U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
|X| Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934
For the quarterly period ended September 30, 1996
|_| Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from _________ to ___________
Commission file number 33-98178
Matzel & Mumford Mortgage Funding, Inc.
----------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
New Jersey 22-33-82016
------------------------------- -----------------
State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
100 Village Court
Hazlet, New Jersey 07730
----------------------------------------
(Address of Principal Executive Offices)
(908) 888-4801
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
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 X No______
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes ____ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS
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 as of September 30, 1996
Transitional Small Business Disclosure Format (check one):
Yes ____ No x
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
FORM 10-QSB INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements ........................................... 1
Matzel & Mumford Mortgage Funding, Inc.
Balance Sheets as of September 30, 1996 (unaudited) and
December 31, 1995 Statements of Operations and Retained
Earnings for the Three and Nine Months ended September
30, 1996 (unaudited)...........................................
Statement of Cash Flows for the Nine Months Ended
September 30, 1996 (unaudited).................................
Notes to Financial Statements (unaudited)......................
Beacon Manor Associates
Balance Sheets as of September 30, 1996 (unaudited) and
December 31, 1995 Statements of Operations and
Partners' Capital for the Three and Nine Months Ended
September 30, 1996 (unaudited).................................
Statement of Cash Flows for the Nine Months Ended
September 30, 1996 (unaudited).................................
Notes to Financial Statements (unaudited)......................
Matzel & Mumford at Staats Farm, L.L.C.
Balance Sheets as of September 30, 1996 (unaudited) and
December 31, 1995 Statements of Operations and Members'
Capital for the Three and Nine Months Ended September
30, 1996 (unaudited)...........................................
Statement of Cash Flows for the Nine Months Ended
September 30, 1996 (unaudited).................................
Notes to Financial Statements (unaudited)......................
Matzel & Mumford at Piscataway, L.L.C.
Balance Sheets as of September 30, 1996 (unaudited) and
June 4, 1996 Statement of Cash Flows for the Nine
Months Ended September 30, 1996 (unaudited)....................
Notes to Financial Statements (unaudited)......................
Matzel & Mumford at South Brunswick, L.L.C.
Balance Sheets as of September 30, 1996 (unaudited) and
July 31, 1996 Statement of Cash Flows for the Nine
Months Ended September 30, 1996 (unaudited)....................
Notes to Financial Statements (unaudited)......................
Item 2. Management's Plan of Operation .................................
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ..............................................
Item 2. Changes in Securities ..........................................
Item 3. Defaults Upon Senior Securities ................................
Item 4. Submission of Matters to a Vote of Security Holders.............
Item 5. Other Information ....... ......................................
Item 6. Exhibits and Reports on Form 8-K ...............................
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC
FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
INDEX TO FINANCIAL STATEMENTS
Page
Balance Sheets .......................................... 1
Statement of Operations and Retained Earnings ............ 2 - 3
Statement of Cash Flows .................................. 4
Notes to the Financial Statements ........................ 5 - 6
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC
BALANCE SHEETS
AS OF SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
9/30/96 12/31/95
---------- ----------
(unaudited) (audited)
ASSETS
Cash $ 76,924 $ 50,604
Prepaid income taxes 50
Due from affiliate 184,000
Mortgages receivable 3,940,112
Deferred costs, net 231,049 185,007
---------- ----------
TOTAL ASSETS $4,248,135 $ 419,611
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable $ 30,950 $ 119,611
Notes Payable 3,750,000
----------- -----------
TOTAL LIABILITIES 3,780,950 119,611
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY
Common stock, no par value, 5,000 shares
authorized 500 shares issued and outstanding 10,000 10,000
Additional paid-in capital 490,000 290,000
Retained earnings (32,815)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 467,185 300,000
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,248,135 $ 419,611
=========== ===========
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<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
Revenue $ 230,817
Interest expense 241,712
Miscellaneous expense 6,417
---------
Income(loss) before amortization and taxes (17,312)
Amortization 15,403
State income taxes 100
---------
15,503
Net Loss (32,815)
Retained Earnings, beginning of period 0
---------
Retained Earnings, end of period $ (32,815)
=========
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<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
(UNAUDITED)
Revenue $ 157,920
Interest expense 169,281
Miscellaneous expense 6,127
---------
Income (loss) before amortization (17,488)
Amortization 10,786
---------
Net Loss (28,274)
Retained Earnings, beginning of period (4,541)
---------
Retained Earnings, end of period $ (32,815)
=========
-3-
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (32,815)
Adjustments to reconcile net loss to net cash
used in operating activities
Amortization 15,403
Increase in mortgages receivable (3,940,112)
Increase in deferred costs (61,445)
Increase in prepaid income taxes (50)
Decrease in accounts payable (88,661)
-----------
NET CASH USED IN OPERATING ACTIVITIES (4,107,680)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes payable 3,750,000
Additional paid in capital 200,000
Proceeds from affiliate 184,000
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 4,134,000
INCREASE IN CASH 26,320
CASH, Beginning of period 50,604
-----------
CASH, End of period $ 76,924
===========
-4-
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
NATURE OF BUSINESS
Matzel & Mumford Mortgage Funding, Inc. (the "Company") 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 closed a public offering of its
intermediate term secured notes (the "Notes") on May 15, 1996 with
issuing $3,750,000 principal amount of Notes. The offering proceeds,
along with the additional paid in capital in excess of
organizational expenses, will be used to make loans primarily for
projects in the early stages of development. The Company has
committed to maintain at least 90% of the offering proceeds in
secured loans, subject to certain conditions.
The Company intends to charge interest on the loans at a rate of 16%
or more and will also assess each borrower an administrative fee.
Debt service payments on the project loans, together with the
administrative fee, are intended to service the 15% interest due on
the Notes, the .5% loan servicing fee payable to MMO, and other
expenses.
The Company filed a registration statement with respect to its Notes
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 public offering.
INCOME TAXES
The stockholders of the Company have elected "S" corporation status
for federal and state income tax purposes.
-5-
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
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 at the date of the 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 - MORTGAGES RECEIVABLE
Mortgages receivable represent loans made to affiliated entities
bearing interest at a rate of 16%. The loans have maturity dates
ranging from twelve to twenty four months.
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<PAGE>
BEACON MANOR ASSOCIATES
(A JOINT VENTURE)
FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
<PAGE>
BEACON MANOR ASSOCIATES
(A JOINT VENTURE)
INDEX TO FINANCIAL STATEMENTS
Page
Balance Sheets ............................... ...................... 1
Statements of Operations and Retained Earnings ...................... 2
Statements of Cash Flows............................................. 3
Notes to the Financial Statements ................................... 4 - 9
<PAGE>
BEACON MANOR ASSOCIATES
(A JOINT VENTURE)
BALANCE SHEETS
AS OF SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
9/30/96 12/31/95
unaudited (audited)
---------- ----------
ASSETS
Cash $ 615 $ 75,575
Performance bonds 52,691 60,670
Inventories 9,635,910 7,702,221
Due from affiliate 150,000 6,000
Due from general partner 3,977 3,977
Property and equipment, net 1,780 2,114
---------- ----------
TOTAL ASSETS $9,844,973 $7,850,557
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage Payable $6,404,916 $5,353,969
Note Payable 300,000 300,000
Accounts Payable 1,416,205 434,098
Accrued expenses 8,000
Accrued interest payable 16,135
Customer deposits 1,301,848 35,208
Due to affiliate 6,000 1,306,294
---------- ----------
TOTAL LIABILITIES 9,428,969 7,453,704
---------- ----------
PARTNERS' CAPITAL 416,004 396,853
---------- ----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $9,844,973 $7,850,557
========== ==========
-1-
<PAGE>
BEACON MANOR ASSOCIATES
(A JOINT VENTURE)
STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
1996 1995
----------- ---------
Revenue $ 2,623,683 $ 2,681
Cost of Sales 2,283,981
----------- ---------
Gross Profit 339,702 2,681
Selling, general and administrative expenses 324,512 228,900
----------- ---------
Net Profit (Loss) 15,190 (226,219)
Partners' Capital, beginning of period 396,853 750,194
Partner contributions 150,000
Partner distributions (146,039)
Partners' Capital, end of period $ 416,004 $ 523,975
=========== =========
-2-
<PAGE>
BEACON MANOR ASSOCIATES
(A JOINT VENTURE)
STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL
FOR THE QUARTER ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
1996 1995
----------- ---------
Revenue $ 1,775,426 $ 931
Cost of Sales 1,555,203
----------- ---------
Gross Profit 220,223 931
Selling, general and administrative expenses 118,921 114,450
----------- ---------
Net Profit (Loss) 101,302 (113,519)
Partners' Capital, beginning of period 420,702 637,494
Partner contributions
Partner distributions (106,000) --
Partners' Capital, end of period $ 416,004 $ 523,975
=========== =========
-3-
<PAGE>
BEACON MANOR ASSOCIATES
(A JOINT VENTURE)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
1996 1995
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ 15,190 $ (226,219)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation 334
Decrease (increase) in performance bonds 7,979 29,629
Increase in inventories (1,933,689) (2,331,276)
Increase (decrease) in accounts payable 982,107 581,862
Decrease in accrued expenses (8,000)
Increase in customer deposits 1,266,640
Decrease in accrued interest payable (16,135) (16,135)
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES 314,426 (1,962,139)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments to affiliate (1,300,294)
-----------
NET CASH USED IN INVESTING ACTIVITIES (1,300,294)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage payable 1,050,947 1,409,410
Capital distributions (146,039)
Capital contributions 150,000
Proceeds (payments) from affiliate (144,000) 482,648
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 910,908 1,892,058
----------- -----------
DECREASE IN CASH (74,960) (70,081)
CASH, Beginning of period 75,575 72,402
CASH, End of period $ 615 $ 2,321
=========== ===========
-4-
<PAGE>
BEACON MANOR ASSOCIATES
(A JOINT VENTURE)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
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
governed 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
-5-
<PAGE>
BEACON MANOR ASSOCIATES
(A JOINT VENTURE)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (Continued)
land and improvements, house construction, project overhead,
interest and a portion of construction management fees. Interest is
capitalized based upon interest incurred on specifically related
debt. A portion of the construction management fees paid to a
related party is paid and capitalized by the Partnership.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is
calculated using straight-line method based upon the estimated
useful lives of the assets.
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 Joint Venture Agreement.
PARTNERS
The financial statements do not reflect the assets the partners may
have outside their interests in the Partnership, nor any personal
obligations, including income taxes, of the individual partners.
ESTIMATES
The preparation of financial statements in conformity with general
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.
-6-
<PAGE>
BEACON MANOR ASSOCIATES
(A JOINT VENTURE)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 2 - INVENTORIES
Inventories relating to the development of single-family homes
consist of the following at September 30, 1996:
Land $4,089,273
Approval costs 312,178
Land improvements and
construction costs 3,590,050
Project overhead 219,210
Financing costs 1,031,129
----------
Sales and marketing 394,070
$9,635,910
==========
All expenses incurred for 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 nine months ended September 30, 1996 are
$419,125.
NOTE 3 - MORTGAGE PAYABLE
The property is encumbered by a $9,921,376 mortgage provided by
Amboy National Bank, pursuant to the terms of a loan agreement dated
December 21, 1994, and a $1,994,000 mortgage provided by Matzel &
Mumford Mortgage Funding, Inc. The balance outstanding at September
30, 1996 for Amboy was $5,877,724. Matzel & Mumford Mortgage
Funding, Inc. was paid off in full.
The loan agreement with Amboy 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 Amboy notes.
Notes #1 and #2 provide for interest on unpaid principal of advanced
funds at 1.50% (floating) in excess of the prime rate of Chase
Manhattan Bank. The prime rate as of September 30, 1996 was 8 1/4%.
-7-
<PAGE>
BEACON MANOR ASSOCIATES (A JOINT VENTURE)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 3 - MORTGAGE PAYABLE (Continued)
The maturity dates of Notes #1 and #2 are December 21, 1996.
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.
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 December 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 affiliated represents noninterest bearing demand loans to
affiliated companies of certain partners of the Partnership. Due
from affiliates represents a non-interest bearing demand loan.
The Partnership has an agreement with MMO whereby MMO provides
construction management services at a fee of $25,000 per house. MMO
is entitled to receive monthly draws of management fees up to
$35,000 per month up to an aggregate of $725,000. Since inception,
the Partnership has incurred $645,000 in management fees, of which
$219,210 has been capitalized in inventories at September 30, 1996.
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 September 30, 1996, the Partnership is contingently liable for
performance bonds totaling $436,913.
-8-
<PAGE>
BEACON MANOR ASSOCIATES
(A JOINT VENTURE)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 7 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for the nine months ended September 30, 1996 for:
Interest $ 520,009
-9-
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
INDEX TO FINANCIAL STATEMENTS
Page
Balance Sheets ........................................... 1
Statement of Operations and Retained Earnings ............ 2 - 3
Statement of Cash Flows .................................. 4
Notes to the Financial Statements ........................ 5 - 9
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
BALANCE SHEETS
AS OF SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
9/30/96 12/31/95
(unaudited) (audited)
ASSETS
Cash $ 1,846 $ 366,031
Performance bonds 58,027 156,710
Inventories 4,439,677 6,464,163
Other receivable 1,391
Due from affiliate 1,000 1,065
---------- ----------
TOTAL ASSETS $4,500,550 $6,989,360
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage payable $ 2,730,385 $4,877,552
Developer note payable 468,750 1,000,000
Accounts Payable 1,076,021 660,283
Accrued interest payable 74,887
Due to affiliate 40,000
Customer deposits 206,148 28,073
----------- ----------
TOTAL LIABILITIES 4,521,304 544,666
----------- ----------
PARTNERS' CAPITAL (20,754 ) 348,565
----------- ----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 4,500,550 $6,989,360
=========== ==========
-1-
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND FROM MARCH 7,
1995 (INCEPTION) TO SEPTEMBER 30, 1995
(UNAUDITED)
1996 1995
----------- -----------
Sales $ 9,153,021
Cost of sales 8,240,324
Gross profit 912,697
Selling, general and administrative expenses 380,100 265,962
----------- -----------
Income from operations 532,597 (265,962)
Interest income 7,209 271
----------- -----------
Net income 539,806 (265,691)
Member's capital, Beginning of period 348,565 1,000
Capital contributions 475,000
Capital distributions (909,125)
----------- -----------
Member's capital, End of Period $ (20,754) $ 210,309
=========== ===========
-2-
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL
FOR THE QUARTER ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
(UNAUDITED)
1996 1995
----------- -----------
Sales $ 3,181,637
Cost of sales 2,871,991
Gross profit 309,646
Selling, general and administrative expenses 131,283 228,500
----------- -----------
Income from operations 178,363 (228,500)
Interest income 1,377 271
----------- -----------
Net income 179,740 (228,229)
Member's capital, Beginning of period (78,869) 263,538
Capital contributions 175,000
Capital distributions (121,625)
----------- -----------
Member's capital, End of Period $ (20,754) $ 210,309
=========== ===========
-3-
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND FROM MARCH 7,
1995 (INCEPTION) TO SEPTEMBER 30, 1995
(UNAUDITED)
1996 1995
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 539,806 ($ 265,691)
Adjustments to reconcile net loss to net cash
used in operating activities
Decrease(increase) in inventories 2,024,486 (5,877,640)
Decrease in other receivable 1,391
Decrease (increase) in performance bonds 98,684 (156,710)
Increase in accounts payable 415,738 267,031
Increase in customer deposits 178,075 43,950
Decrease in accrued interest payable (74,887)
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES 3,183,293 (5,989,060)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage payable 7,135,386 4,840,010
Repayment of mortgage payable (9,282,554)
Repayment of developer note (531,250)
Capital distributions (909,125)
Capital contributions 475,000
Proceeds from affiliate 40,065 912,150
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES (3,547,478) 6,227,160
----------- -----------
INCREASE (DECREASE) IN CASH (364,185) 238,100
CASH, Beginning of period 366,031 0
----------- -----------
CASH, End of period $ 1,846 $ 238,100
=========== ===========
-4-
<PAGE>
MATZEL & MUMFORD AT STAATS, L.L.C.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
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 the
Township of 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 interest incurred on specifically related
debt. A portion of the construction management fees paid to a
related party is 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.
-5-
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (Continued)
DISTRIBUTIONS
The Company shall make the following distributions of cash to the
Special 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 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.
(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 .624998%) at
September 30, 1996) 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 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
-6-
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (Continued)
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 company
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 Company are included on each member's tax return, according to
the terms of the operating agreement.
ESTIMATES
The preparation of financial statements in conformity with general
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 September 30, 1996:
Land $1,349,425
Approval costs 542,060
Land improvements and
construction costs 1,887,216
Project overhead 51,652
Financing costs 348,053
Sales and marketing 261,271
----------
$4,439,677
==========
-7-
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 2 - INVENTORIES (Continued)
All expenses incurred for 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. The Company incurred interest and
management fees of $728,895 of which $0 was capitalized during the
nine months ended September 30, 1996.
NOTE 3 - MORTGAGE PAYABLE
The property is encumbered by a $6,450,000 mortgage provided by a
bank, pursuant to the terms of a loan agreement dated April 18,
1996, and a $2,325,000 mortgage provided by Matzel & Mumford
Mortgage Funding, Inc. (Mortgage Funding). The balance outstanding
at September 30, 1996 to the bank was $1,537,273 and to Mortgage
Funding was $1,193,112. The notes are secured by the property and
the bank's note is personally guaranteed by the Company's managing
members. A total of $127,785 in loan fees related to this loan is
included in financing costs. The bank financing is payable at prime
plus 1 1/2% and Mortgage Funding is payable at 16%. The prime rate
as of September 30, 1996 was 8 1/4%.
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 from cash flow available:
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 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 principal and interest
and other charges due under the note. As of September 30, 1996,
thirty six units have been closed and seventeen payments have been
made on the note.
-8-
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 4 - RELATED PARTY TRANSACTIONS (Continued)
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 receive monthly draws of
management fees up to $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
proportionately reduced if the sales prices of the homes are reduced
or proportionately increased if the sales prices are increased.
Since inception the Company has incurred $660,000 in management
fees, of which $51,652 has been capitalized in inventories at
September 30, 1996.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
(a) Performance Bonds
At September 30, 1996, the Company is contingently liable for
performance bonds totaling $826,118.
NOTE 6 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for the six months ended September 30, 1996 for:
Interest $ 428,895
-9-
<PAGE>
MATZEL & MUMFORD AT PISCATAWAY, L.L.C.
FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
<PAGE>
MATZEL & MUMFORD AT PISCATAWAY, L.L.C.
INDEX TO FINANCIAL STATEMENTS
Page
Balance Sheets ............................... ................. 1
Statement of Cash Flows......................................... 2
Notes to the Financial Statements .............................. 3 - 5
<PAGE>
MATZEL & MUMFORD AT PISCATAWAY, L.L.C.
BALANCE SHEETS
AS OF SEPTEMBER 30, 1996 AND JUNE 4, 1996
9/30/96 6/04/96
(unaudited) (audited)
ASSETS
Cash $ 652 $ 46,527
Performance Bonds 120,465
Inventories 2,133,098 978,605
---------- ----------
TOTAL ASSETS $2,254,215 $1,025,132
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage Payable $1,347,000 $ 903,000
Accounts Payable 287,624 2,132
Due to affiliate 619,591 120,000
---------- ----------
TOTAL LIABILITIES 2,254,215 1,025,132
---------- ----------
PARTNERS' CAPITAL
TOTAL LIABILITIES AND PARTNERS' CAPITAL $2,254,215 $1,025,132
========== ==========
-1-
<PAGE>
MATZEL & MUMFORD AT PISCATAWAY, L.L.C.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD MAY 1, 1996 (DATE OF INCEPTION) TO SEPTEMBER 30, 1996
(UNAUDITED)
1996
-----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)
Adjustments to reconcile net loss to net cash
used in operating activities
Increase in inventories (2,133,098)
Increase in performance bonds (120,465)
Increase (decrease) in accounts payable 287,624
NET CASH USED IN OPERATING ACTIVITIES (1,965,939)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage payable 1,347,000
Proceeds from affiliate 619,591
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,966,591
INCREASE IN CASH 652
CASH, Beginning of period
CASH, End of period $ 652
===========
-2-
<PAGE>
MATZEL & MUMFORD AT PISCATAWAY, L.L.C.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
NATURE OF BUSINESS AND ORGANIZATION
Matzel & Mumford at Piscataway, L.L.C. ("M & M at "Piscataway") is a
New Jersey limited liability company formed for the purpose of
purchasing land in the Township of Piscataway, New Jersey and
developing and constructing 126 single-family homes on that land. M
& M at Piscataway closed title to 21 lots and has a contingent
contract to purchase the remaining 105 lots.
REVENUE RECOGNITION
Revenues arising from home sales will be 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 is
capitalized based upon interest incurred on specifically related
debt. A portion of the construction management fees paid to a
related party is capitalized by the Company.
MEMBERS CAPITAL
The two managing members have pledged a total of $1,000 in capital
contributions.
-3-
<PAGE>
MATZEL & MUMFORD AT PISCATAWAY, L.L.C.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (continued)
INCOME TAXES
The Company is organized and operates as a limited liability company
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.
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 September 30, 1996:
Land $ 960,044
Approval costs 399,195
Land improvements and
construction costs 258,779
Project overhead 175,000
Financing costs 187,783
Sales and marketing 152,297
----------
$2,133,098
==========
All expenses incurred for 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 ended September 30, 1996 are $362,783.
-4-
<PAGE>
MATZEL & MUMFORD AT PISCATAWAY, L.L.C.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 3 - MORTGAGE PAYABLE
The property is encumbered by a $2,000,000 mortgage provided by
Matzel & Mumford Mortgage Funding, Inc., an entity controlled by the
members of M&M at Piscataway, which bears interest at 16%. Interest
payments are payable quarterly until June 4, 1997 when the
outstanding principal balance is due. The note is collateralized by
a first mortgage on the property.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company has an agreement with MMO whereby MMO provides
construction management services at a fee of 4% of the gross selling
price of each house. MMO is entitled to receive monthly draws of
$35,000 per month. Since inception, the Company has incurred
$175,000 in management fees which have been capitalized in
inventories at September 30, 1996.
Also included in due to/from affiliates are net cash advances from
an affiliated company of the managing member of the Company. The
advances are short term in nature and bear no interest. The amounts
are to be repaid from available cash flow.
-5-
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
INDEX TO FINANCIAL STATEMENTS
Page
Balance Sheets ............................... ............. 1
Statement of Cash Flows..................................... 2
Notes to the Financial Statements .......................... 3 - 5
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
BALANCE SHEETS
AS OF SEPTEMBER 30, 1996 AND JULY 31, 1996
9/30/96 7/31/96
(unaudited) (audited)
---------- ----------
ASSETS
Cash $ 212,857
Sales Trailer $ 11,785
Inventories 1,567,430 1,458,603
---------- ----------
TOTAL ASSETS $1,579,215 $1,671,460
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage Payable $1,400,000 $1,200,000
Accounts Payable 30,650
Due to affiliate 148,565 471,460
---------- ----------
TOTAL LIABILITIES 1,579,215 1,671,460
---------- ----------
PARTNERS' CAPITAL
TOTAL LIABILITIES AND PARTNERS' CAPITAL $1,579,215 $1,671,460
========== ==========
-1-
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD MAY 1, 1996 (DATE OF INCEPTION) TO SEPTEMBER 30, 1996
(UNAUDITED)
1996
-----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)
Adjustments to reconcile net loss to net cash
used in operating activities
Increase in inventories (1,567,430)
Increase in performance bonds (11,785)
Increase (decrease) in accounts payable 30,650
-----------
NET CASH USED IN OPERATING ACTIVITIES (1,548,565)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage payable 1,400,000
Proceeds from affiliate 148,565
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,548,565
INCREASE IN CASH --
CASH, Beginning of period
-----------
CASH, End of period $ --
===========
-2-
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
NATURE OF BUSINESS AND ORGANIZATION
Matzel & Mumford at South Brunswick, L.L.C. ("M & M at "South
Brunswick") is a New Jersey limited liability company formed for the
purpose of purchasing land in the Township of South Brunswick, New
Jersey and developing and constructing 91 single-family homes on
that land. M & M at South Brunswick closed title to 40 lots and has
a contingent contract to purchase the remaining 51 lots. Through
September 30, 1996, there has been no operating activities.
REVENUE RECOGNITION
Revenues arising from home sales will be 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
incurred is capitalized based upon interest on specifically related
debt.
A portion of the construction management fees paid to a related
party is capitalized by the Company.
MEMBERS CAPITAL
The two managing members have pledged a total of $1,000 in capital
contributions.
-3-
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (continued)
INCOME TAXES
The Company is organized and operates as a limited liability company
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.
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 September 30, 1996:
Land $1,233,533
Approval costs 121,280
Land improvements and
construction costs 130,970
Project overhead 60,000
Financing costs 141,407
Sales and marketing 1,520
----------
$1,567,430
==========
All expenses incurred for 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 ended September 30, 1996 are $201,407.
-4-
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 3 - MORTGAGE PAYABLE
The Company has a mortgage payable to Matzel & Mumford Mortgage
Funding, Inc., an entity controlled by the members of M&M at South
Brunswick, which bears interest at 16%. Interest payments are
payable quarterly until July 31, 1997 when the outstanding principal
balance is due. The note is collateralized by a first mortgage on
the property.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company has an agreement with MMO whereby MMO provides
construction management services at a fee of 4% of the gross selling
price of each house. MMO is entitled to receive monthly draws of
$30,000 per month. Since inception, the Company has incurred $60,000
in management fees which have been capitalized in inventories at
September 30, 1996.
Also included in due to/from affiliates are net cash advances from
an affiliated company of the managing member of the Company. The
advances are short term in nature and bear no interest. The amounts
are to be repaid from available cash flow.
-5-
<PAGE>
Item 2. Management's Plan of Operation
Matzel & Mumford Mortgage Funding, Inc. (the "Funding Company") is a
finance company that was formed in July 1995 for the purpose of funding land
acquisition, infrastructure improvements, and the construction of homes in
single-family residential housing communities by making loans. In furtherance of
this purpose, the Funding Company made a public offering of up to $6,000,000 of
its Intermediate Term Secured Notes (the "Notes"). On May 16, 1996, the Funding
Company issued and sold $3,750,000 principal amount of Notes.
The Funding Company initially made two first mortgage loans using the net
proceeds of the Notes offering, as well as a portion of the Funding Company's
equity capital. One first mortgage loan was to Matzel & Mumford at Staats Farm,
L.L.C. ("Staats Farm"), and the other was for the benefit of Beacon Manor
Associates ("Beacon Manor"). In addition, the Funding Company made a second
mortgage loan for the benefit of Beacon Manor to refinance a previous short-term
loan. These loans and the borrowers were discussed in the Funding Company's
Current Report on Form 8-K dated May 17, 1996. Following the repayment of Beacon
Manor's loans and a substantial portion of Staats Farm's loan, the Funding
Company made first mortgage loans to Matzel & Mumford at Piscataway, L.L.C.
("Piscataway") for the development of a subdivision known as Maplehurst Farm.
Further, the Funding Company made first mortgage loans to Matzel & Mumford at
South Brunswick, L.L.C. ("South Brunswick") for the development of a subdivision
known as Heather Knolls East. These loans to Piscataway and South Brunswick were
discussed in the Funding Company's Current Report on Form 8-K dated June 4, 1996
and August 12, 1996, respectively.
As of September 30, 1996, the Funding Company had an aggregate of
$3,940,112 of loans outstanding, allocated as follows: to Staats Farm (an
aggregate of $1,193,112 secured by first mortgages), to Piscataway (an
aggregate of $1,347,000 secured by first mortgages), and to South Brunswick (an
aggregate of $1,400,000 secured by first mortgages). The financial statements of
each of these entities are included with this Quarterly Report. The Funding
Company also had $59,888 deposited in a cash collateral account with First Union
National Bank, as trustee for the holders of the Notes.
As of September 30, 1996, the Funding Company has identified one new
project, located in Freehold, New Jersey, with respect to which it intends to
make a second mortgage loan in the 4th quarter. See Item 5, "Other Information"
for a description of the status of certain loans subsequent to September 30,
1996.
Because the Funding Company is not an operating company, it has minimal
cash needs. The Funding Company expects that its cash requirements will be
satisfied by the administrative fee that various borrowers will pay to the
Funding Company and by the amount of interest on the various loans (which will
be at least 16%) that remains after paying the interest on the Notes and a loan
servicing fee to its affiliate, Matzel & Mumford Organization.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable
Item 2. Changes in Securities.
Not applicable
Item 3. Defaults Upon Senior Securities.
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable
Item 5. Other information.
Subsequent to September 30, 1996, Staats Farm and Piscataway paid off
their loans in full to the Funding Company. Furthermore, the Funding Company has
made a first mortgage loan to Piscataway in the amount of $300,000 to construct
a model home which secures the loan. The Funding Company has also made an
additional first mortgage acquisition loan to South Brunswick in the amount of
$1,100,000 to acquire 51 building lots. In late November, 1996, the Funding
Company intends to make a $1,000,000 second mortgage acquisition loan to Matzel
& Mumford at Freehold, L.L.C. The property is located in Freehold and consists
of 126 single family lots approximately 3/4 acre each.
Item 6.
(a) Exhibits.
3(a) Certificate of Incorporation of Matzel & Mumford Mortgage Funding, Inc.
(the "Funding Company") (incorporated by reference to Exhibit 3(a) to
Registration Statement on Form SB-2 of Matzel & Mumford Mortgage Funding,
Inc. (Registration Number 33-98178) (the "Notes Registration Statement")).
3(b) By-Laws of the Funding Company (incorporated by reference to Exhibit 3(b)
to the Notes Registration Statement).
4(a) Indenture (including form of Notes) dated as of January 25, 1996, between
the Funding Company and First Union National Bank, as Trustee
(incorporated by reference to Exhibit 4(a) to the Notes Registration
Statement).
4(b) Resolutions of the Board of Directors of the Funding Company establishing
specific terms of the Notes (incorporated by reference to Exhibit 4(b) of
Quarterly Report on Form 10-QSB for the quarter ended March 31, 1996).
10(a) Form of Loan Agreement (incorporated by reference to Exhibit 10(a) to the
Notes Registration Statement).
10(b) Form of Mortgage and Security Agreement (incorporated by reference to
Exhibit
<PAGE>
10(b) to the Notes Registration Statement).
10(c) Loan Servicing Agreement dated January 22, 1996 between the Funding
Company and The Matzel & Mumford Organization, Inc. (incorporated by
reference to Exhibit 10(c) to the Notes Registration Statement).
27 Financial Data Schedules.
(b) Reports on Form 8-K
The Funding Company filed Current Reports on Form 8-K dated May 17, 1996
(filed June 3, 1996) (to report the execution of an engagement letter with new
certifying accountants and to discuss loans to Beacon Manor and Staats Farm);
dated June 4, 1996 (filed June 26, 1996) (to discuss loans to Piscataway); and
dated July 31, 1996 (filed August 12, 1996) (to discuss loans to South
Brunswick), as amended by a From 8-K/A dated July 31, 1996 (filed October 3,
1996) (to file audited financial statements as of July 31, 1996).
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 76,924
<SECURITIES> 0
<RECEIVABLES> 3,940,112
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,017,036
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,248,135
<CURRENT-LIABILITIES> 30,950
<BONDS> 3,750,000
10,000
0
<COMMON> 0
<OTHER-SE> 457,185
<TOTAL-LIABILITY-AND-EQUITY> 4,248,135
<SALES> 0
<TOTAL-REVENUES> 230,817
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 21,290
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 241,712
<INCOME-PRETAX> (32,815)
<INCOME-TAX> 0
<INCOME-CONTINUING> (32,815)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (32,815)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 53,306
<SECURITIES> 0
<RECEIVABLES> 153,977
<ALLOWANCES> 0
<INVENTORY> 9,635,910
<CURRENT-ASSETS> 9,843,193
<PP&E> 1,780
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,844,973
<CURRENT-LIABILITIES> 9,428,969
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 416,004
<TOTAL-LIABILITY-AND-EQUITY> 9,844,973
<SALES> 2,623,683
<TOTAL-REVENUES> 2,623,683
<CGS> 2,283,981
<TOTAL-COSTS> 2,283,981
<OTHER-EXPENSES> 324,512
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 15,190
<INCOME-TAX> 0
<INCOME-CONTINUING> 15,190
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,190
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 59,873
<SECURITIES> 0
<RECEIVABLES> 1,000
<ALLOWANCES> 0
<INVENTORY> 4,439,677
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