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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
-----------------
FORM 10-QSB
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[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997.
OR
[_] TRANSITION REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES 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 registrant as specified in its charter)
NEW JERSEY 22-3382016
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
100 VILLAGE COURT, HAZLET, NEW JERSEY 07730
--------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(908) 888-1055
-----------------------------------------------
(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
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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 March 31, 1997
Transitional Small Business Disclosure Format (check one):
Yes No X
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<PAGE>
<TABLE>
<CAPTION>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
FORM 10-QSB INDEX
PAGE
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements ..............................................................
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
Balance Sheets as of March 31, 1997 (unaudited) and December 31, 1996
Statements of Operations and Retained Earnings for the Three Months
ended March 31, 1997 (unaudited) ...............................................
Statement of Cash Flows for the Three Months Ended March 31, 1997
(unaudited) ....................................................................
Notes to Financial Statements (unaudited) ........................................
SECTION 13 OF THE HILLS, L.L.C.
Balance Sheets as of March 31, 1997 (unaudited) and December 31, 1996
Statements of Operations and Partners' Capital for the Three Months
Ended March 31, 1997 (unaudited) ...............................................
Statement of Cash Flows for the Three Months Ended March 31, 1997
(unaudited) ....................................................................
Notes to Financial Statements (unaudited) ........................................
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
Balance Sheets as of March 31, 1997 (unaudited) and December 31, 1996
Statements of Operations and Members' Capital for the Three Months
Ended March 31, 1997 (unaudited)................................................
Statement of Cash Flows for the Three Months Ended March 31, 1997
(unaudited) ....................................................................
Notes to Financial Statements (unaudited) ........................................
MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
Balance Sheets as of March 31, 1997 (unaudited) and December 31, 1996
Statement of Cash Flows for the Three Months Ended March 31, 1997
(unaudited) ....................................................................
Notes to Financial Statements (unaudited) ........................................
MATZEL & MUMFORD AT WHITE OAK ESTATES, L.L.C.
Balance Sheets as of March 31, 1997 (unaudited) and December 31, 1996
Statement of Cash Flows for the Three Months Ended March 31, 1997
(unaudited) ....................................................................
Notes to Financial Statements (unaudited) ........................................
</TABLE>
<PAGE>
Item 2. Management's Plan of Operation ..................................
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 MARCH 31, 1997
<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 MARCH 31, 1997 AND DECEMBER 31, 1996
3/31/97 12/31/96
----------- -----------
(unaudited) (audited)
ASSETS
Cash ........................................... $ 124,701 $ 210,207
Due from affiliates ............................ 5,695
Prepaid income taxes ........................... 75
Mortgages receivable ........................... 3,898,826 3,800,000
Deferred costs, net ............................ 217,942 228,573
----------- ----------
TOTAL ASSETS ................................... $4,247,239 $4,238,780
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable ............................... $ 100
Notes Payable .................................. $3,750,000 3,750,000
----------- ----------
TOTAL LIABILITIES .............................. 3,750,000 3,750,100
----------- ----------
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 .................. 490,000 490,000
Retained earnings ........................... (2,760) (11,320)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY ..................... 497,239 488,680
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..... $4,247,239 $4,238,780
========== ==========
-1-
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
Revenue ........................................... $ 156,807
Interest expense .................................. 137,616
---------
Income (loss) before amortization and taxes ....... 19,191
Amortization ...................................... 10,631
---------
Net Income ........................................ 8,560
Retained Earnings, beginning of period ............ $ (11,320)
Retained Earnings, end of period .................. $ (2,760)
=========
-2-
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
FOR THE QUARTER ENDED MARCH 31, 1997
(UNAUDITED)
Revenue ........................................... $ 156,807
Interest expense .................................. 137,616
---------
Income (loss) before amortization and taxes ....... 19,191
Amortization ...................................... 10,631
---------
Net Income ........................................ 8,560
Retained Earnings, beginning of period ............ $ (11,320)
Retained Earnings, end of period .................. $ (2,760)
=========
-3-
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ........................................ $ 8,560
Adjustments to reconcile net loss to net cash
used in operating activities
Amortization .................................. 10,631
Increase in mortgages receivable .............. (98,827)
Increase in prepaid income taxes .............. (75)
Decrease in accounts payable .................. (100)
--------
NET CASH USED IN OPERATING ACTIVITIES ............... (79,811)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds to affiliate ............................. (5,695)
--------
NET CASH PROVIDED BY FINANCING ACTIVITIES ........... (5,695)
DECREASE IN CASH .................................... (85,506)
CASH, Beginning of period ........................... 210,207
--------
CASH, End of period ................................. $124,701
========
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<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
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
MARCH 31, 1997
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.
-6-
<PAGE>
SECTION 13 OF THE HILLS, L.L.C.
FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 1997
<PAGE>
SECTION 13 OF THE HILLS, L.L.C.
INDEX TO FINANCIAL STATEMENTS
PAGE
-----
Balance Sheets .................................................. 1
Statement of Operations and Partner's Capital.................... 2
Statement of Cash Flows.......................................... 3
Notes to the Financial Statements ............................... 4-8
<PAGE>
SECTION 13 OF THE HILLS, L.L.C.
BALANCE SHEETS
AS OF MARCH 31, 1997 AND DECEMBER 31, 1996
03/31/97 12/31/96
-------- --------
(unaudited) (audited)
ASSETS
Cash ............................................... $ 50,807 $ 27,124
Cash - restricted .................................. 74,494 63,029
Due from affiliates ................................ 100,000 --
Inventories ........................................ 5,579,764 6,560,237
---------- ----------
TOTAL ASSETS ....................................... $5,805,065 $6,650,390
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes and mortgages payable ........................ $4,522,092 $4,202,697
Accounts payable ................................... 824,315 1,850,996
Customer deposits .................................. 220,877 334,085
Due to affiliate ................................... 407,100 400,000
---------- ----------
TOTAL LIABILITIES .................................. 5,974,384 6,787,778
----------- ----------
PARTNERS' CAPITAL .................................. (169,319) (137,388)
---------- ----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL ............ $5,805,065 $6,650,390
========== ==========
-1-
<PAGE>
SECTION 13 OF THE HILLS, L.L.C.
STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 1997
3/31/97 3/31/96
------- -------
Sales ...................................... $3,043,920 $4,737,327
Cost of sales .............................. 2,946,570 4,357,059
---------- ----------
Gross profit ............................... 97,350 380,268
Selling, general and administrative expenses 100,000 171,557
---------- ----------
Income from operations ..................... (2,650) 208,711
Interest income ............................ 2,719 917
---------- ----------
Net income ................................. 69 209,628
Member's capital, Beginning of period ...... (137,388) 247,363
Capital distributions ...................... (32,000) (62,000)
---------- ----------
Member's capital, End of Period ............ $ (169,319) $ 394,991
========== ==========
-2-
<PAGE>
SECTION 13 OF THE HILLS, L.L.C.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ............................... 69
Adjustments to reconcile net loss to net cash
used in operating activities
Increase in inventories ..................... $ 980,473
Increase in restricted cash ................. (11,464)
Increase (decrease) in customer deposits .... (113,208)
Increase (decrease) in accounts payable ..... (1,026,681)
-----------
NET CASH USED IN OPERATING ACTIVITIES ............. (170,811)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage payable .............. 319,394
Proceeds from affiliate ..................... 7,100
Proceed to affiliate ........................ (100,000)
Distributions to members .................... (32,000)
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES ......... 194,494
-----------
INCREASE IN CASH .................................. 23,683
CASH, Beginning of period ......................... 27,124
-----------
CASH, End of period ............................... $ 50,807
===========
-3-
<PAGE>
SECTION 13 OF THE HILLS, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE 1 -- SUMMARY OF ACCOUNTING POLICIES
NATURE OF BUSINESS AND ORGANIZATION
Section 13 of the Hills, L.L.C. ("Section 13") is a New Jersey limited
liability company formed for the purpose of purchasing land in Bernards
Township, New Jersey and developing and constructing 60 single-family homes
on that land.
The members of the L.L.C. are Matzel & Mumford at Basking Ridge, L.L.C.
("M&M at Basking Ridge") and KMG Associates, L.L.C. ("KMG"). Profits are
allocated first to M&M at Basking Ridge $20,000 per house closing as a
preference distribution with remaining amounts allocated equally to each
member.
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.
RESTRICTED CASH
Restricted cash represents amounts on deposit as collateral for project
improvements.
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.
-4-
<PAGE>
SECTION 13 OF THE HILLS, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
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 March 31, 1997:
Land ..................................... $2,743,069
Approval costs ........................... 697,741
Land improvements and
construction costs ..................... 862,943
Project overhead ......................... 658,121
Financing costs .......................... 280,600
Sales and marketing ...................... 337,290
----------
$5,579,764
==========
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
March 31, 1997 are $725,177.
-5-
<PAGE>
SECTION 13 OF THE HILLS, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE 3 -- MORTGAGES PAYABLE
03/31/97 12/31/96
-------- --------
Land and construction loan Phase I (a) ....... $ 259,152 $ 259,152
Land and construction loan Phase II (b) ...... 3,091,940 2,527,545
2nd mortgage (c) ............................. -- 75,000
3rd mortgage (d) ............................. 867,000 1,037,000
Note payable (e(i)) .......................... 204,000 204,000
Note payable (e(ii)) ......................... 100,000 100,000
---------- ----------
$4,522,092 $4,202,697
========== ==========
(a) The Company has a commitment from a bank for land acquisition and
construction not to exceed $6,100,000 as follows:
o Note 1 in the maximum amount of $2,600,000 is to fund land
acquisition, improvements and construction of one model. The note
is payable interest only at the prime rate plus 1 1/2%. Interest
is payable monthly and principal is payable with each closing at
120% of the amounts advanced. The note matures on August 21,
1997.
o Note 2 in the maximum amount of $3,500,000 is for construction of
dwelling units. The note is payable interest only at the prime
rate plus 1 1/2%. Interest is payable monthly and principal is
payable with each closing in an amount equal to all related funds
advanced for construction.
The loan is collateralized by a first mortgage on the land and
improvements of Phase I (24 lots) of the project and is guaranteed by
the managing members of Matzel & Mumford at Basking Ridge and KMG.
The Company has a $2,100,000 mortgage payable to Matzel & Mumford Mortgage
Funding, Inc., which bears interest at 16%. Interest payments are payable
quarterly until February 7, 1998 when the outstanding principal is due. The
note is collateralized by a first mortgage on the property.
(b) The Company has a commitment from a bank for land acquisition and
construction not to exceed $6,880,000 as follows:
o Note 1 in the maximum amount of $3,380,000 is to fund land
acquisition, improvements and construction of one model. The note
is
-6-
<PAGE>
SECTION 13 OF THE HILLS, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
payable interest only at the prime rate plus 1 1/2%. Interest is
payable monthly and principal is payable with each closing at
120% of the amounts advanced. The note matures on September 26,
1997.
Note 2 in the maximum amount of $3,500,000 is for construction of
dwelling units. The note is payable interest only at the prime
rate plus 1 1/2%. Interest is payable monthly and principal is
payable with each closing in an amount equal to all related funds
advanced for construction.
The loan is collateralized by a first mortgage on the land and
improvements of Phase II (36 lots) of the project and is
guaranteed by the managing members of Matzel & Mumford at Basking
Ridge and KMG.
(c) The Company has a loan from a bank in the maximum amount of $300,000.
The loan is payable interest only at the prime rate plus 1 1/2%,
monthly through September 26, 1997. During the first quarter of 1997
the loan was repaid in full.
The Company has a subordinated third mortgage to the seller in the
original amount of $1,836,000. The loan is non-interest bearing and
principal is payable $51,000 per closing in Phase II. The loan is
collateralized by a third mortgage on Phase II.
The Company has notes payable to the seller as follows:
Note 1 in the original amount of $1,224,000 is non-interest bearing
and is payable $51,000 per closing in Phase I. Note 2 in the original
amount of $750,000 bears interest at 15% annually. Principal is
payable at a minimum of $30,000 per month, however, after the sale of
the first unit, this amount maybe satisfied by payments in connection
with Note 1 as provided in the loan amount. The note is currently due
on demand.
Notes 1 and 2 are guaranteed by the members of Matzel & Mumford at
Basking Ridge.
NOTE 4 -- RELATED PARTY TRANSACTIONS
The Company has an agreement with MMO whereby MMO provides
-7-
<PAGE>
SECTION 13 OF THE HILLS, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
construction management services at a fee of 4% of the gross selling price
of each house up to $20,000 per house. MMO is entitled to receive monthly
draws of $25,000 per month.
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.
NOTE 5 -- COMMITMENTS AND CONTINGENCIES
The Company is contingently liable for performance bonds totaling $342,000
at March 31, 1997.
-8-
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 1997
<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 ................................... 3-6
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
BALANCE SHEETS
AS OF MARCH 31, 1997 AND DECEMBER 31, 1996
03/31/97 12/31/96
---------- ----------
(unaudited) (audited)
ASSETS
Cash ......................................... $ 39,443 $ 457
Due from affiliate ........................... 118 --
Inventories .................................. 5,005,391 4,404,951
---------- ----------
TOTAL ASSETS ................................. $5,044,952 $4,405,408
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage payable - M&M Mortgage Funding ...... $1,800,000 $2,800,000
Mortgage payable - bank ...................... 1,466,525
Mortgage payable - second .................... 945,125 945,125
Accounts payable ............................. 145,341 18,063
Due to affiliate ............................. 687,961 542,220
---------- ----------
TOTAL LIABILITIES ............................ 5,044,952 4,405,408
---------- ----------
PARTNERS' CAPITAL ............................
---------- ----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL ...... $5,044,952 $4,405,408
========== ==========
-1-
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)
Adjustments to reconcile net loss to net cash
used in operating activities
Increase in inventories ...................................... $(600,440)
Increase in due to affiliate ................................. (118)
Increase (decrease) in accounts payable ...................... 127,278
---------
NET CASH USED IN OPERATING ACTIVITIES .............................. (473,280)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage payable ............................... 466,525
Proceeds from affiliate ...................................... 45,741
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES .......................... 512,266
---------
INCREASE IN CASH ................................................... 38,986
CASH, Beginning of period .......................................... 437
---------
CASH, End of period ................................................ $ 39,443
=========
-2-
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
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. Through
March 31, 1997, 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
MARCH 31, 1997
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 March 31, 1997:
Land ..................................... $3,474,873
Approval costs ........................... 354,896
Land improvements and
construction costs ..................... 249,980
Project overhead ......................... 326,471
Financing costs .......................... 594,999
Sales and marketing ...................... 4,172
----------
$5,005,391
==========
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
March 31, 1997 are $850,000.
-4-
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
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.
The Company has a commitment from a bank for land acquisition and
construction not to exceed $6,400,000 as follows:
Note A in the maximum amount of $3,400,000 is to fund land acquisition
and improvements. The note has a term of 18 months and bears interest
at a rate of prime plus 1.5%. Interest is payable monthly and
principal is payable with each closing at the rate of 120% of the cost
of the related land and site improvements or $102,000.
Note B in the amount of $500,000 is fund the construction of two model
homes. The note has a term of 18 months and bears interest at a rate
of prime plus 1.5%. Interest is payable monthly and principal is
payable with the closing of each model home.
Note C in the amount of $2,500,000 is fund the construction of sold
homes. The note has a term of 18 months and bears interest at a rate
of prime plus 1.5%. Interest is payable monthly and principal is
payable with the closing of each home.
The Company has a mortgage payable to the seller in the amount of
$945,125, bearing interest at 9%. Interest is payable monthly
beginning December 1, 1996, with principal due August 1, 1997.
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 $255,000
in management fees which have been capitalized in inventories at March
31, 1997.
-5-
<PAGE>
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.
-6-
<PAGE>
MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 1997
<PAGE>
MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
INDEX TO FINANCIAL STATEMENTS
Page
----
Balance Sheets ............................................. 1
Statement of Operations and Partner's Capital .............. 2
Statement of Cash Flows .................................... 3
Notes to the Financial Statements .......................... 4 - 6
<PAGE>
MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
BALANCE SHEETS
AS OF MARCH 31, 1997 AND DECEMBER 31, 1996
03/31/97 12/31/96
----------- ---------
(unaudited) (audited)
ASSETS
Cash ............................................ $ 17,621 $ 35,171
Cash - restricted ............................... 10,000 10,000
Notes receivable ................................ 56,700 --
Inventories ..................................... 4,038,656 2,603,466
---------- ----------
TOTAL ASSETS .................................... $4,122,977 $2,648,637
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgages payable ............................... $2,418,177 $1,620,848
Accounts payable ................................ 392,292 484,680
Customer deposits ............................... 218,584 103,522
Due to affiliate ................................ 1,111,236 439,587
---------- ----------
TOTAL LIABILITIES ............................... 4,140,289 2,648,637
---------- ----------
PARTNERS' CAPITAL ............................... (17,312) --
---------- ----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL ......... $4,122,977 $2,648,637
========== ==========
-1-
<PAGE>
MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 1997
Sales ................................................ $592,200
Cost of sales ........................................ 578,410
--------
Gross profit ......................................... 13,790
Selling, general and administrative expenses ......... 23,688
--------
Income from operations ............................... (9,898)
Interest income ...................................... 586
--------
Net income ........................................... (9,312)
Member's capital, Beginning of period ................ --
Capital distributions ................................ (8,000)
--------
Member's capital, End of Period .................. $(17,312)
========
-2-
<PAGE>
MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ......................................... $ (9,312)
Adjustments to reconcile net loss to net cash
used in operating activities
Increase in inventories ............................... (1,435,190)
Increase in notes receivable .......................... (56,700)
Increase (decrease in customer deposits ............... 115,062
Increase (decrease) in accounts payable ............... (92,388)
----------
NET CASH USED IN OPERATING ACTIVITIES ....................... (1,478,528)
----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage payable ............................ 797,329
Proceeds from affiliate ................................... 671,649
Distributions to members .................................. (8,000)
----------
NET CASH PROVIDED BY FINANCING ACTIVITIES ................... 1,460,978
----------
DECREASE IN CASH ............................................ (17,550)
CASH, Beginning of period ................................... 35,171
----------
CASH, End of period ......................................... $ 17,621
==========
-3-
<PAGE>
MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE 1 -- SUMMARY OF ACCOUNTING POLICIES
NATURE OF BUSINESS AND ORGANIZATION
Matzel & Mumford at West Windsor, L.L.C. ("M & M at "West Windsor") is
a New Jersey limited liability company formed for the purpose of
purchasing land in the Township of West Windsor, New Jersey and
developing and constructing 38 single-family homes on that land. M&M
has closed title to 23 lots and has an option to purchase the
remaining 15 lots till September 25, 1997.
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.
-4-
<PAGE>
MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
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 March 31, 1997:
Land ............................... $2,253,604
Approval costs ..................... 79,353
Land improvements and
construction costs ............... 466,061
Project overhead ................... 603,503
Financing costs .................... 298,845
Sales and marketing ................ 337,290
----------
$4,038,656
==========
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 March 31, 1997 are $725,177.
-5-
<PAGE>
MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE 3 -- MORTGAGES PAYABLE
03/31/97 12/31/96
---------- ----------
Land and construction mortgages (a) ... $2,138,177 $1,235,848
2nd mortgage (b) ...................... 280,000 385,000
---------- ----------
$2,418,177 $1,235,848
========== ==========
(a) The company has a loan from a bank for land acquisition and
construction not to exceed $3,800,000. Interest is payable
monthly at 1 1/2% over prime. Principal is payable with each
closing at the rate of 120% of the amount advanced for land
acquisition and 100% of construction advances. The loan matures
on October 25, 1997 after which the principal is due on demand.
The loan is collateralized by a first mortgage on the land and
improvements on the project and is guaranteed by the managing
members and The Matzel & Mumford.
The Company has a loan from Matzel & Mumford Mortgage Funding,
Inc. for the construction of two spec homes not to exceed
$850,000. Interest is payable quarterly at 16%. The loan matures
on February 4, 1998 after which time the principal is due on
demand. The loan is collateralized by a first mortgage on the
land and improvements of the project.
(b) The Company has a mortgage in the amount of $805,000. Interest is
payable monthly at 14%, plus an additional 1% of the sales price
of each unit. Principal is payable $35,000 per unit with any
unpaid balance due on May 1, 1998. The note is collateralized by
a third mortgage and the guarantee of M&M at West Windsor and
MMO.
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 $450,000 in management fees which have been capitalized
in inventories at March 31, 1997.
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.
-6-
<PAGE>
MATZEL & MUMFORD AT WHITE OAK ESTATES, L.L.C.
FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 1997
<PAGE>
MATZEL & MUMFORD AT WHITE OAK ESTATES, L.L.C.
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Balance Sheets ............................... ........................ 1
Statement of Cash Flows................................................ 2
Notes to the Financial Statements ..................................... 3 - 6
<PAGE>
MATZEL & MUMFORD AT WHITE OAK ESTATES, L.L.C.
BALANCE SHEETS
AS OF MARCH 31, 1997 AND DECEMBER 31, 1996
03/31/97 12/31/96
----------- ---------
(unaudited) (audited)
ASSETS
Cash ............................................... $ 49,779 $ 19,911
Cash -- restricted ................................. 161,474 161,474
Notes receivable ................................... 79,200 79,200
Inventories ........................................ 7,030,642 5,692,181
---------- ----------
TOTAL ASSETS ....................................... $7,321,095 $5,952,766
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgages payable .................................. $5,305,604 $4,456,498
Accounts payable ................................... 656,296 633,673
Customer deposits .................................. 46,600 --
Due to affiliate ................................... 1,279,451 829,451
---------- ----------
TOTAL LIABILITIES .................................. 7,287,951 5,919,622
---------- ----------
PARTNERS' CAPITAL .................................. 33,144 33,144
---------- ----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL ............ $7,321,095 $5,952,766
========== ==========
-1-
<PAGE>
MATZEL & MUMFORD AT WHITE OAK ESTATES, L.L.C.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)
Adjustments to reconcile net loss to net cash
used in operating activities
Increase in inventories ............................... $(1,338,461)
Increase in customer deposits ......................... 46,600
Increase (decrease) in accounts payable ............... 22,623
-----------
NET CASH USED IN OPERATING ACTIVITIES ....................... (1,269,238)
------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage payable ............................ 849,106
Proceeds from affiliate ................................... 450,000
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES ................... 1,299,106
-----------
INCREASE IN CASH ............................................ 29,868
CASH, Beginning of period ................................... 19,911
-----------
CASH, End of period ......................................... $ 49,779
===========
-2-
<PAGE>
MATZEL & MUMFORD AT WHITE OAK ESTATES, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE 1 -- SUMMARY OF ACCOUNTING POLICIES
NATURE OF BUSINESS AND ORGANIZATION
Matzel & Mumford at White Oak Estates, L.L.C. ("M & M at "White Oak")
is a New Jersey limited liability company formed for the purpose of
purchasing land in the Township of Branchburg, New Jersey and
developing and constructing 58 single-family homes on that land.
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 WHITE OAK ESTATES, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
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 March 31, 1997:
Land .............................. $2,927,788
Approval costs .................... 512,506
Land improvements and
construction costs .............. 1,839,244
Project overhead .................. 632,967
Financing costs ................... 870,846
Sales and marketing ............... 247,291
----------
$7,030,642
==========
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 March 31, 1997 are $1,291,894.
-4-
<PAGE>
MATZEL & MUMFORD AT WHITE OAK ESTATES, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE 3 -- MORTGAGES PAYABLE
03/31/97 12/31/96
---------- ----------
Land and construction mortgages (a) .... $1,638,840 $1,500,000
2nd mortgage (b) ....................... ,153,764 1,443,498
3rd mortgage (c) ....................... 1,313,000 1,313,000
Note payable (d) ....................... 200,000 200,000
---------- ----------
$5,305,604 $4,456,498
========== ==========
The company has a loan from a bank for land acquisition not to exceed
$1,500,000. Interest is payable monthly at 1 1/2% over prime. The
loan matures on September 27, 1997 after which the principal is due on
demand. The loan is collateralized by a first mortgage on the land and
improvements on the project and is guaranteed by the managing members.
TheCompany has a loan from Matzel & Mumford Mortgage Funding, Inc. for
the construction of two spec homes not to exceed $550,000. Interest is
payable quarterly at 16%. The loan matures on March 27, 1998 after
which time the principal is due on demand. The loan is collateralized
by a first mortgage on the land and improvements of the project.
The Company has a commitment from a bank for land acquisition and
construction not to exceed $4,520,000. Interest is payable monthly at
1 1/2% over prime. Principal is payable with each closing at the rate
of 120% of the amount advanced for land acquisition and 100% of
construction advances. The loan matures on March 31, 1998, with the
availability of a six month extension at the option of the lender
after which time the balance will be due upon demand. The loan is
collateralized by a second mortgage on the land and improvements of
the project and is guaranteed by the managing members of M&M at White
Oak and MMO.
(c) The Company has a mortgage in the amount of $1,313,000. Interest is
payable monthly at 15%, plus an additional 1% of the sales price of
each unit closed before September 20, 1997 and 1 1/2% thereafter.
Principal is payable $10,000 per unit for the 5th through 7th lots
closed, $31,000 for the 8th through 23rd lots, $35,000 for the 24th
through 50th lots and $31,000 for the 51st lot closed. The note is
collateralized by a third mortgage and the guarantee of M&M at White
Oak.
-5-
<PAGE>
MATZEL & MUMFORD AT WHITE OAK ESTATES, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(d) The Company has a note payable in the amount of $200,000 bearing
interest at 25%. Interest is payable semi-annually and principal is
payable upon demand with 90 days notice. The note is guaranteed by the
managing members of M&M at White Oak.
NOTE 4 -- RELATED PARTY TRANSACTIONS
The Company has an agreement with MMO whereby MMO provides
construction management services at a fee of 3.5% of the gross selling
price of each house. MMO is entitled to receive monthly draws of
$25,000 per month. Since inception, the Company has incurred $450,000
in management fees of which $421,048 have been capitalized in
inventories at March 31, 1997.
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.
-6-
<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.
During the first quarter of 1997, the Funding Company made four mortgage
loans to four different project entities. One first mortgage loan was made to
Matzel & Mumford at West Windsor, L.L.C. ("West Windsor"), and another was made
to Section 13 of the Hills, L.L.C. ("Section 13"). These loans and the borrowers
were discussed in the Funding Company's Current Report on Form 8-K dated
February 14, 1997. In addition, the Funding Company made a first mortgage loan
to Matzel & Mumford at White Oak Estates, L.L.C. ("White Oak"), which was
discussed in the Funding Company's Current Report on Form 8-K dated April 11,
1997. Further, the Funding Company made a first mortgage loan to Matzel &
Mumford at Piscataway, L.L.C. ("Piscataway") for construction of three spec
houses, which was discussed in the Funding Company's Annual Report on Form
10-KSB dated March 28, 1997.
As of March 31, 1997, the Funding Company had an aggregate of $3,898,826 of
loans outstanding, allocated as follows: to Section 13 (an aggregate of
$1,362,008 secured by first mortgages), to Piscataway (an aggregate of $262,977
secured by first mortgages), to Matzel & Mumford at South Brunswick, L.L.C.
("South Brunswick"), (an aggregate of $1,800,000 of which $1,100,000 is secured
by a first mortgage and $700,000 secured by a second mortgage), to White Oak (an
aggregate of $262,977 secured by a first mortgage), and to West Windsor (an
aggregate of $191,738 secured by a first mortgage). The financial statements of
each of these entities are included with this Quarterly Report. The Funding
Company also had $101,174 deposited in a cash collateral account with First
Union National Bank, as trustee for the holders of the Notes.
During the first quarter of 1997, Matzel & Mumford at Freehold, L.L.C.
("Freehold") repaid its previously outstanding loan from the Funding Company in
full. In addition, South Brunswick repaid $1,100,000 in principal on its loan
and also borrowed an additional $100,000 during the quarter from the Funding
Company, resulting in a principal balance of $1,800,000 outstanding as of March
31, 1997.
Subsequent to March 31, 1997, the Funding Company made three additional
loans to project entities. Further, the Funding Company intends to make
additional loans to Section 13 and West Windsor. See Item 5, "Other Information"
for a description of these loans.
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
<PAGE>
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. Inc.
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 March 31, 1997, the Funding Company has made a first mortgage
loan to Freehold in the amount of $550,000 to construct two spec homes. The
Funding Company also made subsequent to March 31, 1997 additional first mortgage
loans to White Oak and Section 13 in the amounts of $800,000 and $400,000,
respectively. The loan to White Oak was for construction of three spec homes,
and the loan to Section 13 was for the construction of one spec home. The
Funding Company also anticipates making additional loans in the second quarter
of 1997 to West Windsor in the amount of $1,100,000 for the construction of
three spec homes and to Section 13 in the amount of $400,000 for the
construction of one spec home, respectively.
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).
<PAGE>
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
During the first quarter of 1997, the Funding Company filed Current Reports
on Form 8-K on January 15, 1997, and February 14, 1997, each concerning Loans
from the Funding Company to M&M Project Entities.
<PAGE>
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the under-signed, thereunto duly authorized.
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
Date: May 13, 1997 By: /s/ ROGER MUMFORD
--------------------------------------
Roger Mumford, President
(Principal Executive Officer)
By: /s/ RICHARD G. ANDERSON
---------------------------------------
Richard G. Anderson, Chief Financial
Officer (Principal Accounting Officer)
Pursuant to the requirements of the Securities and Exchange Act of 1934,
This report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: May 13, 1997 By: /s/ ROGER MUMFORD
--------------------------------------
Roger Mumford, Director
By: /s/ BRUCE MATZEL
---------------------------------------
Bruce Matzel, Director
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
MATZEL & MORTGAGE FUNDING, INC.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 124,701
<SECURITIES> 0
<RECEIVABLES> 3,904,596
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,029,297
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,247,239
<CURRENT-LIABILITIES> 0
<BONDS> 3,750,000
0
0
<COMMON> 10,000
<OTHER-SE> 487,239
<TOTAL-LIABILITY-AND-EQUITY> 4,247,239
<SALES> 156,807
<TOTAL-REVENUES> 156,807
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,631
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 137,616
<INCOME-PRETAX> 8,560
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,560
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,560
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
SECTION 13 OF THE HILLS, L.L.C.
</LEGEND>
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