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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 15, 1996
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
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(Exact name of registrant as specified in its charter)
NEW JERSEY 33-98178 22-3382016
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
100 VILLAGE COURT, HAZLET, NEW JERSEY 07730
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(Address of principal executive offices) (Zip Code)
(908) 888-1055
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(Registrant's telephone number, including area code)
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<PAGE>
Item 5. Other Events.
On November 15, 1996, Matzel & Mumford Mortgage Funding, Inc. (the "Funding
Company") made a second mortgage loan to Matzel & Mumford at Freehold, LLC
("Freehold LLC"), the entity organized to develop, market and build a 126-lot
subdivision known as Seven Oaks located on Burlington Road, in Freehold,
Monmouth County, New Jersey. Freehold is located in central New Jersey among
major thoroughfares including the Garden State Parkway, Routes 18 and 9
(traveling north and south) and Routes 537 and 33 (traveling east and west).
Freehold is convenient to employment centers in central and northern New Jersey
and New York City.
Seven Oaks will consist of 126 homes on approximately 199 acres of land,
all of which has been farmed. Freehold LLC acquired the 126 building lots with
final approval on 77 lots and preliminary approval on the remaining 49 lots. On
December 5, 1996, final approval was granted on the remaining 49 lots.
The purchase price for the property was $7,060,000 or $56,032 per building
lot. The closing of title to the property was funded with first mortgage
financing on 95 lots provided by Amboy National Bank, first mortgage financing
on 31 lots provided by the seller, the second mortgage loan from Funding Company
and a portion of the capital contributed by an investor that was secured with a
third mortgage on 95 lots. The land was appraised as of October 18, 1996 at
$57,800 per building lot.
Freehold LLC commenced site improvements to Seven Oaks in December 1996.
Amboy National Bank is providing funding for sitework, two model houses, one
spec house and construction of sold houses under its commitment letter dated
September 20, 1996.
Item 7(a). Financial Statements.
The audited financial statements of Freehold LLC for the period from
inception (October 3, 1996) to November 15, 1996 are being filed as part of this
Current Report.
Item 7 (c). Exhibits.
27. Financial Data Schedule.
<PAGE>
MATZEL & MUMFORD AT
FREEHOLD, L.L.C.
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FINANCIAL STATEMENTS
PERIOD OCTOBER 3, 1996
(DATE OF INCEPTION) TO NOVEMBER 15, 1996
1
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
CONTENTS
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INDEPENDENT AUDITORS' REPORT 3
FINANCIAL STATEMENTS:
Balance sheet 4
Statement of cash flows 5
Notes to financial statements 6-9
2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Members
Matzel & Mumford at Freehold, L.L.C.
Hazlet, New Jersey
We have audited the accompanying balance sheet of Matzel & Mumford at Freehold,
L.L.C. as of November 15, 1996 and the related statement of cash flows for the
period October 3, 1996 (date of inception) to November 15, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Matzel & Mumford at Freehold,
L.L.C. as of November 15, 1996 and its cash flows for the period October 3, 1996
(date of inception) through November 15, 1996 in conformity with generally
accepted accounting principles.
December 20, 1996
3
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
BALANCE SHEET
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November 15, 1996
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ASSETS
Cash $ 392,835
Cash-restricted 197,470
Inventory (Notes 2 and 3) 7,472,925
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TOTAL ASSETS $8,063,230
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LIABILITIES AND MEMBERS' EQUITY
Accounts payable $ 38,272
Due to affiliates (Note 4) 48,716
Mortgages payable (Note 3) 7,976,242
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TOTAL LIABILITIES 8,063,230
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MEMBERS' EQUITY 1,000
RECEIVABLE FROM MEMBERS (1,000)
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TOTAL MEMBERS' EQUITY --
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TOTAL LIABILITIES AND MEMBERS' EQUITY 8,063,230
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See accompanying notes to financial statements.
4
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
STATEMENT OF CASH FLOWS
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For the period October 3, 1996 (date of inception) to November 15, 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ --
Adjustments to reconcile net income to net cash used in
operating activities:
Increase in cash-restricted (197,470)
Increase in inventories (5,773,657)
Increase in accounts payable 38,272
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NET CASH USED IN OPERATING ACTIVITIES 5,932,855
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from mortgages payable 6,276,974
Advances from affiliates 48,716
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NET CASH PROVIDED BY FINANCING ACTIVITIES 6,325,690
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INCREASE IN CASH 392,835
CASH, BEGINNING OF PERIOD --
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CASH, END OF PERIOD $ 392,835
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NON-CASH INVESTING AND FINANCING ACTIVITIES:
The acquisition of the land was partially financed by the seller in the amount
of $1,699,268.
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See accompanying notes to financial statements.
5
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
NOTES TO FINANCIAL STATEMENTS
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1. SUMMARY OF Nature of Business and Organization
ACCOUNTING POLICIES
Matzel & Mumford at Freehold, L.L.C. ("M&M at
Freehold") is a New Jersey limited liability company
formed on October 3, 1996 for the purpose of
purchasing land in Freehold, New Jersey and
developing and constructing 126 single-family homes
on the land. Through November 15, 1996, there has
been no operating activities.
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.
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 currently comprised of land and
project overhead. Inventory costs will be comprised
of 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
capitalized is based upon the interest rate on
specifically related debt. A portion of the
management fees to a related party are paid and
capitalized by the Company.
Members' Capital
The two managing members have pledged a total of
$1,000 in capital contributions.
6
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
NOTES TO FINANCIAL STATEMENTS
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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 reporting period. Actual results could
differ from those estimates.
2. INVENTORIES Inventories relating to the development of single-
family homes consist of the following at November
15, 1996:
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Land $7,060,556
Project overhead 412,369
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$7,472,925
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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.
7
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
NOTES TO FINANCIAL STATEMENTS
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3. LOANS AND ---------------------------------------------------
MORTGAGES PAYABLE Land and construction loan (a) $4,626,974
1st mortgage (b) 1,699,268
2nd mortgage (c) 1,000,000
3rd mortgage (d) 650,000
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$7,976,242
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(a) The Company has a commitment from a bank for
land acquisition and construction not to exceed
$10,330,000 as follows:
o Note A in the maximum amount of $6,030,000
is to fund land acquisition and
improvements. The note has a term of 18
months and bears interest at the prime rate
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 $110,210.
o Note B in the amount of $700,000 matures on
April 10, 1997 and bears interest at 18%.
Interest is payable monthly and principal
is due at maturity.
o Note C in the amount of $600,000 is for the
construction of models. The note has a term
of 18 months and bears interest at prime
plus 1.5%. Interest is payable monthly and
principal is due at the rate of $1,345 per
closing and upon sale of the related
models.
o Note D in the maximum amount of $3,000,000
is for construction of dwelling units. The
note has a term of 18 months and bears
interest at the prime rate plus 1%.
Interest is payable monthly and principal
is payable $111,600 plus all related funds
advanced for construction with each
closing.
The loan is collateralized by a first mortgage
on the land and improvements of phases one and
two (95 lots) of the project and is guaranteed
by the managing members.
8
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
NOTES TO FINANCIAL STATEMENTS
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(b) The Company has a mortgage to the seller, which
is payable $600,000 on November 15, 1997 with
the balance due on November 15, 1998. The
mortgage bears interest at 9.25%, which is
payable at the time of the related principal
payment. The note is collateralized by a first
mortgage on phase three (31 lots) of the
project.
(c) The Company has a mortgage payable to Matzel &
Mumford Mortgage Funding, an entity controlled
by the members of M&M at Freehold, which is
payable interest only at 16%. Interest payments
are payable quarterly until November 15, 1997
when the outstanding principal balance is due.
The note is collateralized by a second mortgage
on the land and improvements.
(d) The Company has a mortgage payable to an
insurance company in the maximum amount of
$1,250,000 bearing interest at 20% on the first
$1,000,000 and 25% on the balance. Fifty percent
of the interest is payable semi-annually
beginning one year from initial advance with the
balance deferred until the related principal
payments commence. Principal is payable $50,000
per house beginning with the 71st closing with
the unpaid balance, if any, due December 31,
2001. The note is collateralized by a third
mortgage on the land and improvements and the
guarantee of the managing members.
4. RELATED PARTY The Company has an agreement with the Matzel &
TRANSACTIONS 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 $30,000 per month. During
the period October 3 through November 15, 1996, no
management fees have been incurred.
Included in due to/from affiliates are transfers of
costs incurred by affiliated companies of the
managing member of the Company. The amounts are short
term in nature and bear no interest. The amounts are
to be repaid as cash flow allows.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
By: /s/ ROGER MUMFORD
-----------------------------------
Roger Mumford
President
Dated: January 15, 1997
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Document Page
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27 Financial Data Schedule 6
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> NOV-15-1996
<CASH> 590,305
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 7,472,925
<CURRENT-ASSETS> 8,063,230
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,063,230
<CURRENT-LIABILITIES> 8,063,230
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,063,230
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
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<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
