Luminent Mtg Cap Inc (fka LUMC)

[leebret]

"UPDATE" for the board and new investors who have just joined us recently. Two things are about to happen. One is they will be reporting their first quarter results by Monday May 19th. According to the narrative in part III they will also be issuing a press release on certain corporate events that are in the process of being finalized and will be included in the 10Q as well.

1) The latest filing and Narrative quoted below. There will be some adjustments that favor Luminent and their current book value.

Narrative;
If so, attach an explanation of the anticipated change, both narratively and quantitatively, and, if appropriate, state the reasons why a reasonable estimate of the results cannot be made.


Our Form 10-Q quarterly report for the quarter ended March 31, 2008 will report a significant change in our results of operations from the quarter ended March 31, 2007. For the three months ended March 31, 2008 and 2007, we had net income of approximately $128.2 million and $14.4 million, respectively. Net income for the three months ended March 31, 2008 was mainly comprised of approximately $7.8 million of net interest income and approximately $135.2 million of net gains on instruments carried at fair value mainly due to the decrease in the fair value of borrowings. Due to our adoption of SFAS No. 159 as of January 1, 2008, all gains and losses in the fair value of our investment assets and financing liabilities are now recognized in our statement of operations.

PART III — NARRATIVE
State below in reasonable detail why Forms 10-K, 20-F, 11-K, 10-Q, 10-D, N-SAR, N-CSR, or the transition report or portion thereof, could not be filed within the prescribed time period.
We will be reporting certain corporate events, which are in the process of being finalized, immediately prior to filing our Form 10-Q for the quarter ended March 31, 2008. We want our Form 10-Q quarterly report for the quarter ended March 31, 2008 to disclose those events. We anticipate filing our Form 10-Q quarterly report for the quarter ended March 31, 2008 by Monday, May 19, 2008.



http://www.sec.gov/Archives/edgar/data/1236309/000089322008001506/w57859nnt10vq.htm


2) They will be doing a 3/1 reverse merger and de-reiting into a LLC and expanding their services into other area's. They need the cash to help them grow. They will also need to distribute the first two quarters of their income back to shareholders as well. Page 40 of the filing describes in detail how they will determine the amount of the cash and shares they will need to distribute to satisfy those requirments. They expect to do this in the second quarter which ends in the month of June.

As of December 31, 2007, we estimate that we had approximately $45.0 million of undistributed REIT taxable income. In order to maintain our qualification as a REIT for our taxable year ended December 31, 2007 and for our taxable year ending on the effective date of the merger, we must distribute at least 90% of our taxable income for each such taxable year through cash distributions or distributions-in-kind.

http://www.secinfo.com/dr89b.tsn.htm


3)At last count there are still 7 million shares short on Luminent. I can't imagine them not covering well ahead of this merger. They certainly don't want to pay out any cash dividends and/or having to buy shares and give them to the rightful owners of those borrowed shares. We have seen evidence of that in progress since February. They have covered over 4 million shares since Feb thru the end of April.

4) Arco may exercise their warrants before the merger, if they do I believe it's already baked into the price. Here is part of my reasoning. We have a market cap of about 12 million and it will cost them approximately 6 million to exercise their warrants. Essentially paying market price to purchase 49% of the company, yes it's dilutive. Luminent had no choice when they needed them for their survival. Keep in mind Arco has loaned Luminent 190 million for re-purchase aggrements and corporate purposes. Using 80 million shares @ $1.00 per-share only gives Luminent a $80 million dollar market cap. They sill have 4 billion dollars in mortgages they hold with great possiblilites of mark-to-market valuation ajustments which will bring book value positive at some point.

I would assume the 6 million dollars will show as adding to their cash balance if exercised.

I have simplfied this post and focused on the major points. I have read over 500 pages of documents related to Luminent. Including their last 10k for the year of the 2007 and the S-4 filing of some 300 pages decribing the reverse merger. If you have any detailed questions you may view the documents or you can call Karen Chang our CFO and she will speak to you. I have had two conversations with her at this point.



Luminent Mortgage Capital Inc.
2005 Market Street
21st Floor
Philadelphia, PA 19103
Main: [phone]
Fax: [phone]
[e-mail]