U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
(Mark One)
|X| Annual report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 (Fee Required)
For the fiscal year ended December 31, 1995*
*In accordance with Rule 15d-2, this Special Financial Report contains only
financial statements for the referenced fiscal year.
|_| Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 (No fee required)
For the transition period from ______ to ________
Commission file number 33-98178
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Matzel & Mumford Mortgage Funding, Inc.
- - --------------------------------------------------------------------------------
(Name of Small Business Issuer in Its Charter)
New Jersey 22-3382016
---------- ----------
(State or Other Jurisdiction (I.R.S. Employer or
of Incorporation) Organization Identification No.)
100 Village Court, Hazlet, New Jersey 07730
- - ------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(908) 888-4801
- - --------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange
------------------- on Which Registered
-------------------
None None
- - --------------------------------------------------------------------------------
Securities registered under Section 12(g) of the Exchange Act:
None
- - --------------------------------------------------------------------------------
(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 No X (not subject to filing requirements for the past 90 days)
---- ----
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.|X|
State issuer's revenues for its most recent fiscal year. $0
--
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days. $0
--
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. 500 shares common stock, no par value
-------------------------------------
Transitional Small Business Disclosure Format (check one):
Yes No X
---- ----
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
FINANCIAL STATEMENTS
FOR THE PERIOD JULY 11, 1995
(INCEPTION) TO
DECEMBER 31, 1995
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
INDEX TO FINANCIAL STATEMENTS
PAGE
Report of Independent Certified Public Accountants........... 1
Balance Sheet as of December 31, 1995........................ 2
Statement of Cash Flows for the Period July 11, 1995
(inception) to December 31, 1995............................ 3
Notes to Financial Statements................................ 4 - 5
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders
Matzel & Mumford Mortgage Funding, Inc.
Hazlet, New Jersey
We have audited the accompanying balance sheet of Matzel & Mumford Mortgage
Funding, Inc. as of December 31, 1995, and the related statement of cash flows
for the period July 11, 1995 (inception) to December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Matzel & Mumford Mortgage
Funding, Inc. as of December 31, 1995, and the results of cash flows for the
period then ended in conformity with generally accepted accounting principles.
MINTZ ROSENFELD & COMPANY LLC
Certified Public Accountants
February 28, 1996
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
BALANCE SHEET
DECEMBER 31, 1995
ASSETS
Cash $ 50,604
Due from affiliate 184,000
Deferred costs 185,007
----------
TOTAL ASSETS $ 419,611
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 119,611
----------
TOTAL LIABILITIES 119,611
----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, no par value, 5,000 shares authorized
500 shares issued and outstanding 10,000
Additional paid-in capital 290,000
----------
TOTAL STOCKHOLDERS' EQUITY 300,000
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 419,611
==========
See accompanying notes and accountants' report.
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD JULY 11, 1995 (INCEPTION) TO DECEMBER 31, 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Increase in deferred costs $ (185,007)
Increase in accounts payable 119,611
-----------
NET CASH USED IN OPERATING ACTIVITIES (65,396)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES
Advances to affiliate (184,000)
-----------
NET CASH USED IN OPERATING ACTIVITIES (184,000)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from affiliate 16,000
Repayments to affiliate (16,000)
Proceeds from common stock 300,000
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 300,000
-----------
INCREASE IN CASH 50,604
CASH, Beginning of period 0
CASH, End of period $ 50,604
===========
See accompanying notes and accountants' report.
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
NATURE OF BUSINESS
Matzel & Mumford Mortgage Funding, Inc. is a New Jersey corporation
formed for the purpose of financing loans to real estate development
companies controlled by the principals of The Matzel & Mumford
Organization, Inc. ("MMO") which are engaged in the business of
developing single-family residential housing communities. The Company
intends to use the proceeds of a public debt offering of up to
$6,000,000 to make loans primarily for projects in the early stages of
development. The Company has committed to convert at least 90% of the
offering proceeds into loans within ten (10) business days after the
issuance of investor notes. The Company intends to charge interest on
the loans at a rate of 16% or more and will also assess each borrower
an annual administrative fee. Debt service payments on the project
loans, together with the administrative fee, are intended to service
the 15% interest due on the investor notes and the .5% loan servicing
fee payable to MMO, and other expenses.
The Company has not earned any revenues or incurred expenses other
than expenses related to the public debt offering; therefore no income
statement is presented.
The Company filed a registration statement with respect to its debt
offering under the Securities and Exchange Act of 1933, as amended.
The Company's registration statement was declared effective by the
Securities and Exchange Commission on February 7, 1996.
DEFERRED COSTS
Deferred costs include legal, accounting and filing fees incurred in
connection with the Company's registration statement.
INCOME TAXES
The stockholders of the Company have elected "S" corporation status
for federal and state income tax purposes.
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (Continued)
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the period. Actual results could differ from those
estimates.
NOTE 2 - RELATED PARTY TRANSACTIONS
Due from affiliate represents a 16% interest-bearing demand loan to an
affiliated company of the stockholders.
NOTE 3 - COMMITMENT
In August 1995, the stockholders contributed $10,000 for the purchase
of common stock. In December 1995, the stockholders contributed an
additional $290,000 to the Company as capital. Contemporaneously with
the issuance and sale of notes offered by the Company as reflected in
the registration statement, the stockholders are obligated to
contribute as capital an additional $200,000 to provide for initial
capitalization of the Company.
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
FINANCIAL STATEMENTS
FOR THE PERIOD MARCH 7, 1995
(INCEPTION) TO
DECEMBER 31, 1995
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
INDEX TO FINANCIAL STATEMENTS
PAGE
Report of Independent Certified Public Accountants........... 1
Balance Sheet as of December 31, 1995........................ 2
Statement of Income and Members' Capital for the Period
March 7, 1995 (Inception) to December 31, 1995 3
Statement of Cash Flows for the Period March 7, 1995
(Inception) to December 31, 1995............................ 4
Notes to Financial Statements................................ 5 - 9
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Members
Matzel & Mumford at Staats Farm, L.L.C.
Hazlet, New Jersey
We have audited the accompanying balance sheet of Matzel & Mumford at Staats
Farm, L.L.C. as of December 31, 1995, and the related statements of income and
members' capital and cash flows for the period March 7, 1995 (inception) to
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Matzel & Mumford at Staats
Farm, L.L.C. as of December 31, 1995, and the results of its operations and its
cash flows for the period then ended in conformity with generally accepted
accounting principles.
MINTZ ROSENFELD & COMPANY LLC
Certified Public Accountants
February 28, 1996
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
BALANCE SHEET
DECEMBER 31, 1995
ASSETS
Cash and equivalents $ 366,031
Performance bonds 156,710
Inventories 6,464,163
Due from affiliate 1,065
Other receivable 1,391
----------
TOTAL ASSETS $6,989,360
==========
LIABILITIES AND MEMBERS' CAPITAL
Mortgage payable $4,877,552
Developer note payable 1,000,000
Accounts payable 660,283
Accrued interest payable 74,887
Customer deposits 28,073
---------
TOTAL LIABILITIES 6,640,795
MEMBERS' CAPITAL 348,565
---------
TOTAL LIABILITIES AND MEMBERS' CAPITAL $6,989,360
==========
See accompanying notes and accountants' report.
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
STATEMENT OF INCOME AND MEMBERS' CAPITAL
FOR THE PERIOD MARCH 7, 1995 (INCEPTION) TO DECEMBER 31, 1995
SALES $2,087,006
COST OF SALES 1,819,531
----------
GROSS PROFIT 267,475
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 309,273
----------
LOSS FROM OPERATIONS (41,798)
INTEREST INCOME 4,363
----------
NET LOSS (37,435)
MEMBERS' CAPITAL, Beginning of period 0
CAPITAL DISTRIBUTIONS (90,000)
CAPITAL CONTRIBUTIONS 476,000
----------
MEMBERS' CAPITAL, End of period $ 348,565
==========
See accompanying notes and accountants' report.
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
STATEMENT OF CASH FLOWS
FOR THE PERIOD MARCH 7, 1995 (INCEPTION) TO DECEMBER 31, 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (37,435)
Adjustments to reconcile net loss to
net cash used in operating activities
Increase in performance bonds (156,710)
Increase in inventories (6,464,163)
Increase in other receivable (1,391)
Increase in accounts payable 660,283
Increase in customer deposits 28,073
Increase in accrued expenses 74,887
------------
NET CASH USED IN OPERATING ACTIVITIES (5,896,456)
------------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments to affiliate (1,065)
------------
NET CASH USED IN INVESTING ACTIVITIES (1,065)
------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 4,877,552
Proceeds from affiliates 1,000,000
Member capital contributions 476,000
Member capital distributions (90,000)
------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,263,552
------------
INCREASE IN CASH 366,031
CASH, Beginning of period 0
------------
CASH, End of period $ 366,031
============
See accompanying notes and accountants' report.
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
NATURE OF BUSINESS AND ORGANIZATION Matzel & Mumford at Staats Farm,
L.L.C. is a New Jersey limited liability company formed for the
purpose of purchasing land in Branchburg, New Jersey, and of
developing and constructing 51 single-family homes on that land.
REVENUE RECOGNITION
Revenues arising from home sales are recognized under the full accrual
method. Under this method, income is recognized when all terms
relating to the sale of a unit are complete, consideration is
exchanged, and title is conveyed to the buyer.
INVENTORIES
Inventories are stated at the lower of cost or estimated net
realizable value, which is determined by reducing the anticipated net
sales proceeds by the estimated costs necessary to complete or improve
the property to the condition used in arriving at the anticipated
selling price.
Inventory costs are comprised of direct unit and allocated costs.
Development costs are capitalized until the property is complete and
title has been conveyed to the buyer. Development costs generally
include land and improvements, house construction, project overhead,
interest and a portion of construction management fees. Interest
capitalized is based upon the interest rate on specifically related
debt. A portion of the management fees to a related party are paid and
capitalized by the Company.
MEMBERS' CAPITAL
The two managing members have paid $1,000 in capital contributions.
Three special members have contributed a total of $475,000.
DISTRIBUTIONS
The Company shall make the following distributions of cash to the
Members:
(a) each special member shall be paid a guaranteed payment equal to
8% per annum of their unpaid capital ("Guaranteed Payment"). The
Guaranteed Payment initially will accrue through the
twenty-fifth day of the sixth full calendar month following the
date of the contribution and will be paid on the first business
day following such six-month period. Thereafter, the Guaranteed
Payment will be paid on a quarterly basis.
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (Continued)
DISTRIBUTIONS (Continued)
(b) each special member shall be paid a distribution (the "Special
Distribution") in an amount equal to the product of: (A) the
special member's relevant percentage (aggregates .742185% at
December 31, 1995) multiplied by (B) the aggregate gross sales
proceeds of all housing units actually closed by the Company as
of the twenty-fifth (25th) day of the immediately preceding
calendar month.
(c) each special member shall be paid a return distribution ("Return
Distribution") representing a return of such special member's
capital contribution equal to the product of: (A) such special
member's return amount as defined, multiplied by (B) the number
of housing units actually closed by the Company as of the
twenty-fifth (25th) day of the immediately preceding calendar
month; provided, however, that this shall only apply to the sales
of the twentieth through fifty-first units actually closed by the
Company; (d) all other distributions shall be made to the
managing members in proportion to their respective capital
contributions.
The distributions payable to special members are guaranteed
personally by the managing members.
PROFIT AND LOSS ALLOCATIONS
All items of Profits and Losses shall be allocated to the Members
as follows:
(a) first, net Profits will be allocated to the special members
equal to the aggregate total of the Guaranteed Payment and
the Special Distribution paid or payable to such special
members; and
(b) second, to the managing members in proportion to their
respective capital contributions.
INCOME TAXES
The Company is organized and operates as a limited liability
corporation which is not subject to Federal or state income taxes.
Accordingly, no provision for income taxes has been made. The
earnings or losses of the Company are included on each member's
tax return, according to the terms of the operating agreement.
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (Continued)
ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
NOTE 2 - INVENTORIES
Inventories relating to the development of single-family homes
consist of the following at December 31, 1995:
Land $2,829,310
Approval costs 267,141
Land improvements and
construction costs 2,509,063
Project overhead 80,388
Financing costs 451,678
Sales and marketing 326,583
----------
$6,464,163
==========
All expenses incurred for the development of the project are
capitalized. Selling expenses which do not benefit future periods,
and general and administrative expenses, are treated as period
costs and are expensed as incurred. Interest and management fees
capitalized during the period March 7, 1995 (inception) to
December 31, 1995 are $536,211.
NOTE 3 - MORTGAGE PAYABLE
The Company has a mortgage payable to a bank which is payable
interest only at prime plus 1 1/2%. The prime rate as of December
31, 1995 was 8 1/2%. Interest payments are payable monthly until
October 18, 1996, when the outstanding principal balance is due.
The Company can borrow up to $6,450,000, which must be repaid in
full with any unpaid interest on October 18, 1996. As of December
31, 1995, the outstanding balance is $4,877,552. The note is
secured by the property and is personally guaranteed by the
Company's managing members. A total of $63,150 in loan fees
related to this loan is included in financing costs. During
January and February 1996, the Company received additional
advances of approximately $417,500 and repaid loan advances of
$801,374.
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 4 - RELATED PARTY TRANSACTIONS
Due to/from affiliates consists of net cash advances from
affiliated companies of the managing members of the Company. The
advances are short term in nature and bear no interest. The
amounts are to be repaid as cash flow allows.
The Company has borrowed from The Matzel & Mumford Organization,
Inc. ("MMO"), an affiliate of the managing members, $1,000,000,
which is evidenced by a secured developer note. Interest payments
are payable monthly at a rate of 18%. Additional interest is
charged at a rate equal to 1.5625% of the gross sales price per
unit received at closing. The principal balance is payable in
installments of $31,250 each. The first installment is due upon
the closing of the sale of the 20th unit and thereafter upon the
sale of each subsequent unit, until the earlier to occur of
December 18, 1997, or the date of the payment in full of the
entire balance of principal and interest and other charges due
under the note. As of December 31, 1995, six units have been
closed and no payments have been made on the note.
The Company has an agreement with MMO whereby MMO provides
construction management services at a fee of 5% of the gross
selling price of each house. MMO is entitled to draws of $50,000
per month for the first six months for a total of $300,000 and the
balance at the rate of no more than $12,000 at the time of the
closing of the sale of each home, for an aggregate total of
$912,000. The management fee payable shall be proportionally
reduced if the sales prices of the homes are reduced or
proportionally increased if the sales prices are increased. During
1995, the Company incurred $360,000 in management fees of which
$131,712 has been capitalized in inventories at December 31, 1995.
In addition, certain construction costs totalling $260,272 were
charged by MMO to the Company.
NOTE 5 - COMMITMENT
(a) Performance Bonds
At December 31, 1995, the Company is contingently liable
for performance bonds totalling $1,410,388.
(b) Sales Contracts Backlog
As of December 31, 1995, the Company has sales contracts
for ten (10) homes with an approximate average sales price
of $358,000.
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 6 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid from March 7, 1995 (inception) to December 31, 1995 for:
Interest $351,854
BEACON MANOR ASSOCIATES
(A JOINT VENTURE)
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
DECEMBER 31, 1995
AND THE PERIOD
NOVEMBER 21, 1994
(DATE OF INCEPTION)
TO DECEMBER 31, 1994
<PAGE>
BEACON MANOR ASSOCIATES
(A JOINT VENTURE)
INDEX TO FINANCIAL STATEMENTS
Page
Accountants................................................... 1
Balance Sheets as of December 31, 1995 and 1994............... 2
Statements of Operations and Partners' Capital for the
Year Ended December 31, 1995 and the Period
November 21, 1994 (Inception) to December 31, 1994........... 3
Statements of Cash Flows for Year Ended December 31, 1995
and the Period November 21, 1994 (Inception) to
December 31, 1994........................................... 4
Notes to Financial Statements................................ 5-8
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners
Beacon Manor Associates (A Joint Venture)
Hazlet, New Jersey
We have audited the accompanying balance sheets of Beacon Manor Associates (A
Joint Venture) as of December 31, 1995 and 1994, and the related statements of
operations and partners' capital and cash flows for the year ended December 31,
1995 and the period November 21, 1994 (inception) to December 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,in all
material respects, the financial position of Beacon Manor Associates (A Joint
Venture) as of December 31, 1995 and 1994, and the results of its operations and
its cash flows for the year and period then ended in conformity with generally
accepted accounting principles.
MINTZ ROSENFELD & COMPANY LLC
Certified Public Accountants
February 28, 1996
<PAGE>
BEACON MANOR ASSOCIATES
(A JOINT VENTURE)
BALANCE SHEETS
ASSETS
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
Cash and cash equivalents $ 75,575 $ 72,402
Performance bonds 60,670 89,944
Inventories 7,702,221 4,750,796
Property and equipment, net 2,114 0
Due from general partner 3,977 8,594
Due from affiliate 6,000 15,000
---------- ----------
TOTAL ASSETS $7,850,557 $4,936,736
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Mortgage payable $5,353,969 $3,300,000
Notes payable 300,000 300,000
Accounts payable 434,098 762
Accrued expenses 8,000 0
Accrued interest payable 16,135 16,165
Due to affiliates 1,306,294 569,615
Customer deposits 35,208 0
---------- ----------
TOTAL LIABILITIES 7,453,704 4,186,542
PARTNERS' CAPITAL 396,853 750,194
---------- ----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $7,850,557 $4,936,736
========== ==========
See accompanying notes and accountants' report.
<PAGE>
BEACON MANOR ASSOCIATES
(A JOINT VENTURE)
STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL
FOR THE PERIOD
NOVEMBER 21, 1994
YEAR ENDED (INCEPTION) TO
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
INCOME
Sales $ 287,500 $ 0
Interest income 3,079 194
---------- ----------
290,579 194
COST OF SALES 238,503 0
---------- ----------
GROSS PROFIT 52,076 194
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 405,417 0
---------- ----------
NET INCOME (LOSS) (353,341) 194
PARTNERS' CAPITAL, Beginning of period 750,194 0
CAPITAL CONTRIBUTIONS 0 750,000
---------- ----------
PARTNERS' CAPITAL, End of period $ 396,853 $ 750,194
========== ==========
See accompanying notes and accountants' report.
<PAGE>
BEACON MANOR ASSOCIATES
(A JOINT VENTURE)
STATEMENTS OF CASH FLOWS
FOR THE PERIOD
NOVEMBER 21, 1994
YEAR ENDED (INCEPTION) TO
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (353,341) $ 194
Adjustments to reconcile net income (loss)
to net cash used in operating activities
Depreciation 111 0
Decrease (increase) in performance bonds 29,274 (89,944)
Increase in inventories (2,951,425) (4,750,796)
Increase in property and equipment (2,225) 0
Increase in accounts payable 433,336 762
Increase in accrued expenses 8,000 0
Increase (decrease) in accrued
interest payable (30) 16,165
Increase in customer deposits 35,208 0
---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (2,801,092) (4,823,619)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments from (to) affiliate 9,000 (15,000)
Payments from (to) general partner 4,617 (8,594)
---------- ----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 13,617 (23,594)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage payable 2,269,141 3,300,000
Proceeds from notes payable 0 300,000
Proceeds from affiliates 736,679 569,615
Repayment of mortgage payable (215,172) 0
Capital contributions 0 750,000
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,790,648 4,919,615
---------- ----------
INCREASE IN CASH 3,173 72,402
CASH, Beginning of period 72,402 0
---------- ----------
CASH, End of period $ 75,575 $ 72,402
========== ==========
See accompanying notes and accountants' report.
<PAGE>
BEACON MANOR ASSOCIATES
(A JOINT VENTURE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
NATURE OF BUSINESS AND ORGANIZATION
Beacon Manor Associates (the "Partnership")is a New Jersey general
partnership formed in November 1994 for the purpose of purchasing land
in the Township of Bernards, New Jersey and of developing and
constructing 29 single-family homes on that land.
On November 21, 1994, the partners formed a joint venture as provided
by a Joint Venture Agreement. The parties to the agreement are The
Matzel & Mumford Organization, Inc. ("MMO") and the Centrone Building
Corp., Inc. ("CBC").
MMO entered into a contract to purchase the land in October 1994. The
contract to purchase was assigned to CBC in December 1994.
CBC acquired the land and contributed $750,000 to the Partnership.
CBC's partnership interest is 20%. For securing necessary development
financing and committing to advance up to $1.5 million, MMO received
an 80% partnership interest.
REVENUE RECOGNITION
Revenues arising from home sales are recognized under the full accrual
method. Under this method, income is recognized when all terms
relating to the sale of a unit are complete, consideration is
exchanged, and title is conveyed to the buyer.
INVENTORIES
Inventories are stated at the lower of cost or estimated net
realizable value, which is determined by reducing the anticipated net
sales proceeds by the estimated costs necessary to complete or improve
the property to the condition used in arriving at the anticipated
selling price.
Inventory costs are comprised of direct unit and allocated costs.
Development costs are capitalized until the property is complete and
title has been conveyed to the buyer. Development costs generally
include land and improvements, house construction, project overhead,
interest and a portion of construction management fees. Interest
capitalized is based upon the interest rate on specifically related
debt. A portion of the construction management fees to a related party
is paid and capitalized by the Partnership.
<PAGE>
BEACON MANOR ASSOCIATES
(A JOINT VENTURE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (Continued)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is calculated
using the straight-line method based upon the estimated useful lives
of the assets. Depreciation expense for 1995 was $111. There was no
depreciation for 1994.
INCOME TAXES
The Partnership is organized and operates as a general partnership and
is not subject to Federal or state income taxes. Accordingly, no
provision for income taxes has been made. The earnings or losses of
the Partnership are included on each partner's tax return, according
to the terms of the Partnership agreement.
PARTNERS
The financial statements do not reflect assets the partners may have
outside their interests in the Partnership, nor any personal
obligations, including income taxes, of the individual partners.
The income or loss of the Partnership will be allocated 20% to CBC and
80% to MMO.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the period. Actual results could differ from those
estimates.
<PAGE>
BEACON MANOR ASSOCIATES
(A JOINT VENTURE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 2 - INVENTORIES
Inventories relating to the development of single-family homes consist
of the following at December 31, 1995 and 1994:
1995 1994
---- ----
Land $4,535,473 $4,633,848
Approval costs 197,431 37,783
Land improvements and
construction costs 1,845,691
Project overhead 144,060
Financing costs 687,154 79,165
Sales and marketing 292,412
---------- ----------
$7,702,221 $4,750,796
========== ==========
All expenses incurred for the development of the project are
capitalized. Selling expenses which do not benefit future periods and
general and administrative expenses are treated as period costs and
are expensed as incurred. Interest and management fees capitalized
during the year ended December 31, 1995 are $756,858.
NOTE 3 - MORTGAGE PAYABLE
The property is encumbered by a $9,921,376 mortgage provided by Amboy
National Bank. The balance outstanding at December 31, 1995 and 1994,
was $5,353,969 and $3,300,000, respectively. On December 21, 1994,
Amboy National Bank, CBC and D. Majorie Centrone entered into a loan
agreement which provides for aggregate financing in the amount of
$9,921,376.
The loan agreement provides for three notes as follows:
Note #1 $5,200,000
Note #2 $3,721,376
Note #3 $1,000,000
D. Majorie Centrone has guaranteed all of the above notes.
Notes #1 and #2 provide for interest on advanced funds with interest
on unpaid principal at 1.50% (floating) in excess of the prime rate of
Chase Manhattan Bank, N.A. The prime rate as of December 31, 1995 was
8 1/2%. The maturity dates of Notes #1 and #2 are December21, 1996.
The maturity date of Note #3 was December 30, 1995. Effective November
17, 1995, the $1,000,000 balance of Note #3 was transferred to Note
#1. A total of $63,000 in loan fees related to these loans are
included in financing costs. During January and February 1996, the
Partnership received additional advances of approximately $486,956
from CBC.
<PAGE> BEACON MANOR ASSOCIATES
(A JOINT VENTURE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 4 - NOTES PAYABLE
The Partnership has a demand note payable to a private investor in the
amount of $300,000. Interest on the note is computed at 25% per annum.
The maturity date is June 19, 1996. The note is unsecured and is
jointly and severally guaranteed by Bruce Matzel and Roger Mumford,
principals of MMO.
NOTE 5 - RELATED PARTY TRANSACTIONS
Due to/from affiliates represents noninterest-bearing demand loans to
affiliated companies of certain partners of the Partnership, except
for a $184,000 portion which bears interest at 16% per annum.
The Partnership has an agreement with MMO whereby MMO provides
construction management services at a fee of $25,000 per unit. MMO is
entitled to receive monthly draws of management fees of $35,000 per
month up to an aggregate of $725,000. During 1995, the Partnership
incurred $420,000 in management fees, of which $144,060 has been
capitalized in inventories at December 31, 1995. In addition, certain
construction costs totalling $142,738 were charged by MMO to the
Partnership.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
In accordance with the Joint Venture Agreement, MMO will be required
to loan up to $1.5 million (as needed) to fund the Partnership for
acquisition and working capital.
PERFORMANCE BONDS
At December 31, 1995, the Partnership is contingently liable for
performance bonds totalling $899,045.
At December 31, 1995, the Partnership has sales contracts for seven
(7) homes with an approximate average sales price of $875,000.
NOTE 7 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for the year ended December 31, 1995 for:
Interest $ 596,663
