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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 JUNE 30, 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.
------------------------------------------------------
(Exact Name of Registrant 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) (Zip Code)
(908) 888-1055
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(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
---- ----
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes No
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 500 shares common stock, no par value
as of June 30, 1997
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
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements ........................................... 1
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
Balance Sheets as of June 30, 1997 (unaudited) and December 31, 1996
Statements of Operations and Retained Earnings for the Six and Three
Months ended June 30, 1997 (unaudited).............................
Statement of Cash Flows for the Six Months Ended
June 30, 1997 (unaudited) .........................................
Notes to Financial Statements (unaudited) ...........................
SECTION 13 OF THE HILLS, L.L.C.
Balance Sheets as of June 30, 1997 (unaudited) and December 31, 1996
Statements of Operations and Partners' Capital for the Six and Three
Months ended June 30, 1997 (unaudited) ............................
Statement of Cash Flows for the Six Months Ended June 30,
1997 (unaudited) ..................................................
Notes to Financial Statements (unaudited) ...........................
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
Balance Sheets as of June 30, 1997 (unaudited) and December 31, 1996
Statement of Cash Flows for the Six Months Ended June 30,
1997 (unaudited) ...................................................
Notes to Financial Statements (unaudited) ............................
MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
Balance Sheets as of June 30, 1997 (unaudited) and December 31, 1996
Statements of Operations and Partners' Capital for the Six and Three
Months ended June 30, 1997 (unaudited) .............................
Statement of Cash Flows for the Six Months Ended June 30,
1997 (unaudited) ...................................................
Notes to Financial Statements (unaudited) ............................
MATZEL & MUMFORD AT WHITE OAK ESTATES, L.L.C.
Balance Sheets as of June 30, 1997 (unaudited) and December 31, 1996
Statements of Operations and Partners' Capital for the Six and Three
Months ended June 30, 1997 (unaudited) ...............................
Statement of Cash Flows for the Six Months Ended June 30,
1997(unaudited) .....................................................
Notes to Financial Statements (unaudited) .............................
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
Balance Sheets as of June 30, 1997 (unaudited) and December 31, 1996
Statement of Cash Flows for the Six Months Ended June 30,
1997 (unaudited) ....................................................
Notes to Financial Statements (unaudited) .............................
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 STATEMENT
FOR THE QUARTER ENDED JUNE 30, 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>
<TABLE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC
BALANCE SHEETS
AS OF JUNE 30,1997 AND DECEMBER 31, 1996
<CAPTION>
6/30/97 12/31/96
---------- ---------
(unaudited) (audited)
ASSETS
<S> <C> <C>
Cash $ 98,317 $ 210,207
Prepaid income taxes 75
Mortgages receivable 3,925,570 3,800,000
Deferred costs, net 207,311 228,573
---------- ----------
TOTAL ASSETS $4,231,273 $4,238,780
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable $ 145 $ 100
Notes Payable 3,750,000 3,750,000
---------- ----------
TOTAL LIABILITIES 3,750,145 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 (18,872) (11,320)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 481,128 488,680
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,231,273 $4,238,780
========== ==========
</TABLE>
-1-
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
Revenue $318,271
Interest expense 288,550
--------
Income (loss) before G & A and amortization 29,721
General & administrative expenses 16,010
Amortization 21,262
--------
Net Income (7,551)
Retained Earnings, beginning of period $(11,321)
Retained Earnings, end of period $(18,872)
========
-2-
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
FOR THE QUARTER ENDED JUNE 30, 1997
(UNAUDITED)
Revenue $161,464
Interest expense 150,935
--------
Income (loss) before G & A and amortization 10,529
General and administrative 16,010
Amortization 10,631
--------
Net Income $(16,112)
Retained Earnings, beginning of period $ (2,760)
Retained Earnings, end of period $(18,872)
========
-3-
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ (7,551)
Adjustments to reconcile net loss to net cash
used in operating activities
Amortization 21,262
Increase in mortgages receivable (125,571)
Increase in prepaid income taxes (75)
Increase in accounts payable 45
---------
NET CASH USED IN OPERATING ACTIVITIES (111,890)
DECREASE IN CASH (111,890)
CASH, Beginning of period 210,207
---------
CASH, End of period $ 98,317
=========
-4-
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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
JUNE 30, 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 JUNE 30, 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 - 3
Statement of Cash Flows............................................ 4
Notes to the Financial Statements ................................. 5 - 9
<PAGE>
<TABLE>
SECTION 13 OF THE HILLS, L.L.C.
BALANCE SHEETS
AS OF JUNE 30, 1997 AND DECEMBER 31, 1996
<CAPTION>
06/30/97 12/31/96
---------- ---------
(unaudited) (audited)
ASSETS
<S> <C> <C>
Cash $ 354,136 $ 27,124
Performance bonds 77,494 63,029
Due from affiliates 106,756
Inventories 4,460,659 6,560,237
---------- ----------
TOTAL ASSETS $4,999,045 $6,650,390
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes and mortgages payable $3,589,917 $4,202,697
Accounts payable 847,880 1,850,996
Customer deposits 357,084 334,085
Due to affiliate 150,200 400,000
---------- ----------
TOTAL LIABILITIES 4,945,081 6,787,778
---------- ----------
PARTNERS' CAPITAL 53,964 (137,388)
---------- ----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $4,999,045 $6,650,390
========== ==========
</TABLE>
-1-
<PAGE>
SECTION 13 OF THE HILLS, L.L.C.
STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 1997
6/30/97 6/30/96
------- -------
Sales $6,297,572 $4,737,327
Cost of sales 6,255,971 4,357,059
---------- ----------
Gross profit 41,601 380,268
Selling, general and administrative expenses 219,434 171,557
---------- ----------
Income from operations (177,833) 208,711
Interest income 1,185 917
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Net income (176,648) 209,628
Member's capital, Beginning of period (137,388) 247,363
Capital contributions 376,000
Capital distributions (8,000) (62,000)
---------- ----------
Member's capital, End of Period $ 53,964 $ 394,991
========== ==========
-2-
<PAGE>
SECTION 13 OF THE HILLS, L.L.C.
STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED JUNE 30, 1997
6/30/97 6/30/96
------- -------
Sales $3,253,652 $4,737,327
Cost of sales 3,310,935 4,357,059
---------- ----------
Gross profit (57,283) 380,268
Selling, general and administrative expenses 119,434 171,557
---------- ----------
Income from operations (176,717) 208,711
Interest income 917
---------- ----------
Net income (176,717) 209,628
Member's capital, Beginning of period (169,319) 247,363
Capital contributions 376,000
Capital distributions 24,000 (62,000)
---------- ----------
Member's capital, End of Period $ 53,964 $ 394,991
========== ==========
-3-
<PAGE>
SECTION 13 OF THE HILLS, L.L.C.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) (176,648)
Adjustments to reconcile net loss to net cash
used in operating activities
Decrease in inventories 2,099,578
Increase in restricted cash (14,465)
Increase (decrease) in customer deposits 22,999
Increase (decrease) in accounts payable (1,003,116)
-----------
NET CASH USED IN OPERATING ACTIVITIES 928,348
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage payable 4,766,254
Payments on construction and land mortgages (5,379,034)
Proceeds from affiliate (106,756)
Proceed to affiliate (249,800)
Contributions from members 376,000
Distributions to members (8,000)
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES (601,336)
-----------
INCREASE IN CASH 327,012
CASH, Beginning of period 27,124
-----------
CASH, End of period $ 354,136
===========
-4-
<PAGE>
SECTION 13 OF THE HILLS, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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.
-5-
<PAGE>
SECTION 13 OF THE HILLS, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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 June 30, 1997:
Land $2,026,391
Land improvements and
construction costs 1,238,616
Project overhead 634,235
Financing costs 229,476
Sales and marketing 331,941
----------
$4,460,659
==========
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 June 30, 1997 are $725,177.
-6-
<PAGE>
SECTION 13 OF THE HILLS, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
NOTE 3 -- MORTGAGES PAYABLE
6/30/97 12/31/96
------- --------
Land and construction loan Phase I (a) $ 514,967 $ 259,152
Land and construction loan Phase II (b) 2,583,950 2,527,545
2nd mortgage (c) 75,000
3rd mortgage (d) 287,000 1,037,000
Note payable (e(i)) 204,000 204,000
Note payable (e(ii)) 100,000
---------- ----------
$3,589,917 $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 and $400,000 mortgage payable to Matzel &
Mumford Mortgage Funding, Inc., which bears interest at 16%. Interest
payments are payable quarterly until February 7, 1998 and April 16, 1998
respectively, when the outstanding principal is due. During the second
quarter, the $2,100,000 note was repaid in full. 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
-7-
<PAGE>
SECTION 13 OF THE HILLS, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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.
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 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.
(d) 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.
(e) The Company has notes payable to the seller as follows:
(i) Note 1 in the original amount of $1,224,000 is non-interest
bearing and is payable $51,000 per closing in Phase I.
(ii) 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
-8-
<PAGE>
SECTION 13 OF THE HILLS, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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
$315,000 at June 30, 1997.
-9-
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
FINANCIAL STATEMENTS
FOR THE QUARTER ENDED JUNE 30, 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 JUNE 30, 1997 AND DECEMBER 31, 1996
06/30/97 12/31/96
---------- ---------
(unaudited) (audited)
ASSETS
Cash $ 115,402 $ 457
Performance Bond 256,093
Inventories 5,992,920 4,404,951
---------- ----------
TOTAL ASSETS $6,364,415 $4,405,408
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage payable- M&M Mortgage Funding $1,800,000 $2,800,000
Mortgage payable - bank 2,476,358
Mortgage payable - second 945,125 945,125
Accounts payable 109,271 18,063
Note Payable 300,000
Due to affiliate 733,661 642,220
---------- ----------
TOTAL LIABILITIES 6,364,415 4,405,408
---------- ----------
PARTNERS' CAPITAL
---------- ----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $6,364,415 $4,405,408
========== ==========
-1-
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)
Adjustments to reconcile net loss to net cash
used in operating activities
Increase in performance bonds (256,093)
Increase in inventories (1,587,969)
Increase (decrease) in accounts payable 91,208
------------
NET CASH USED IN OPERATING ACTIVITIES (1,752,854)
------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage payable 2,776,358
Payments on land mortgages (1,000,000)
Proceeds from affiliate 91,441
------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,867,799
-----------
INCREASE IN CASH 114,945
CASH, Beginning of period 457
-----------
CASH, End of period $ 115,402
===========
-2-
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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 June 30, 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
JUNE 30, 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 June 30, 1997:
Land $3,475,944
Approval costs 533,623
Land improvements and
construction costs 722,889
Project overhead 478,971
Financing costs 748,629
Sales and marketing 32,864
----------
$5,992,920
==========
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 June 30, 1997 are $850,000.
-4-
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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.
The Company has a note payable to an investor in the amount of
$300,000, bearing interest at 15%. Interest is payable beginning
December 16, 1997 and every three months thereafter. Principal is
payable in the amount of $10,000 per closing starting with the
eleventh house closing but no later than June 15, 1999.
-5-
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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
$35,000 per month. Since inception, the Company has incurred $360,000
in management fees which have been capitalized in inventories at June
30, 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 WEST WINDSOR, L.L.C.
FINANCIAL STATEMENTS
FOR THE QUARTER ENDED JUNE 30, 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 - 3
Statement of Cash Flows................................................. 4
Notes to the Financial Statements ...................................... 5 - 8
<PAGE>
MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
BALANCE SHEETS
AS OF JUNE 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
06/30/97 12/31/96
(unaudited) (audited)
---------- ----------
ASSETS
<S> <C> <C>
Cash $ 2,849 $ 35,171
Cash - restricted 10,000 10,000
Notes receivable 56,700
Vehicle (net of accumulated depreciation) 2,750
Inventories 4,703,154 2,603,466
---------- ----------
TOTAL ASSETS $4,775,453 $2,648,637
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgages payable $3,708,804 $1,620,848
Accounts payable 554,806 484,680
Customer deposits 354,813 103,522
Due to affiliate 223,212 439,587
---------- ----------
TOTAL LIABILITIES 4,821,635 2,648,637
---------- ----------
PARTNERS' CAPITAL (46,182)
---------- ----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $4,775,453 $2,648,637
========== ==========
</TABLE>
-1-
<PAGE>
MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 1997
Sales $ 1,227,649
Cost of sales 1,224,735
-----------
Gross profit 2,914
Selling, general and administrative expenses 34,084
-----------
Income from operations (31,170)
Depreciation 250
Interest income 1,238
-----------
Net income (30,182)
Member's capital, Beginning of period --
Capital distributions (16,000)
-----------
Member's capital, End of Period $ (46,182)
===========
-2-
<PAGE>
MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL
FOR THE QUARTER ENDED JUNE 30, 1997
Sales $ 635,447
Cost of sales 646,325
---------
Gross profit (10,878)
Selling, general and administrative expenses 10,396
---------
Income from operations (21,274)
Depreciation 250
Interest income 654
---------
Net income (20,870)
Member's capital, Beginning of period (17,312)
Capital distributions (8,000)
---------
Member's capital, End of Period $ (46,182)
=========
-3-
<PAGE>
MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
STATEMENTS OF CASH FLOWS
FOR THE QUARTER ENDED JUNE 30, 1997
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) (30,182)
Depreciation 250
Adjustments to reconcile net loss to net cash
used in operating activities
Increase in inventories (2,099,688)
Increase in note receivable (56,700)
Increase (decrease) in customer deposits 231,291
Increase (decrease) in accounts payable 70,126
-----------
NET CASH USED IN OPERATING ACTIVITIES (1,884,903)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage payable 2,981,618
Payments of construction and land mortgages (893,662)
Proceeds to affiliate (216,375)
Distributions to members (16,000)
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,855,581
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of vehicle 3,000
-----------
NET CASH USED BY INVESTING ACTIVITIES (3,000)
-----------
DECREASE IN CASH (32,322)
CASH, Beginning of period 35,171
-----------
CASH, End of period $ 2,849
===========
-4-
<PAGE>
MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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.
-5-
<PAGE>
MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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 June 30, 1997:
Land $2,148,454
Approval costs 134,307
Land improvements and
construction costs 917,377
Project overhead 725,520
Financing costs 399,706
Sales and marketing 377,790
----------
$4,703,154
==========
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 June 30, 1997 are $905,622.
-6-
<PAGE>
MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
NOTE 3 - MORTGAGES PAYABLE
06/30/97 12/31/96
---------- ----------
Land and construction mortgages (a) $3,148,804 $1,235,848
3rd mortgage (b) 560,000 385,000
---------- ----------
$3,708,804 $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 two loans from Matzel & Mumford Mortgage Funding,
Inc. for the construction of a total of five spec homes. The first
loan is not to exceed $850,000 which matures February 4, 1998 and
the second loan is not to exceed $1,100,000 which matures May 1,
1998. 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
$540,000 in management fees of which $505,916 have been capitalized
in inventories at June 30, 1997.
-7-
<PAGE>
MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
NOTE 3 - MORTGAGES PAYABLE (continued)
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.
-8-
<PAGE>
MATZEL & MUMFORD AT WHITE OAK ESTATES, L.L.C.
FINANCIAL STATEMENTS
FOR THE QUARTER ENDED JUNE 30, 1997
<PAGE>
MATZEL & MUMFORD AT WHITE OAK ESTATES, L.L.C.
INDEX TO FINANCIAL STATEMENTS
Page
----
Balance Sheets ........................................................ 1
Statement of Operations................................................ 2-3
Statement of Cash Flows................................................ 4
Notes to the Financial Statements ..................................... 5-8
<PAGE>
MATZEL & MUMFORD AT WHITE OAK ESTATES, L.L.C.
BALANCE SHEETS
AS OF JUNE 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
06/30/97 12/31/96
(unaudited) (audited)
----------- -----------
ASSETS
<S> <C> <C>
Cash $ 25,791 $ 19,911
Cash - restricted 95,587 161,474
Notes receivable 79,200 79,200
Due from affiliate 50,000
Vehicle (net of accumulated depreciation) 4,125
Inventories 6,780,167 5,692,181
----------- -----------
TOTAL ASSETS $ 7,034,870 $ 5,952,766
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgages payable $ 4,944,206 $ 4,456,498
Accounts payable 1,190,663 633,673
Customer deposits 237,874
Due to affiliate 725,000 829,451
----------- -----------
TOTAL LIABILITIES 7,097,743 5,919,622
----------- -----------
PARTNERS' CAPITAL (62,873) 33,144
----------- -----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 7,034,870 $ 5,952,766
=========== ===========
</TABLE>
-1-
<PAGE>
MATZEL & MUMFORD AT WHITE OAK ESTATES, L.L.C.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
Revenue $2,505,697
Cost of Sales 2,515,187
----------
Gross Profit (9,490)
Selling, General and administrative expenses 87,696
----------
Loss from operations (97,186)
Interest Income 1,544
Depreciation 375
----------
Net Loss (96,017)
Members capital, beginning of period 33,144
----------
Members capital, end of period ($ 62,873)
==========
-2-
<PAGE>
MATZEL & MUMFORD AT WHITE OAK ESTATES, L.L.C.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
Revenue $ 2,505,697
Cost of Sales 2,515,187
-----------
Gross Profit (9,490)
Selling, General and administrative expenses 87,696
-----------
Loss from operations (97,186)
Interest Income 1,544
Depreciation 375
-----------
Net Loss (96,017)
Members capital, beginning of period 33,144
-----------
Members capital, end of period ($ 62,873)
===========
-3-
<PAGE>
MATZEL & MUMFORD AT WHITE OAK ESTATES, L.L.C.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) (96,017)
Depreciation 375
Adjustments to reconcile net loss to net cash
used in operating activities
Increase in inventories (1,087,986)
Decrease in performance bonds 65,887
Increase in customer deposits 237,874
Increase (decrease) in accounts payable 556,990
-----------
NET CASH USED IN OPERATING ACTIVITIES (322,877)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage payable 3,282,422
Payments of construction and land mortgages (2,794,714)
Proceeds to affiliate (104,451)
Proceeds from affiliate (50,000)
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 333,257
-----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of vehicle 4,500
-----------
NET CASH USED BY INVESTING ACTIVITIES (4,500)
-----------
INCREASE IN CASH 5,880
CASH, Beginning of period 19,911
-----------
CASH, End of period $ 25,791
===========
-4-
<PAGE>
MATZEL & MUMFORD AT WHITE OAK ESTATES, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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.
-5-
<PAGE>
MATZEL & MUMFORD AT WHITE OAK ESTATES, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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 June 30, 1997:
Land $2,550,367
Approval costs 581,079
Land improvements and
construction costs 1,983,669
Project overhead 561,559
Financing costs 899,246
Sales and marketing 204,247
----------
$6,780,167
==========
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 June 30, 1997 are $1,307,598.
-6-
<PAGE>
MATZEL & MUMFORD AT WHITE OAK ESTATES, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
NOTE 3 - MORTGAGES PAYABLE
06/30/97 12/31/96
---------- ----------
Land and construction mortgages (a) $1,639,566 $1,500,000
2nd mortgage (b) 2,038,640 1,443,498
3rd mortgage c) 1,066,000 1,313,000
Note payable (d) 200,000 200,000
---------- ----------
$4,944,206 $4,456,498
========== ==========
(a) 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.
The Company has two loans from Matzel & Mumford Mortgage Funding,
Inc. for the construction of a total of five spec homes. The first
loan is in the amount of $550,000 for 2 two spec homes and matures
March 27, 1998 and the second loan is in the amount of $800,000 for
three spec homes and matures on April 16, 1998. Interest is payable
quarterly at 16%. The loan is collateralized by a first mortgage on
the land and improvements of the project.
(b) 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.
-7-
<PAGE>
MATZEL & MUMFORD AT WHITE OAK ESTATES, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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 $525,000 in management fees of which $408,352 have been
capitalized in inventories at June 30, 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.
-8-
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
FINANCIAL STATEMENTS
FOR THE QUARTER ENDED JUNE 30, 1997
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, 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 FREEHOLD, L.L.C.
BALANCE SHEETS
AS OF JUNE 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
06/30/97 12/31/96
(unaudited) (audited)
----------- -----------
ASSETS
<S> <C> <C>
Cash $ 45,031 $ 67,949
Performance Bond 346,700 197,470
Due from affiliates 735,822 126,322
Sales Trailer 11,785
Inventories 11,561,557 7,718,927
----------- -----------
TOTAL ASSETS $12,700,895 $ 8,110,668
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgages payable $11,466,182 $ 7,976,242
Customer deposits 158,682
Accounts payable 1,076,031 134,426
----------- -----------
TOTAL LIABILITIES 12,700,895 8,110,668
----------- -----------
PARTNERS' CAPITAL
----------- -----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $12,700,895 $ 8,110,668
=========== ===========
</TABLE>
-1-
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)
Adjustments to reconcile net loss to net cash
used in operating activities
Increase in performance bonds (149,230)
Increase in inventories (3,842,630)
Increase in customer deposits 158,682
Increase (decrease) in accounts payable 941,605
-----------
NET CASH USED IN OPERATING ACTIVITIES (2,891,573)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage payable 3,712,440
Payments on land mortgages (222,500)
Proceeds to affiliate (609,500)
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,880,440
-----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of sales trailer 11,785
-----------
NET CASH USED BY INVESTING ACTIVITIES (11,785)
-----------
DECREASE IN CASH (22,918)
CASH, Beginning of period 67,949
-----------
CASH, End of period $ 45,031
===========
-2-
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
NATURE OF BUSINESS AND ORGANIZATION
Matzel & Mumford at Freehold, L.L.C. ("M & M at Freehold") is a New
Jersey limited liability company formed for the purpose of
purchasing land in the Township of Freehold, New Jersey and
developing and constructing 126 single-family homes on that land.
Through June 30, 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 FREEHOLD, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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 June 30, 1997:
Land $ 7,086,784
Approval costs 525,662
Land improvements and
construction costs 2,476,955
Project overhead 389,095
Financing costs 566,286
Sales and marketing 516,775
-----------
$11,561,557
===========
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 June 30, 1997 are $210,000.
-4-
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
NOTE 3 - MORTGAGE PAYABLE
Land and Construction Mortgages (a) $ 7,516,914
1st mortgage (b) 1,699,268
2nd mortgage(C) 1,000,000
3rd mortgage (d) 1,250,000
-----------
$11,466,182
===========
(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 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, 1998 and
bears interest at 18%. Interest is payable monthly and principal
is due at maturity.
The loan is collateralized by a first mortgage on the land and
improvements of phases one and two (93 lots) of the project and is
guaranteed by the managing members.
Matzel & Mumford Mortgage Funding, Inc. ("Funding Company") has a
first mortgage on two of the lots in the project in the amount of
$550,000. The note has a term of 12 months and bears interest at
16%. Interest is payable quarterly and principal is payable with
each closing at the rate of 105% of the amount outstanding on the
particular unit.
(b) The Company has a mortgage to the seller, of which $600,000 is
payable 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 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 an investor group which bears
interest at a rate of 20%. Interest is payable quarterly on the
outstanding
-5-
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
NOTE 3 - MORTGAGE PAYABLE (continued)
balance until January 30, 2000, when the loan matures. The interest
payment is paid current at 14% with 6% deferred until the 31st
closing when the deferred portion becomes due and payable. Principal
repayments commence on the twenty first house closing through the
fiftieth $20,000 per closing and then increase to $40,000 per
closing for the next ten house closings. 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 the initial advance
with the balance deferred until the related principal payments
commence. Principal is payable $50,000 per house, plus the related
portion of the deferred interest, beginning with the 71st closing
through the 95th 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.
The recorded value of the mortgages payable approximates fair value
of instruments with similar terms and average maturities.
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
$210,000 in management fees which have been capitalized in
inventories at June 30, 1997.
Also included in due to/from affiliates are net cash advances to 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 second 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. ("Section13"). Another first mortgage loan
was made to Matzel & Mumford at White Oak Estates, L.L.C. ("White Oak") for the
construction of three spec homes. Finally, the Funding Company made a first
mortgage loan to Matzel & Mumford at Freehold, L.L.C. ("Freehold") for
construction of two spec houses. All of these loans and the borrowers were
discussed in the Funding Company's Form 10-QSB for quarter ended March 31, 1997
dated May 13, 1997.
As of June 30, 1997, the Funding Company had an aggregate of $3,925,570 of
loans outstanding, allocated as follows: to Section 13 ( an aggregate of
$119,715 secured by first mortgages), to Freehold (an aggregate of $603,383
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 $574,049 secured by a first mortgage), and to West Windsor (an
aggregate of $828,423 secured by a first mortgage). The financial statements of
each of these entities are included with this Quarterly Report. The Funding
Company also had $74,430 deposited in a cash collateral account with First Union
National Bank, as trustee for the holders of the Notes.
During the second quarter of 1997, Matzel & Mumford at Piscataway, L.L.C.
("Piscataway") repaid its previously outstanding loan from the Funding Company
in full.
Subsequent to June 30, 1997, the Funding Company made an additional loan to one
project entity. Further, the Funding Company intends to make an additional loan
to South Brunswick. 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 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.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable
ITEM 2. CHANGES IN SECURITIES.
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable
ITEM 5. OTHER INFORMATION.
Subsequent to June 30, 1997, the Funding Company has made a first mortgage loan
to Matzel & Mumford at Apple Ridge II, LLC ("Apple Ridge") in the amount of
$1,000,000 for land acquisition. The previous transaction was reported on
Current Form 8-K dated July 15, 1997. The Funding Company also anticipates
making an additional first mortgage loan in the third quarter of 1997 to South
Brunswick in the amount of $945,125 to refinance a second mortgage to the land
seller.
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).
<PAGE>
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 third quarter of 1997, the Funding Company filed a Current
Report on Form 8-K on July 15, 1997 concerning a loan from the Funding Company
to an M&M Project Entity.
<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: August 15, 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 15, 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.
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MATZEL & MORTGAGE FUNDING, INC.
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SECTION 13 OF THE HILLS, L.L.C.
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MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
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MATZEL & MUMFORD AT FREEHOLL, LLC
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