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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
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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 September 30, 1997
[_] 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 22-33-82016
------------------------------ -------------------
(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>
<TABLE>
<CAPTION>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
FORM 10-QSB INDEX
PAGE
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements .................................................... 1
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
Balance Sheets as of September 30, 1997 (unaudited) and December 31,
1996 Statements of Operations and Retained Earnings for the Nine and
Three Months ended September 30, 1997 (unaudited) .....................
Statement of Cash Flows for the Nine Months Ended
September 30, 1997 (unaudited).........................................
Notes to Financial Statements (unaudited)................................
MATZEL & MUMFORD AT APPLE RIDGE II, L.L.C.
Balance Sheets as of September 30, 1997 (unaudited) and December 31,
1996 Statement of Cash Flows for the Nine Months Ended September 30,
1997 (unaudited)........................................................
Notes to Financial Statements (unaudited).................................
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
Balance Sheets as of September 30, 1997 (unaudited) and December 31,
1996 Statement of Cash Flows for the Nine Months Ended September 30,
1997 (unaudited).......................................................
Notes to Financial Statements (unaudited)................................
MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
Balance Sheets as of September 30, 1997 (unaudited) and December 31,
1996 Statements of Operations and Partners' Capital for the Nine and
Three Months ended September 30, 1997 (unaudited)......................
Statement of Cash Flows for the Nine Months Ended
September 30, 1997 (unaudited).........................................
Notes to Financial Statements (unaudited)................................
Item 2. Management's Plan of Operation ...........................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART II. OTHER INFORMATION
<S> <C>
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 .........................................
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC
FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 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>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
BALANCE SHEETS
AS OF SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
9/30/97 12/31/96
---------- ----------
(unaudited) (audited)
ASSETS
Cash ........................................... $ 273,454 $ 210,207
Prepaid income taxes ........................... 75
Mortgages receivable ........................... 3,757,729 3,800,000
Deferred costs, net ............................ 196,680 228,573
---------- ----------
TOTAL ASSETS ................................... $4,227,968 $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 ........................... (22,062) (11,320)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY ..................... 477,938 488,680
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..... $4,227,938 $4,238,780
========== ==========
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<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
Revenue ..................................................... $474,062
Interest expense ............................................ 435,971
--------
Income (loss) before G & A and amortization ................. 38,091
General & administrative expenses ........................... 16,939
Amortization ................................................ 31,893
--------
Net Income .................................................. (10,741)
Retained Earnings, beginning of period ...................... $(11,321)
Retained Earnings, end of period ............................ $(22,062)
========
-2-
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
(UNAUDITED)
Revenue ........................................... $155,791
Interest expense .................................. 147,421
--------
Income (loss) before G & A and amortization ....... 8,370
General and administrative ........................ 929
Amortization ...................................... 10,631
--------
Net Income ........................................ $ (3,190)
Retained Earnings, beginning of period ............ $(18,872)
Retained Earnings, end of period .................. $(22,062)
========
-3-
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................................. $(10,741)
Adjustments to reconcile net loss to net cash
used in operating activities
Amortization ........................................... 31,893
Decrease in mortgages receivable ....................... 42,270
Increase in prepaid income taxes ....................... (75)
Increase in accounts payable ........................... (100)
--------
NET CASH USED IN OPERATING ACTIVITIES ......................... 63,247
DECREASE IN CASH .............................................. 63,247
CASH, Beginning of period ..................................... 210,207
--------
CASH, End of period ........................................... $273,254
========
-4-
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 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
SEPTEMBER 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>
MATZEL & MUMFORD AT APPLE RIDGE II, L.L.C.
FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
<PAGE>
MATZEL & MUMFORD AT APPLE RIDGE II, 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 APPLE RIDGE II, L.L.C.
BALANCE SHEETS
AS OF SEPTEMBER 30, 1997 AND JULY 15, 1997 (date of inception)
09/30/97 07/15/97
(unaudited) (audited)
----------- -----------
ASSETS
Cash ............................................... $ 12,435
Performance Bond ................................... 71,812
Utility deposit receivable ......................... 6,496 $ 6,496
Inventories ........................................ 1,273,745 1,175,892
---------- ----------
TOTAL ASSETS ....................................... $1,364,488 $1,182,388
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage payable - M&M Mortgage Funding ............ $ 832,690 $ 650,690
Mortgage payable - bank ............................ 40,000 40,000
Due to affiliate ................................... 491,798 491,698
---------- ----------
TOTAL LIABILITIES .................................. 1,364,488 1,182,388
---------- ----------
PARTNERS' CAPITAL ..................................
---------- ----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL ............ $1,364,488 $1,182,388
========== ==========
-1-
<PAGE>
MATZEL & MUMFORD AT APPLE RIDGE II, L.L.C.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD SEPTEMBER 30, 1997 TO JULY 15, 1997 (date of inception)
(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 .......................... (71,812)
Increase in inventories ................................ (97,853)
--------
NET CASH USED IN OPERATING ACTIVITIES ......................... (169,665)
--------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage payable ......................... 182,000
Proceeds from affiliate ................................ 100
--------
NET CASH PROVIDED BY FINANCING ACTIVITIES ..................... 182,100
--------
INCREASE IN CASH .............................................. 12,435
CASH, Beginning of period......................................
--------
CASH, End of period ........................................... $ 12,435
========
-2-
<PAGE>
MATZEL & MUMFORD AT APPLE RIDGE II, L.L.C.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 1 -- SUMMARY OF ACCOUNTING POLICIES
NATURE OF BUSINESS AND ORGANIZATION
Matzel & Mumford at Apple Ridge II, L.L.C. ("M & M at "Apple Ridge
II") is a New Jersey limited liability company formed for the purpose
of purchasing land in the Township of Wall, New Jersey and developing
and constructing 17 single-family homes on that land. One additional
with a farm house closed October 31, 1996 by an affiliate and was
transferred to the Company on July 14, 1997. Through September 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 APPLE RIDGE II, L.L.C.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 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 September 30, 1997:
Land ....................................... $ 889,707
Approval costs ............................. 198,742
Land improvements and
construction costs ....................... 48,100
Financing costs ............................ 137,196
----------
$1,273,745
==========
All expenses incurred for development of the project are capitalized.
Selling expenses which do not benefit future periods and general and
administrative expenses are treated as period costs and are expensed as
incurred. Interest and management fees capitalized during the period ended
September 30, 1997 are $137,196.
-4-
<PAGE>
MATZEL & MUMFORD AT APPLE RIDGE II, L.L.C.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 3 -- MORTGAGE PAYABLE
The Company has a mortgage payable of $1,000,000 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 15, 1998 when the outstanding principal
balance is due. The note is collateralized by a first mortgage on the
property.
The Company also has a loan payable to a bank bearing interest at
prime, plus 1 1/2%. Interest payments are payable monthly until
October 30, 1998 when the outstanding principal balance is due. The
loan is collateralized by a mortgage on the property.
NOTE 4 -- RELATED PARTY TRANSACTIONS
Included in due to/from affiliates are net cash advances from an
affiliated company of the managing member of the Company. The advances
are short term in nature and bear no interest. The amounts are to be
repaid from available cash flow.
-5-
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 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 SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
09/30/97 12/31/96
(unaudited) (audited)
---------- ---------
ASSETS
Cash ........................................... $ 23,598 $ 457
Performance Bond ............................... 256,093
Inventories .................................... 7,318,811 4,404,951
---------- ----------
TOTAL ASSETS ................................... $7,598,502 $4,405,408
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage payable - M&M Mortgage Funding ........ $2,750,000 $2,800,000
Mortgage payable - bank ........................ 3,291,901
Mortgage payable - second ...................... 945,125
Accounts payable ............................... 293,988 18,063
Note Payable ................................... 300,000
Customer deposits .............................. 166,451
Due to affiliate ............................... 796,162 642,220
---------- ----------
TOTAL LIABILITIES .............................. 7,598,502 4,405,408
---------- ----------
PARTNERS' CAPITAL...............................
---------- ----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL ........ $7,598,502 $4,405,408
========== ==========
-1-
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 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 .............................. (2,913,860)
Increase (decrease) in accounts payable .............. 275,925
Increase (decrease) in customer deposits ............. 166,451
-----------
NET CASH USED IN OPERATING ACTIVITIES ....................... (2,727,577)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage payable ....................... 4,541,901
Payments on land mortgages ........................... (1,945,125)
Proceeds from affiliate .............................. 153,942
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES ................... 2,750,718
-----------
INCREASE IN CASH ............................................ 23,141
CASH, Beginning of period ................................... 457
-----------
CASH, End of period ......................................... $ 23,598
===========
-2-
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 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 September 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
SEPTEMBER 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 September 30, 1997:
Land ............................................ $3,523,461
Approval costs .................................. 615,726
Land improvements and
construction costs ............................ 1,561,785
Project overhead ................................ 595,128
Financing costs ................................. 934,232
Sales and marketing ............................. 88,479
----------
$7,318,811
==========
All expenses incurred for development of the project are capitalized.
Selling expenses which do not benefit future periods and general and
administrative expenses are treated as period costs and are expensed
as incurred. Interest and management fees capitalized during the
period ended September 30, 1997 are $1,364,232.
-4-
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 3 -- MORTGAGE PAYABLE
The Company has a first mortgage payable of $2,050,000 and a second
mortgage payable of $1,000,000 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
for both loans until July 31, 1998 when the outstanding principal
balance is due. The note is collateralized by a first mortgage and
second 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 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
SEPTEMBER 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 $430,000
in management fees which have been capitalized in inventories at
September 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 SEPTEMBER 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 SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
09/30/97 12/31/96
(unaudited) (audited)
----------- ----------
ASSETS
Cash ............................................. $ 74,778 $ 35,171
Cash - restricted ................................ 10,000 10,000
Notes receivable ................................. 56,700
Vehicle (net of accumulated depreciation) ........ 2,500
Inventories ...................................... 4,714,334 2,603,466
---------- ----------
TOTAL ASSETS ..................................... $4,858,312 $2,648,637
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgages payable ................................ $3,846,971 $1,620,848
Accounts payable ................................. 494,170 484,680
Customer deposits ................................ 571,646 103,522
Due to affiliate ................................. 50,000 439,587
---------- ----------
TOTAL LIABILITIES ................................ 4,962,787 2,648,637
---------- ----------
PARTNERS' CAPITAL ................................ (104,475)
---------- ----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL .......... $4,858,312 $2,648,637
========== ==========
-1-
<PAGE>
MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
Sales ........................................... $3,155,813
Cost of sales ................................... 3,145,364
----------
Gross profit .................................... 10,449
Selling, general and administrative expenses .... 102,252
----------
Income from operations .......................... (91,803)
Depreciation .................................... 500
Interest income ................................. 3,828
----------
Net income ...................................... (88,475)
Member's capital, Beginning of period ........... --
Capital distributions ........................... (16,000)
----------
Member's capital, End of Period ................. $ (104,475)
==========
-2-
<PAGE>
MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
Sales ........................................... $1,928,164
Cost of sales ................................... 1,920,629
----------
Gross profit .................................... (7,535)
Selling, general and administrative expenses .... 68,168
----------
Income from operations .......................... (75,703)
Depreciation .................................... 250
Interest income ................................. 2,590
----------
Net income ...................................... (73,363)
Member's capital, Beginning of period ........... (31,112)
----------
Member's capital, End of Period ................. $ (104,475)
==========
-3-
<PAGE>
MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
STATEMENTS OF CASH FLOWS
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ......................................... $ (88,475)
Depreciation .............................................. 500
Adjustments to reconcile net loss to net cash
used in operating activities
Increase in inventories ............................... (2,110,868)
Increase in note receivable ........................... (56,700)
Increase (decrease) in customer deposits .............. 468,124
Increase (decrease) in accounts payable ............... 9,490
-----------
NET CASH USED IN OPERATING ACTIVITIES ........................ (1,777,929)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage payable ........................ 4,586,110
Payments of construction and land mortgages ........... (2,359,987)
Proceeds to affiliate ................................. (389,587)
Distributions to members .............................. (16,000)
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES .................... 1,820,536
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of vehicle ................................... 3,000
NET CASH USED BY INVESTING ACTIVITIES ........................ (3,000)
-----------
DECREASE IN CASH ............................................. 39,607
CASH, Beginning of period .................................... 35,171
-----------
CASH, End of period .......................................... $ 74,778
===========
-4-
<PAGE>
MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 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
at West Windsor has closed title to 23 lots and has an option to
purchase the remaining 15 lots till November 12, 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
SEPTEMBER 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 September 30, 1997:
Land ..................................... $2,090,715
Approval costs ........................... 152,130
Land improvements and
construction costs ..................... 1,043,711
Project overhead ......................... 729,212
Financing costs .......................... 400,489
Sales and marketing ...................... 298,077
----------
$4,714,334
==========
All expenses incurred for development of the project are capitalized.
Selling expenses which do not benefit future periods and general and
administrative expenses are treated as period costs and are expensed
as incurred. Interest and management fees capitalized during the
period ended September 30, 1997 are $898,237.
-6-
<PAGE>
MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 3 -- MORTGAGES PAYABLE
09/30/97 12/31/96
---------- ----------
Land and construction mortgages (a) .... $3,356,971 $1,235,848
3rd mortgage (b) ...................... 490,000 385,000
---------- ----------
$3,846,971 $1,620,848
========== ==========
(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 April 25, 1998 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 a total of three spec homes. The loan is not
to exceed $1,100,000 which matures May 1, 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 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 $600,000
in management fees of which $497,748 have been capitalized in
inventories at September 30, 1997.
-7-
<PAGE>
MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 4 -- RELATED PARTY TRANSACTIONS (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>
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 third quarter of 1997, the Funding Company made one new mortgage
loan to a project entity and modified an existing first mortgage loan to Matzel
& Mumford at South Brunswick, LLC ("South Brunswick") . The first mortgage loan
was made to Matzel & Mumford at Apple Ridge II, L.L.C. ("Apple Ridge II"). This
loan and the borrowers were discussed in the Funding Company's Form 8-K dated
July 15, 1997 and the South Brunswick loan was discussed in the Funding
Company's Form 10-QSB dated June 30, 1997.
As of September 30, 1997, the Funding Company had an aggregate of
$3,757,729 of loans outstanding, allocated as follows: to Apple Ridge II ( an
aggregate of $832,690 secured by a first mortgage), to Matzel & Mumford at South
Brunswick, L.L.C. ("South Brunswick"), (an aggregate of $2,750,000 of which
$2,050,000 is secured by a first mortgage and $700,000 secured by a second
mortgage), and to West Windsor (an aggregate of $175,039 secured by a first
mortgage). The financial statements of each of these entities are included with
this Quarterly Report. The Funding Company also had $253,556 deposited in a cash
collateral account with First Union National Bank, as trustee for the holders of
the Notes.
During the third quarter of 1997, Matzel & Mumford at White Oak, L.L.C.
("White Oak"), Matzel & Mumford at Freehold L.L.C., ("Freehold"), and Section 13
of the Hills L.L.C., ("Section 13") all repaid there previously outstanding
loans from the Funding Company in full.
Subsequent to September 30, 1997, the Funding Company made two additional
loans to two different project entities. Further, the Funding Company was repaid
on its second mortgage loan from South Brunswick in full. See Item 5, "Other
Information" for a description of these loans and repayments.
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 September 30, 1997, the Funding Company has made a second mortgage
loan to Matzel & Mumford at Freehold, LLC ("Freehold") in the amount of $600,000
for land acquisition. Further, the Funding Company also modified its first
mortgage loan to South Brunswick from $2,050,000 to $3,400,000 for the
installation of site improvements. Upon the execution of the modification the
Funding Company advanced South Brunswick $100,000 which now has an outstanding
loan balance of $2,150,000. Finally, the Funding Company was repaid in full on
its second mortgage to South Brunswick.
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).
<PAGE>
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 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 and amended the Form 8-K on September 23, 1997 to file
the financial statements and the related financial data schedule.
<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: November 14, 1997 By: /s/ ROGER MUMFORD
---------------------------------------
Roger Mumford, President
(Principal Executive Officer)
By: /s/ JONATHAN FISHER
---------------------------------------
Jonathan Fisher, 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: November 14, 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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<ARTICLE> 5
<LEGEND>
MATZEL & MORTGAGE FUNDING, INC.
</LEGEND>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 273,454
<SECURITIES> 0
<RECEIVABLES> 3,757,804
<ALLOWANCES> 0
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<CURRENT-ASSETS> 4,031,258
<PP&E> 196,680
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,227,938
<CURRENT-LIABILITIES> 0
<BONDS> 3,750,000
0
0
<COMMON> 10,000
<OTHER-SE> 467,938
<TOTAL-LIABILITY-AND-EQUITY> 4,227,938
<SALES> 474,062
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<INCOME-PRETAX> (10,741)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,741)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,741)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
MATZEL & MUMFORD AT APPLE RIDGE II, L.L.C.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
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<PERIOD-END> SEP-30-1997
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<RECEIVABLES> 6,496
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 279,691
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<RECEIVABLES> 0
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<INVENTORY> 7,318,811
<CURRENT-ASSETS> 7,598,502
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MATZEL & MUMFORD AT WEST WINDSOR, L.L.C.
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<PERIOD-END> SEP-30-1997
<CASH> 84,778
<SECURITIES> 0
<RECEIVABLES> 56,700
<ALLOWANCES> 0
<INVENTORY> 4,714,334
<CURRENT-ASSETS> 4,855,812
<PP&E> 2,500
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