BASIS) (UNAUDITED)**

 

 

**FOR THE**

 

 

 

 

 

 

**THREE MONTHS ENDED**

 

**SIX MONTHS ENDED**

 

 

 

 

 

 

 

**JUNE 30, 2003**

 

**JUNE 30, 2002**

 

**JUNE 30, 2003**

 

**JUNE 30, 2002**

 

 

 

 

 

 

 

**Cash Flows From Operating Activities**

 

 

 

 

 

 

 

 

 

 

 

 

 

(Decrease) increase in net assets in liquidation from operating activities

 

$

(125,385

)

$

(30,708

)

$

935,744

 

$

46,463

 

Adjustments to reconcile (decrease) increase in net assets in liquidation from operating activities to net cash used in operatingactivities:

 

 

  

 

 

  

 

 

  

 

 

  

 

Amortization of mortgage premiums

 

 

—  

 

 

—  

 

 

—  

 

 

(8,766

)

Net (gain) loss on securities

 

 

—  

 

 

—  

 

 

(2,000,000

)

 

33,614

 

Decrease in interest receivable

 

 

182

 

 

822

 

 

55

 

 

315,182

 

Decrease in accrued interest payable

 

 

—  

 

 

(42,530

)

 

—  

 

 

(30,576

)

Decrease in accounts payable and accrued expenses

 

 

(74,024

)

 

(27,417

)

 

(91,916

)

 

(419,651

)

Decrease in reserve for estimated liquidation costs

 

 

—  

 

 

(15,011

)

 

(14,033

)

 

(19,818

)

 

 

 

 

 

 

Net cash used in operating activities

 

 

(199,227

)

 

(114,844

)

 

(1,170,150

)

 

(83,552

)

 

 

 

 

 

 

**Cash Flows From Investing Activities**

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of security

 

 

(2,954,375

)

 

—  

 

 

(2,954,375

)

 

—  

 

Proceeds from sale of securities

 

 

—  

 

 

1,677,563

 

 

2,000,000

 

 

16,105,648

 

Principal payments on securities and mortgage loans

 

 

—  

 

 

311,483

 

 

—  

 

 

2,510,300

 

 

 

 

 

 

 

Net cash (used in) provided by investing activities

 

 

(2,954,375

)

 

1,989,046

 

 

(954,375

)

 

18,615,948

 

 

 

 

 

 

 

**Cash Flows From Financing Activities**

 

 

 

 

 

 

 

 

 

 

 

 

 

Repayment of repurchase agreement

 

 

—  

 

 

(2,028,000

)

 

—  

 

 

(2,028,000

)

Liquidation distribution to stockholders

 

 

(7,019,492

)

 

—  

 

 

(7,019,492

)

 

—  

 

 

 

 

 

 

 

Net cash used in financing activities

 

 

(7,019,492

)

 

(2,028,000

)

 

(7,019,492

)

 

(2,028,000

)

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

 

(10,173,094

)

 

(153,798

)

 

(9,144,017

)

 

16,504,396

 

Cash and cash equivalents at beginning of period

 

 

19,970,624

 

 

19,618,379

 

 

18,941,547

 

 

2,960,185

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

9,797,530

 

$

19,464,581

 

$

9,797,530

 

$

19,464,581

 

 

 

 

 

 

 

See notes to financial statements.

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**LASER Mortgage Management, Inc.NOTES TO FINANCIAL STATEMENTSJUNE 30, 2003 (UNAUDITED)**

**1.**            **ORGANIZATION ANDSIGNIFICANT ACCOUNTING POLICIES**

               LASER Mortgage Management, Inc. (the “Company”) wasincorporated in Delaware on May 1, 2001, as a wholly-owned subsidiary of LASER Mortgage Management, Inc., a Maryland corporation (“LASER Maryland”), and is the successor by merger to LASER Maryland.  LASER Maryland was incorporated inMaryland on September 3, 1997 and commenced its operations on November 26, 1997.  On May 30, 2001, the Company’s Board of Directors and sole stockholder, LASER Maryland, approved the liquidation and dissolution of the Company under theterms and conditions of the Plan of Liquidation and Dissolution, subject to the approval of the Plan of Liquidation and Dissolution by the stockholders of LASER Maryland.  On July 27, 2001, the stockholders of LASER Maryland, at the annualmeeting, approved the reincorporation of LASER Maryland in Delaware (the “Reincorporation”), through the merger of LASER Maryland with and into the Company, and the subsequent liquidation and dissolution of the Company under the terms andconditions of the Plan of Liquidation and Dissolution.  On July 31, 2001, LASER Maryland completed the Reincorporation by merging with and into the Company.  As of the effective date of the Reincorporation, LASER Maryland ceased toexist.  On August 3, 2001, the Company filed a certificate of dissolution with the Secretary of State of the State of Delaware, and the dissolution of the Company was effective upon such filing.  The Company has ceased to conduct normalbusiness operations and now operates solely for the purpose of providing for the satisfaction of its obligations, adjusting and winding-up its business and affairs and distributing its remaining net assets.  References herein to“LASER” or the “Company” include LASER Maryland prior to the date of the Reincorporation, as applicable.

               In accordance with the Plan of Liquidation and Dissolution, receiving the approval of the Delaware Court of Chancery, the Company madedistributions of $0.50 and $3.00 per outstanding share of common stock on April 8, 2003 and December 28, 2001, respectively, to stockholders of record as of March 31, 2003 and December 17, 2001, respectively.  As of June 30, 2003, theestimated net realizable value of the Company’s net assets in liquidation was $0.87 per share.  After providing for expenses and subject to court approval, the Company expects to distribute the majority of the remaining net assets inliquidation over the next two years with a final liquidating distribution to occur thereafter.  The total amount of distributions to stockholders is subject to change based on numerous factors, including operating expenses, the Delaware Courtof Chancery modifying the distribution amounts and timing currently envisioned by the Board of Directors under the Plan of Liquidation and Dissolution, unanticipated claims or expenses, as well as other factors beyond the control of theCompany.  

               The Company was organized to create and manage an investment portfolio of primarilymortgage-backed securities and mortgage loans that, in combination with financing and hedging activities, would generate income for distribution to its stockholders while preserving the Company’s capital base.  At its inception, theCompany elected to be taxed as a real estate investment trust (a “REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its short taxable year ended December 31, 1997.  The Companyqualified as a REIT for the taxable years ended December 31, 1997 through 2001.  The Company did not qualify as a REIT for the year beginning January 1, 2002. 

               ***Basis of Presentation*** – As described above, stockholders approved the Plan of Liquidation and Dissolution of theCompany on July 27, 2001.  As a result, the Company adopted liquidation basis accounting effective July 28, 2001.  Accordingly, the Company’s assets are stated at their estimated net realizable values and liabilities are stated attheir estimated settlement amounts, including an accrual for estimated expenses associated with the liquidation of the Company.  Before the adoption of liquidation basis accounting, the Company operated as a continuing business and followedgoing concern basis accounting.  Because substantially all of the existing assets and liabilities of the Company were carried at approximate fair value in accordance with generally accepted accounting principles (“GAAP”), the adoptionof liquidation basis accounting did not have a material impact on the Company’s financial statements other than requiring the Company to charge stockholders’ equity for the reduction in the carrying value of securities to reflect theirestimated net realizable value, the write-off of the remaining balance of prepaid expenses, and the reserve for estimated expenses associated with the liquidation of the Company.  However, the valuation of assets and liabilities at theirestimated net realizable values and estimated settlement amounts, respectively, necessarily requires estimates and assumptions.  Changes in market conditions, actual costs associated with the liquidation, and other factors may affect theamounts ultimately realized or settled, and those amounts may differ, perhaps materially, from the carrying values on the Company’s financial statements.

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**LASER Mortgage Management, Inc.NOTES TO FINANCIAL STATEMENTSJUNE 30, 2003 (UNAUDITED)**

               The accompanying unaudited financial statements have been prepared on liquidation basis accounting in conformity with GAAP and theinstructions to Form 10-Q and Article 10, Rule 10-01 of Regulation S-X for interim financial statements.  Accordingly, these unaudited financial statements do not include all of the information and footnotes required by GAAP for completefinancial statements.  In the opinion of the Company’s management, all adjustments, consisting only of normal recurring accruals, considered necessary for a fair presentation, have been included in these financial statements.  Theseunaudited interim financial statements, as of and for the periods ended June 30, 2003 should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31,2002.  Operating results for any interim period are not necessarily indicative of results that may be expected for a full year.

               A summary of the Company’s significant accounting policies follows:

               ***Cash Equivalents*** – Cash equivalents consist of an overnight reverse repurchase agreement.  The amount reportedon the statements of net assets in liquidation represents the amount advanced under the agreement.

               ***Investments*** – The Company invested primarily in mortgage-backed securities and mortgage loans.  Themortgage-backed securities included privately issued or U.S. government or agencies issued mortgage pass-through certificates, collateralized mortgage obligations and other securities representing interests in, or obligations backed by, pools ofmortgage loans (collectively, “Mortgage Securities”).  The mortgage loans were secured by first or second liens on single-family residential, multi-family residential, commercial or other real property  (“MortgageLoans,” and together with Mortgage Securities, “Mortgage Assets”).  The Company also invested in other debt and equity securities (together with Mortgage Securities, “Securities,” and together with Mortgage Assets,“Investments”).

               Before the adoption of liquidation basis accounting and in accordance with theprovisions of Statement of Financial Accounting Standards (“SFAS”) No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, the Company classified its Securities as available-for-sale.  Theavailable-for-sale classification required that those Securities be carried at estimated fair value, with unrealized gains and losses reported on the balance sheet as a separate component of stockholders’ equity within accumulated othercomprehensive loss.  This classification was appropriate since the Company may have needed to sell, from time to time, any of its Securities as part of its overall management of its balance sheet even though the Company generally intended tohold most of its Securities until maturity.

               After the adoption of liquidation basis accounting, theCompany’s Investments were carried at estimated net realizable value on the statements of net assets in liquidation, with unrealized gains and losses reported on the statements of changes in net assets in liquidation.

               The Company’s Mortgage Loans were carried at estimated net realizable value on the statements of net assets inliquidation, with unrealized gains and losses reported on the statements of changes in net assets in liquidation.  Before the adoption of liquidation basis accounting, the Company’s Mortgage Loans were carried on the balance sheet at theirunpaid principal balance, net of unamortized discount or premium.

               Interest income is accrued based on theoutstanding principal or notional amount of the Investments and cash equivalents and their contractual terms.  Premiums and discounts associated with the purchase of the Investments were amortized into interest income over the lives of theInvestments using the effective yield method.

               Realized gains and losses on Investment transactions weredetermined on the specific identification basis and were recorded on the statements of changes in net assets in liquidation.

               ***Repurchase Agreements*** – The Company utilized repurchase agreements to finance most of its Investments.  Therepurchase agreements were collateralized by certain of the Company’s Investments and carried interest rates that generally moved in close relation to the one-month London Interbank Offered Rate.  

               ***Reserve for Estimated Liquidation Costs*** – Under liquidation basis accounting, the Company is required to estimate andaccrue the costs directly associated with the liquidation.  The amount recorded in the statements of net

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**LASER Mortgage Management, Inc.NOTES TO FINANCIAL STATEMENTSJUNE 30, 2003 (UNAUDITED)**

assets in liquidationrepresents estimated professional fees and other expenses expected to be incurred in connection with liquidation activities and paid out over the course of the liquidation.  The ongoing general and administrative expenses related to operatingthe Company until its liquidation is completed have not been included in this reserve.  The ultimate amount paid might vary significantly due to, among other things, the timing of the liquidation.

               ***Fair Value of Financial Instruments*** – The carrying values of cash equivalents, Securities, interest receivable, andother financial liabilities approximate their estimated fair value because of the short-term nature of these financial instruments.  Estimated net realizable value approximates estimated fair value as presented in these financialstatements.

               ***Income Taxes*** – At its inception, the Company elected to be taxed as a REITunder the Internal Revenue Code of 1986, as amended, commencing with its short taxable year ended December 31, 1997.  As such, the Company generally had been entitled to a deduction for all dividends it paid to its stockholders for a taxableyear.  As a result, the Company had not been subject to federal income taxation with respect to its distributed income.  Qualification as a REIT requires that the Company satisfy a number of asset, income and distribution tests.  TheCompany qualified as a REIT for the taxable years ended December 31, 1997 through 2001.  The Company did not qualify as a REIT for the year beginning January 1, 2002.

               The Company follows the provisions of SFAS No. 109, “Accounting for Income Taxes”, which provides for the recognition ofdeferred tax assets and liabilities relating to the future tax consequences of net operating loss carryforwards and the differences between the financial reporting amounts and the tax bases of assets and liabilities, measured using the enacted taxrates and laws that are expected to be in effect when the taxes are actually paid or recovered.  When the Company determines that it is more likely than not that the measured amount of the deferred tax assets will not be realized, the Companywill reduce the deferred tax assets through a valuation allowance.

               ***Use of Estimates*** –The preparation of financial statements in conformity with GAAP requires the Company 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 thefinancial statements and the reported amounts of income and expenses during the reporting period.  Actual results could differ from those estimates.

**2.**            **MORTGAGE SECURITIES**

               During June 2003, the Company purchased a $2,900,000 principal amount U.S. Treasury Note for $2,954,375.  The Security matures June30, 2004 and carries an annual coupon interest rate of 2.875%.

               On October 23, 2000 the Company filed suitin the Southern District of New York against Asset Securitization Corporation (“ASC”), Nomura Asset Capital Corporation (“Normura Asset”) and Nomura Securities International, Inc. (“Nomura”) alleging that the defendantsdefrauded the Company into purchasing approximately $19.0 million worth of ASC Securities by failing to disclose, among other things, that one of the largest loans in a trust fund of which the Company owned subordinated interests was seriouslytroubled.  

               On February 4, 2003, the Company withdrew the lawsuit and all claims were dismissed withprejudice and without costs.

               On March 21, 2003, the Company sold all of the ASC Securities, whichpreviously were estimated to have no net realizable value, for $2,000,000.

**3.**            **MORTGAGE LOANS**

               During May 2002, the Company sold all of the remaining Mortgage Loans it owned at their estimated net realizable value of$1,677,563.

**4.**            **REPURCHASE AGREEMENT**

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**LASER Mortgage Management, Inc.NOTES TO FINANCIAL STATEMENTSJUNE 30, 2003 (UNAUDITED)**

During May 2002, theCompany repaid its outstanding repurchase agreement of $2,028,000 and the related accrued interest of $50,238.

**5.**            **RESERVE FOR ESTIMATED LIQUIDATION COSTS**

               At the time of the adoption of liquidation basis accounting, the Company recorded $700,000 for estimated professional fees and otherexpenses directly related to the liquidation that are anticipated to be incurred over the course of the liquidation.  The ongoing general and administrative expenses related to operating the Company until its liquidation is completed have notbeen included in this reserve.  At June 30, 2003 and December 31, 2002, the reserve for estimated liquidation costs amounted to $396,726 and $410,759, respectively.  During the three months ended June 30, 2003 and 2002, the Company paid $0and $15,011, respectively, of liquidation costs.  During the six months ended June 30, 2003 and 2002, the Company paid $14,033 and $19,818, respectively, of liquidation costs.

**6.**            **MANAGEMENT ARRANGEMENTS**

               Upon the termination of the management agreement with Mariner Mortgage Management, L.L.C. (“Mariner”) on November 1, 2001, theCompany became self managed and entered into employment agreements with William J. Michaelcheck, the President and Chief Executive Officer of the Company, and Charles R. Howe, II, the Vice President, Treasurer and Secretary of the Company, each at asalary of $10,000 per month.  Effective October 1, 2002, the employment agreement with Mr. Howe was amended to reduce his salary to $5,000 per month.  Messrs. Michaelcheck and Howe previously were responsible for managing theCompany’s portfolio at Mariner and continue to have significant responsibilities at Mariner.

               OnNovember 1, 2001, the Company also entered into a support services agreement with Mariner Investment Group, Inc. (“Mariner Investment Group”), an affiliate of Mariner, under which Mariner Investment Group will provide the Company withoffice space and services, bookkeeping and accounting services and such other services as may be agreed upon from time to time by the Company and Mariner Investment Group for a fee of $30,000 per month.  Effective July 1, 2002, the fee underthe support services agreement was reduced to $20,000 per month.   

               For the three months endedJune 30, 2003 and 2002, the Company incurred $45,000 and $60,000, respectively, of expenses under the employment agreements and $60,000 and $90,000, respectively, of expenses under the support services agreement.  For the six months ended June30, 2003 and 2002, the Company incurred $90,000 and $120,000, respectively, of expenses under the employment agreements and $120,000 and $180,000, respectively, of expenses under the support services agreement.

               All of the management arrangements discussed above have been ratified and approved by the Compensation Committee of the Board ofDirectors.

**7.**            **INCOME TAXES**

               At its inception, the Company elected to be taxed as a REIT under the Internal Revenue of 1986, as amended, commencing with its shorttaxable year ended December 31, 1997.  As such, the Company generally had been entitled to a deduction for all dividends it paid to its stockholders for a taxable year.  As a result, the Company had not been subject to federal incometaxation with respect to its distributed income.  Qualification as a REIT requires that the Company satisfy a number of asset, income and distribution tests.  The Company qualified as a REIT for the taxable years ended December 31, 1997through 2001.  Because less than 75% of the Company’s gross income for the 2002 taxable year did not derive from certain required REIT investments, the Company did not qualify as a REIT for the year beginning January 2002.  As aconsequence, the Company is no longer entitled to deduct dividends paid to stockholders from its taxable income.  The Company is subject to federal income tax at corporate rates (including any applicable alternative minimum tax) with respect togains from liquidating sales of assets and income from operations for the year ended December 31, 2002 and for subsequent taxable years.  The federal income taxes would reduce the amounts otherwise distributable to its stockholders. 

               For the tax year ended December 31, 2002, net operating losses as calculated for tax purposes(“NOLs”) are estimated at approximately $(0.7) million.  Prior to 2002, the Company experienced approximately $(120.1)

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**LASER Mortgage Management, Inc.NOTES TO FINANCIAL STATEMENTSJUNE 30, 2003 (UNAUDITED)**

million of aggregateNOLs.  NOLs generally may be carried forward for 20 years.  The Company believes that during 1999 it experienced an “ownership change” within the meaning of Section 382 of the Code.  Consequently, the Company’s use ofNOLs generated before the ownership change to reduce taxable income after the ownership change will be subject to limitations under Code Section 382.  Generally, Code Section 382 limits the use of NOLs in any year to the value of theCompany’s common stock on the date of the ownership change multiplied by the long-term tax-exempt rate (published by the IRS) with respect to that date.  The Company believes that the annual limitation with respect to the use of its NOLsis approximately $(3.0) million and that, as of the beginning of the tax year 2003, approximately $(91.2) million of the estimated cumulative NOL of $(120.8) million is subject to the annual limitation.

               For the six months ended June 30, 2003, the Company estimates that taxable income before utilizing its carried forward NOLsamounted to approximately $0.9 million.  To the extent that the Company generates taxable income, the Company will utilize its NOLs to reduce its taxable income and adjust its deferred tax assets and valuation allowance accordingly.  Forthe six months ended June 30, 2003, the Company offset its taxable income with NOLs and reduced its aggregate gross deferred tax assets by approximately $435,000.  The aggregate gross deferred tax asset amounted to approximately$56,108,000 at June 30, 2003.  Due to the continuing liquidation of the Company and the expectation that the Company will not have sufficient earnings to utilize these deferred tax assets, the existing valuation allowance for the entire grossdeferred tax asset was reduced by $435,000 to $56,108,000 at June 30, 2003.

               For the three months endedJune 30, 2003, the Company estimates that it incurred approximately $0.1 million of loss for tax purposes.  As a result, the Company increased its aggregate gross deferred tax assets by approximately $58,000 and recognized a correspondingincrease of $58,000 in the valuation allowance for the change in the gross deferred tax asset.

*   *   *   *   *

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

               The following discussion should be read in conjunction with the Company’s financial statements as of and for the three and sixmonths ended June 30, 2003 and notes thereto and with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.  References herein to “LASER” or the“Company” include LASER Mortgage Management, Inc., a Maryland corporation, prior to the date of the Reincorporation described in Note 1 to the Notes to Financial Statements included as part of Item 1.

**Forward-Looking Statements**

                “Safe Harbor” statement under thePrivate Securities Litigation Reform Act of 1995: Statements in this discussion regarding the Company and its business, which are not historical facts, are “forward-looking statements” that involve risks and uncertainties.  Risks anduncertainties, which could cause results to differ from those discussed in the forward-looking statements herein, are listed in the Company’s Annual Report filed on Form 10-K.

**General**

               On July 27, 2001, the stockholders of LASER Maryland, at the annualmeeting, approved the Reincorporation of LASER Maryland in Delaware, through the merger of LASER Maryland with and into the Company, and the subsequent liquidation and dissolution of the Company under the terms and conditions of the Plan ofLiquidation and Dissolution.  On July 31, 2001, LASER Maryland completed the Reincorporation by merging with and into the Company.  As of the effective date of the Reincorporation, LASER Maryland ceased to exist.  On August 3, 2001,the Company filed a certificate of dissolution with the Secretary of State of the State of Delaware, and the dissolution of the Company was effective upon such filing.  The Company has ceased to conduct normal business operations and nowoperates solely for the purpose of providing for the satisfaction of its obligations, adjusting and winding-up its business and affairs and distributing its remaining net assets.  

               In accordance with the Plan of Liquidation and Dissolution, receiving the approval of the Delaware Court of Chancery, the Company madedistributions of $0.50 and $3.00 per outstanding share of common stock on April 8, 2003 and December 28, 2001, respectively, to stockholders of record as of March 31, 2003 and December 17, 2001, respectively.  As of June 30, 2003, theestimated net realizable value of the Company’s net assets in liquidation was $0.87 per share.  After providing for expenses and subject to court approval, the Company expects to distribute the majority of the remaining net assets inliquidation over the next two years with a final liquidating distribution to occur thereafter.  The total amount of distributions to stockholders is subject to change based on numerous factors, including operating expenses, the Delaware Courtof Chancery modifying the distribution amounts and timing currently envisioned by the Board of Directors under the Plan of Liquidation and Dissolution, unanticipated claims or expenses, as well as other factors beyond the control of theCompany.  

               As a result of the stockholders approving the Plan of Liquidation and Dissolution, theCompany adopted liquidation basis accounting effective July 28, 2001.  Accordingly, the Company’s assets are stated at their estimated net realizable values and liabilities are stated at their estimated settlement amounts, including anaccrual for estimated expenses associated with the liquidation of the Company.  Before the adoption of liquidation basis accounting, the Company operated as a continuing business and followed going concern basis accounting.  Becausesubstantially all of the existing assets and liabilities of the Company were carried at approximate fair value in accordance with generally accepted accounting principles (“GAAP”), the adoption of liquidation basis accounting did not havea material impact on the Company’s financial statements other than requiring the Company to charge stockholders’ equity for: the reduction in the carrying value of securities to reflect their estimated net realizable value, the write-offof the remaining balance of prepaid expenses, and the reserve for estimated expenses associated with the liquidation of the Company.  However, the valuation of assets and liabilities at their estimated net realizable values and estimatedsettlement amounts, respectively, necessarily requires estimates and assumptions.  Changes in market conditions, actual costs associated with the liquidation, and other factors may affect the amounts ultimately realized or settled, and thoseamounts may differ, perhaps materially, from the carrying values on the Company’s financial statements.  

               At its inception, the Company elected to be taxed as a REIT under the Code, commencing with its short taxable year ended December 31,1997.  The Company qualified as a REIT for the taxable years ended December 31, 1997 through 2001.  The Company did not qualify as a REIT for the year beginning January 1, 2002.

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**Changes in Net Assets in Liquidation for the Three and Six Months Ended June 30, 2003**

               Under liquidation basis accounting, the Company reported a (decrease) increase in net assets in liquidation from operating activities of$(0.1) million and $0.9 million for the three and six months ended June 30, 2003.  The Company’s cash equivalents earned interest income of less than $0.1 million for the three months ended June 30, 2003 and $0.1 million for the six monthsthen ended.  In addition, during the first quarter of 2003, the Company recorded an increase of $2.0 million from securities comprised primarily of the proceeds from the sale of securities previously determined to be other-than-temporarilyimpaired and estimated to have no net realizable value.  General and administrative expenses during the three and six months ended June 30, 2003 amounted to $(0.2) million and $(1.2) million, respectively, and consisted of $(0.8) million paidfor directors and officers insurance during the first quarter of 2003, less than $(0.1) million and $(0.1) million, respectively, of fees paid pursuant to the support services agreement and $(0.1) million and $(0.2) million, respectively, ofprofessional fees, payroll and other expenses.

               The cash liquidation distribution of $0.50 per outstandingshare of common stock that was declared during the first quarter of 2003 offset the Company’s increase in net assets in liquidation from operating activities for the six months ended June 30, 2003 by $(7.0) million.  At June 30, 2003, theCompany’s net assets in liquidation amounted to $12.3 million.

               During the three and six months endedJune 30, 2003, a net $(0.2) million and $(1.2) million, respectively, of cash was used in the Company’s operating activities, primarily for the extension of the insurance coverage for the directors and officers during the first quarter of 2003.Cash generated by the proceeds from the previously mentioned sale of securities during the first quarter of 2003 amounted to $2.0 million.  During June 2003, the Company purchased a U.S. Treasury Note for $(3.0) million.  During April2003, the Company paid the $(7.0) cash liquidation distribution to stockholders.  At June 30, 2003, the balance of cash and cash equivalents amounted to $9.8 million.

**Changes in Net Assetsin Liquidation for the Three and Six Months Ended June 30, 2002**

               Under liquidation basis accounting,net assets in liquidation amounted to $18.5 million at June 30, 2002 and were essentially unchanged for the three and six months then ended.  The Company’s portfolio of interest earning assets, net of interest bearing liabilities, earned$0.1 million and $0.3 million, respectively, of net interest income.  In addition, the Company recorded a net increase of $0.1 million and $0.2 million, respectively, from securities comprised primarily of payments received on a securitypreviously determined to be impaired.  General and administrative expenses during these periods amounted to $(0.2) million and $(0.5) million, respectively, and consisted of  $(0.1) million and $(0.2) million, respectively, of fees paidpursuant to the support services agreement and $(0.1) million and $(0.3) million, respectively, of professional fees, payroll and other expenses.

               During the three and six months ended June 30, 2002, net cash of $1.9 million and $18.5 million, respectively, was generated from theCompany’s operating and investing activities, including $2.0 million and $18.6 million, respectively, of proceeds from sales of, and principal payments on, securities.  At June 30, 2002, the balance of cash and cash equivalents amounted to$19.5 million.

**Distributions**

               On March 20,2003, the Company announced that it would make a partial liquidation distribution to its stockholders of $0.50 per outstanding share of common stock.  On April 8, 2003, the Company made that distribution to stockholders of record as of March31, 2003.  For the three and six months ended June 30, 2002, the Company did not make any capital distributions or declare any dividends.  

**Financial Condition**

**Investments**

               The Company purchased a $2.9 million principalamount U.S. Treasury Note carrying an annual coupon interest rate of 2.875% that matures on June 30, 2004.  On March 21, 2003, the Company sold substantially all of 

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the mortgage securities previously determined to be other-than-temporarily impaired, which were estimated to have no net realizable value, for $2,000,000.  The remainingmortgage securities owned and previously determined to be other-than-temporarily impaired are estimated to have no net realizable value as of June 30, 2003.

**Liquidity and CapitalResources**

               Liquidity measures the Company’s ability to turn non-cash assets into cash during theliquidation period to satisfy its commitments to pay ongoing general and administrative expenses and estimated costs of liquidation, and to make distributions to stockholders.  As of June 30, 2003, the Company holds a highly liquid, readilymarketable U.S. Treasury Note and combined with its balance of cash and cash equivalents of $9.8 million, liquidity amounts to $12.8 million.  The Company believes that this amount and its resultant earnings will be adequate to support theCompany and pay its obligations during the liquidation period.  The Delaware Court of Chancery granted permission on March 18, 2003 to make a distribution of $0.50 per outstanding share of common stock and the Company made that distribution onApril 8, 2003 to stockholders of record as of March 31, 2003.

**Item 3.**   **Quantitative and Qualitative Disclosures About Market Risk**

**Market Risk**

               Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodityprices and equity prices. The primary market risk exposure that the Company had been subject to was the movement in interest rates with respect to its portfolio of mortgage assets, which were highly sensitive to many factors, including governmentalmonetary and tax policies, domestic and international economic and political considerations and other factors beyond the control of the Company.  

               The Company is exposed to interest rate risk as an investor in a US Treasury Note and in an overnight reverse repurchaseagreement.  Due to their short-term maturity, the interest rate risk to the Company is not significant.

               Additionally, the Company is a party to certain other financial instruments, including interest receivable, accounts payable and otheraccrued expenses that are not interest rate sensitive.

**Item 4.**   **Controls and Procedures**

               The Company maintains a system of internal controls and procedures designed to provide reasonable assurance that information required tobe disclosed in its filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The Company’s principalexecutive and financial officers have evaluated the disclosure controls and procedures within 90 days prior to the filing of this Quarterly Report on Form 10-Q and have determined that such disclosure controls and procedures are effective as of June30, 2003. 

               There have been no significant changes in the Company’s internal controls or in otherfactors which could significantly affect internal controls subsequent to the completion of the evaluation.

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**PART II.**            **OTHER INFORMATION**

               References in this Part II to “LASER” or the “Company” include LASER Mortgage Management, Inc., a Marylandcorporation, prior to the date of the reincorporation described in Note 1 to the Notes to Financial Statements included as part of Item 1.

**Item 1.**   **Legal Proceedings**

               On October 23, 2000, the Company filed suit in federal court in the Southern District of New York against Asset SecuritizationCorporation, Nomura Asset Capital Corporation and Nomura Securities International, Inc. alleging that the defendants defrauded the Company into purchasing over $19.0 million worth of mortgage pass-through certificates by failing to disclose amongother things, that one of largest loans in the mortgage pool was seriously troubled.  On December 8, 2000, the defendants filed a motion to dismiss the action.  On September 5, 2001, defendants’ motion to dismiss the action wasgranted with respect to the claims brought under Sections 12(a)(2) and 15 of the Securities Act of 1933 and denied with respect to the common law fraud claims and claims brought under Sections 10(b) and 20(a) of Securities Exchange Act of 1934 andRule 10b-5 promulgated thereunder.  On February 4, 2003, the Company withdrew the lawsuit and all claims were dismissed with prejudice and without costs.

               In accordance with the Plan of Liquidation and Dissolution, on November 8, 2001, the Board of Directors filed a petition with theDelaware Court of Chancery for permission to make an initial distribution to stockholders of $3.00 per outstanding common share.  On November 28, 2001, the Delaware Court of Chancery approved this initial distribution to stockholders.  OnDecember 28, 2001, a distribution of $3.00 per outstanding share of common stock was made to stockholders of record as of December 17, 2001.  The Delaware Court of Chancery granted permission on March 18, 2003 to make a distribution of$0.50 per outstanding share of common stock and the Company made that distribution on April 8, 2003 to stockholders of record as of March 31, 2003.

**Item 6.**   **Exhibits and Reports on Form 8-K**

               (a) Exhibits

               See Exhibit Index.

               (b) Reports

               None.

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**SIGNATURES**

               Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

 

LASER MORTGAGE MANAGEMENT, INC.

Dated:  August 14, 2003

 

 

 

 

 

 

By:

/s/ CHARLES R. HOWE, II

 

 

 

 

**Charles R. Howe, IIChief Financial Officer(principal accounting officer)(authorized officer of registrant)**

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**EXHIBIT INDEX**

**Exhibit Number**

 

**Exhibit**

 

2.1

 

The Articles of Merger (Incorporated by reference to Exhibit 2.1 to Registrant’s Quarterly Report on Form 10-Q dated June 30, 2001.)

 

 

 

2.2

 

The Certificate of Ownership and Merger (Incorporated by reference to Exhibit 2.2 to Registrant’s Quarterly Report on Form 10-Q dated June 30, 2001.)

 

 

 

2.3

 

Plan of Liquidation and Dissolution of LASER Mortgage Management, Inc. (Incorporated by reference to Exhibit 2.3 to Registrant’s Quarterly Report on Form 10-Q dated June 30,2001.)

 

 

 

3.1

 

Restated Certificate of Incorporation of LASER Mortgage Management, Inc., a Delaware corporation (Incorporated by reference to Exhibit 3.1 to Registrant’s Quarterly Report on Form 10-Qdated June 30, 2001.)

 

 

 

3.2

 

Bylaws of LASER Mortgage Management, Inc., a Delaware corporation (Incorporated by reference to Exhibit 3.2 to Registrant’s Quarterly Report on Form 10-Q dated June 30,2001.)

 

 

 

99.1

 

Certificate of Dissolution (Incorporated by reference to Exhibit 99.1 to Registrant’s Quarterly Report on Form 10-Q dated September 30, 2001.)

 

 

 

31.1

 

Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.

 

 

 

31.2

 

Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.

 

 

 

32.1

 

Section 1350 Certification of the Chief Executive Officer.

 

 

 

32.2

 

Section 1350 Certification of the Chief Financial Officer.

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