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 June 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.
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(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
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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 July 30, 1996
- -----------------------------
Transitional Small Business Disclosure Format (check one):
Yes No x
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<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
FORM 10-QSB INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.................................................5
Matzel & Mumford Mortgage Funding, Inc.
Balance Sheets as of June 30, 1996 (unaudited) and
December 31, 1995...................................................5
Statements of Operations and Retained Earnings (unaudited)..........6
Statement of Cash Flows for the Period Ended June 30, 1996
(unaudited).........................................................7
Notes to Financial Statements (unaudited).........................8-9
Beacon Manor Associates
Balance Sheets as of June 30, 1996 (unaudited) and
December 31, 1995..................................................10
Statements of Operations and Partners' Capital (unaudited).........11
Statements of Cash Flows for the Periods Ended June 30, 1996 and
and June 30, 1995 (unaudited)......................................12
Notes to Financial Statements (unaudited).......................13-15
Matzel & Mumford at Staats Farm, L.L.C.
Balance Sheets as of June 30, 1996 (unaudited) and
December 31, 1995..................................................16
Statements of Operations and Members' Capital (unaudited)..........17
Statements of Cash Flows for the Periods Ended June 30, 1996 and
June 30, 1995 (unaudited)..........................................18
Notes to Financial Statements (unaudited).......................19-23
Matzel & Mumford at Piscataway, L.L.C.
Balance Sheets as of June 30, 1996 (unaudited) and June 4, 1996....24
Statement of Cash Flows for the Period Ended June 30, 1996
(unaudited)........................................................25
Notes to Financial Statements (unaudited).......................26-27
Item 2. Management's Plan of Operation......................................28
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...................................................29
Item 2. Changes in Securities...............................................29
Item 3. Defaults Upon Senior Securities.....................................29
Item 4. Submission of Matters to a Vote of Security Holders.................29
Item 5. Other Information...................................................29
Item 6. Exhibits and Reports on Form 8-K....................................29
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
BALANCE SHEETS
AS OF JUNE 30, 1996 AND DECEMBER 31, 1995
6/30/96 12/31/95
(unaudited) (audited)
ASSETS
Cash $ 558,016 $ 50,604
Prepaid income taxes 50
Due from affiliate 184,000
Mortgages receivable 3,470,381
Deferred costs, net 217,012 185,007
------------ ---------
TOTAL ASSETS $4,245,459 $419,611
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable $119,611
Notes Payable $3,750,000
------------ ----------
TOTAL LIABILITIES 3,750,000 119,611
------------ ---------
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 (4,541)
----------- ----------
TOTAL STOCKHOLDERS' EQUITY 495,459 300,000
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,245,459 $419,611
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
Statement Of Operations And Retained Earnings
For The Six Months Ended June 30, 1996
(Unaudited)
Revenue $72,897
Interest expense 72,431
Miscellaneous expense 290
---------
Income before amortization and taxes 176
Amortization 4,617
State income taxes 100
---------
4,717
Net Loss (4,541)
Retained Earnings, beginning of period
---------
Retained Earnings, end of period $ (4,541)
=========
Statement Of Operations And Retained Earnings
For The Quarter Ended June 30, 1996
(Unaudited)
Revenue $72,897
Interest expense 72,431
Miscellaneous expense 290
---------
Income before amortization 176
Amortization 4,617
---------
Net Loss (4,441)
Retained Earnings, beginning of period (100)
---------
Retained Earnings, end of period $ (4,541)
=========
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
Statement Of Cash Flows
For The Six Months Ended June 30, 1996
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (4,541)
Adjustments to reconcile net loss to net cash
used in operating activities
Amortization 4,617
Increase in mortgages receivable (3,470,381)
Increase in deferred costs (36,622)
Increase in prepaid income taxes ( 50)
Decrease in accounts payable (119,611)
---------
NET CASH USED IN OPERATING ACTIVITIES (3,626,588)
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 507,412
CASH, Beginning of period 50,604
---------
CASH, End of period $ 558,016
============
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 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 and issued $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.
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 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 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 - 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.
<PAGE>
BEACON MANOR ASSOCIATES
(A JOINT VENTURE)
BALANCE SHEETS
AS OF JUNE 30, 1996 AND DECEMBER 31, 1995
6/30/96 12/31/95
(unaudited) (audited)
ASSETS
Cash $ 458 $ 75,575
Performance bonds 42,691 60,670
Inventories 9,019,240 7,702,221
Due from affiliate 150,000 6,000
Due from general partner 3,977 3,977
Property and equipment, net 1,891 2,114
----------- -----------
TOTAL ASSETS $9,218,257 $7,850,557
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage Payable $6,532,724 $5,353,969
Note Payable 300,000 300,000
Accounts Payable 707,728 434,098
Accrued expenses 8,000
Accrued interest payable 16,135
Customer deposits 1,129,603 35,208
Due to affiliate 127,500 1,306,294
----------- ----------
TOTAL LIABILITIES 8,797,555 7,453,704
----------- -----------
PARTNERS' CAPITAL 420,702 396,853
----------- ------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $9,218,257 $7,850,557
========== ==========
<PAGE>
BEACON MANOR ASSOCIATES
(A JOINT VENTURE)
STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995
(Unaudited)
1996 1995
Revenue $ 848,257 $ 1,750
Cost of Sales 728,778
--------- ---------
Gross Profit 119,479 1,750
Selling, general and administrative expenses 205,591 114,450
--------- ---------
Net Profit (Loss) (86,112) (112,700)
Partners' Capital, beginning of period 396,853 750,194
Partner contributions 150,000
Partner distributions (40,039)
Partners' Capital, end of period $ 420,702 $637,494
========== ========
Statements Of Operations And Partners' Capital
For The Quarter Ended June 30, 1996 And June 30, 1995
(Unaudited)
1996 1995
Revenue $847,348 $ 166
Cost of Sales 728,778
--------- ----------
Gross Profit 118,570 166
Selling, general and administrative expenses 120,609 45,780
--------- ----------
Net Profit (Loss) (2,039) (45,614)
Partners' Capital, beginning of period 312,741 715,733
Partner contributions 150,000
Partner distributions (40,000)
Partners' Capital, end of period $ 420,702 $670,119
========== ========
<PAGE>
BEACON MANOR ASSOCIATES
(A JOINT VENTURE)
Statements Of Cash Flows
For The Six Months Ended June 30, 1996 And June 30, 1995
(Unaudited)
1996 1995
---------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (86,112) $ (112,700)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation 223
Decrease (increase) in performance bonds 17,979 (370)
Increase in inventories (1,317,019) (1,243,841)
Increase (decrease) in accounts payable 273,630 257,344
Decrease in accrued expenses ( 8,000)
Increase in customer deposits 1,094,395
Decrease in accrued interest payable ( 16,135) (16,135)
---------------- -------------
NET CASH USED IN OPERATING ACTIVITIES (41,039) (1,115,702)
---------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments to affiliate (1,178,794) (10,808)
---------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (1,178,794) (10,808)
---------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage payable 1,178,755 1,039,910
Capital distributions (40,039)
Capital contributions 150,000
Proceeds (payments) from affiliate (144,000) 15,000
---------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,144,716 1,054,910
---------------- -------------
DECREASE IN CASH (75,117) (71,600)
CASH, Beginning of period 75,575 72,402
CASH, End of period $ 458 $ 802
================ =============
<PAGE>
BEACON MANOR ASSOCIATES
(A JOINT VENTURE)
NOTES TO FINANCIAL STATEMENTS
JUNE 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 land and improvements, house construction, project overhead,
interest and a portion of construction management fees. Interest is
capitalized 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.
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.
<PAGE>
BEACON MANOR ASSOCIATES
(A JOINT VENTURE)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (continued)
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.
NOTE 2 - INVENTORIES
Inventories relating to the development of single-family homes consist
of the following at June 30, 1996:
Land $4,370,739
Approval costs 268,163
Land improvements and
construction costs 2,814,958
Project overhead 190,380
Financing costs 974,128
Sales and marketing 400,872
-----------
$9,019,240
===========
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 six
months ended June 30, 1996 are $333,294.
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 June 30,
1996 for Amboy was $5,877,724 and for Matzel & Mumford Mortgage
Funding Inc. was $655,000.
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 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, N.A. The prime rate as of June 30, 1996 was 8 1/4%.
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 September 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 loan made to an affiliated entity before
certain mortgage transactions occurred.
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 receivemonthly draws of management fees up to $35,000 per
month up to an aggregate of $725,000. Since inception, the Partnership
has incurred $570,000 in management fees, of which $190,380 has been
capitalized in inventories at June 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 June 30, 1996, the Partnership is contingently liable for
performance bonds totaling $426,913.
NOTE 7 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for the six months ended June 30, 1996 for:
Interest $ 340,445
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
BALANCE SHEETS
AS OF JUNE 30, 1996 AND DECEMBER 31, 1995
6/30/96 12/31/95
(unaudited) (audited)
ASSETS
Cash $ 331,045 $ 366,031
Performance bonds 58,027 156,710
Inventories 5,124,898 6,464,163
Other receivable 1,391
Due from affiliate 1,000 1,065
-------------- --------------
TOTAL ASSETS $5,514,970 $6,989,360
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage payable $3,560,510 $4,877,552
Developer note payable 656,250 1,000,000
Accounts Payable 1,120,681 660,283
Accrued interest payable 74,887
Due to affiliate
Customer deposits 256,398 28,073
------------ -----------
TOTAL LIABILITIES 5,593,839 544,666
------------ ----------
PARTNERS' CAPITAL (78,869) 348,565
------------ ------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $5,514,970 $6,989,360
========== ==========
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
Statements Of Operations And Members' Capital
For The Six Months Ended June 30, 1996
And From March 7, 1995 (Inception) To June 30, 1995
(Unaudited)
1996 1995
SALES $5,971,384
COST OF SALES 5,368,333
------------
GROSS PROFIT 603,051
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 248,817 37,462
------------ -----------
INCOME FROM OPERATIONS 354,234 (37,462)
INTEREST INCOME 5,832
------------ -----------
NET INCOME 360,066 (37,462)
MEMBER'S CAPITAL, Beginning of period 348,565 1,000
CAPITAL CONTRIBUTIONS 300,000
CAPITAL DISTRIBUTIONS (787,500)
------------ -----------
MEMBER'S CAPITAL, End of Period $ (78,869) 263,538
=========== ===========
Statements Of Operations And Members' Capital
For The Quarter Ended June 30, 1996 And June 30, 1995
(Unaudited)
1996 1995
SALES $3,374,154
COST OF SALES 3,013,945
GROSS PROFIT 360,209
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 146,739 37,462
---------- ---------
INCOME FROM OPERATIONS 213,470 (37,462)
INTEREST INCOME 5,696
NET INCOME 219,166 (37,462)
MEMBER'S CAPITAL, Beginning of period 314,465 1,000
CAPITAL CONTRIBUTIONS 300,000
CAPITAL DISTRIBUTIONS (612,500)
--------- ---------
MEMBER'S CAPITAL, End of Period $ (78,869) 263,538
============ =========
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
Statements Of Cash Flows
For The Six Months Ended June 30, 1996
And From March 7, 1995 (Inception) To June 30, 1995
(Unaudited)
1996 1995
------------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 360,066 ($ 37,462)
Adjustments to reconcile net loss to net cash
used in operating activities
Decrease(increase) in inventories 1,339,265 (4,233,298)
Decrease in other receivable 1,391
Decrease (increase) in performance bonds 98,683 (156,710)
Increase in accounts payable 460,398 262,159
Increase in customer deposits 228,325
Decrease in accrued interest payable ( 74,887)
------------ ----------
NET CASH USED IN OPERATING ACTIVITIES 2,413,241 (4,165,311)
------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage payable 5,842,061 2,922,946
Repayment of mortgage payable (7,159,103)
Repayment of developer note ( 343,750)
Capital distributions ( 787,500)
Capital contributions 300,000
Proceeds from affiliate 65 1,242,039
------------ -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES (2,448,227) 4,464,985
------------ -----------
INCREASE (DECREASE) IN CASH (34,986) 299,674
CASH, Beginning of period 366,031 0
------------ -----------
CASH, End of period $ 331,045 $ 299, 674
============ ===========
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 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 is
capitalized 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 Company.
MEMBERS' CAPITAL
The two managing members have paid $1,000 in capital contributions.
Three special members have contributed a total of $475,000.
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (Continued)
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 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 June
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
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 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 partner'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 June 30, 1996:
Land $1,882,542
Approval costs 474,102
Land improvements and
construction costs 2,008,067
Project overhead 54,391
Financing costs 419,765
Sales and marketing 286,031
----------
$5,124,898
==========
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 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
$508,727 of which $0 was capitalized during the six months ended June
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, 1995,
and a $2,325,000 mortgage provided by Matzel & Mumford Mortgage
Funding, Inc. (Mortgage Funding). The balance outstanding at June 30,
1996 for the bank was $1,784,603 and for Mortgage Funding was
$1,775,907. The notes are secured by the property and the bank's note
is personally guaranteed by the Company's managing members. A total of
$110,615 in loan fees related to the bank loan is included in
financing costs. The bank financing is payable at prime plus 1 1/2%
and the loan from Mortgage Funding is payable at 16% per annum. The
prime rate as of June 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 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% per annum. 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 June 30, 1996, twenty-two units have been closed and
eleven payments have been made on the note.
<PAGE>
MATZEL & MUMFORD AT STAATS FARM, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 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 $540,000 in management fees, of
which $54,391 has been capitalized in inventories at June 30, 1996.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
(a) Performance Bonds
At June 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 June 30, 1996 for:
Interest $ 336,225
<PAGE>
MATZEL & MUMFORD AT PISCATAWAY, L.L.C.
BALANCE SHEETS
AS OF JUNE 30, 1996 AND JUNE 4, 1995
6/30/96 6/4/96
(unaudited) (audited)
ASSETS
Cash $ 21,755 $ 46,527
Inventories 1,501,498 978,605
---------- ----------
TOTAL ASSETS $1,523,253 $1,025,132
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage Payable $1,039,474 $ 903,000
Accounts Payable 11,838 2,132
Due to affiliate 471,941 120,000
------------ -----------
TOTAL LIABILITIES 1,523,253 1,025,132
------------ ----------
PARTNERS' CAPITAL
------------ ------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $1,523,253 $1,025,132
========== ==========
<PAGE>
MATZEL & MUMFORD AT PISCATAWAY, L.L.C.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD MAY 1, 1996 (DATE OF INCEPTION) TO JUNE 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 (1,501,498)
Increase (decrease) in accounts payable 11,838
------------
NET CASH USED IN OPERATING ACTIVITIES (1,489,660)
------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage payable 1,039,474
Proceeds from affiliate 471,941
------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,511,415
------------
INCREASE IN CASH 21,755
CASH, Beginning of period
------------
CASH, End of period $ 21,755
============
<PAGE>
MATZEL & MUMFORD AT PISCATAWAY, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
NATURE OF BUSINESS AND ORGANIZATION
Matzel & Mumford at Piscataway, L.L.C.(the "Company") 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. The Company closed title to 21
lots and has an option to purchase the remaining 125 lots. Through
June 30, 1996, there has been no operating activity.
REVENUE RECOGNITION
Revenues arising from home sales will be recognized under the accrual
method. Under this method, income will be 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 will be 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 will comprise direct unit and allocated costs.
Development costs will be 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 the interest rate on specifically related debt.
A portion of the management fees to a related party is paid and
capitalized by the Company.
MEMBERS' CAPITAL
The two managing members have pledged a total of $1,000 in capital
contributions.
<PAGE>
MATZEL & MUMFORD AT PISCATAWAY, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 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 June 30, 1996:
Land $960,044
Approval Costs 306,755
Land improvements and construction costs 19,394
Project overhead 70,000
Financing costs 122,603
Sales and marketing 22,702
----------
$1,501,498
==========
All expenses incurred for the development of the project will be
capitalized. Selling expenses which do not benefit future periods and
general and administrative expenses will be treated as period costs
and will be expensed as incurred. Interest and management fees
capitalized during the period ended June 30, 1996 are $192,603.
NOTE 3 - MORTGAGE PAYABLE
The property is encumbered by a $2,000,000 mortgage payable to Matzel
& Mumford Mortgage Funding, Inc., an entity controlled by the members
of M&M at Piscataway, bearing interest at a rate of 16% per annum.
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 The Matzel & Mumford Organization,
Inc. ("MMO"), whereby MMO provides construction management services at
a fee of 4% of the gross selling price of each house. MMO is entitled
to draws of $35,000 per month. Since inception, the Company has
incurred $70,000 in management fees which have been capitalized in
inventories at June 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 as cash flow allows.
<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 $6,000,000.00
of its Intermediate Term Secured Notes (the "Notes"). On May 16, 1996, the
Funding Company issued and sold $3,750,000.00 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 a substantial portion of the loans to Beacon Manor, 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. These loans and
the borrower were discussed in the Funding Company's Current Report on Form 8-K
dated June 4, 1996.
As of June 30, 1996, the Funding Company has an aggregate of $3,470,381
of loans outstanding, allocated as follows: to Staats Farm (an aggregate of
$1,775,907 secured by first mortgages), for Beacon Manor ($582,750 secured by a
first mortgage and $72,250 secured by a second mortgage), and to Piscataway (an
aggregate of $1,039,474 secured by first mortgages). The financial statements of
each of these entities are included with this Quarterly Report. The Funding
Company also had $529,619 deposited in a cash collateral account with First
Union National Bank, as trustee for the holders of the Notes.
The Funding Company expects that in the third quarter of 1996, the loans
to Beacon Manor will be paid in full. As of June 30, the Funding Company has
identified one new project, located in South Brunswick, New Jersey, to which it
intends to make a loan in the third quarter.
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 the 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.
<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.
Not applicable.
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 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) and
dated June 4, 1996 (filed June 26, 1996) (to discuss loans to Piscataway).
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, as amended, the registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
MATZEL & MUMFORD
MORTGAGE FUNDING, INC.
By: /S/ ROGER MUMFORD
------------------------
Roger Mumford, President
Dated: August 15, 1996
By: /S/ RICHARD ANDERSON By: /S/ JONATHAN FISHER
------------------------ ----------------------------
Richard Anderson, Jonathan Fisher, Controller
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
NUMBER DOCUMENT PAGE
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
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 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.
- ---------------------------
* Incorporated by reference
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PERIOD-END> JUN-30-1996
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<CURRENT-ASSETS> 4,028,397
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0
0
<COMMON> 10,000
<OTHER-SE> 490,000
<TOTAL-LIABILITY-AND-EQUITY> 4,245,459
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<INCOME-CONTINUING> 4,441
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,441
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<TOTAL-COSTS> 728,778
<OTHER-EXPENSES> 118,570
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<RECEIVABLES> 1,000
<ALLOWANCES> 0
<INVENTORY> 5,124,898
<CURRENT-ASSETS> 5,514,970
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<TOTAL-ASSETS> 5,514,970
<CURRENT-LIABILITIES> 5,593,839
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0
0
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<TOTAL-LIABILITY-AND-EQUITY> 5,514,970
<SALES> 3,374,154
<TOTAL-REVENUES> 3,379,850
<CGS> 3,013,945
<TOTAL-COSTS> 3,013,945
<OTHER-EXPENSES> 146,739
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
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