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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 March 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from ___________ to _____________
Commission file number 33-98178
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
NEW JERSEY 22-33-82016
------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
100 VILLAGE COURT
HAZLET, NEW JERSEY, 07730
----------------------------------------
(Address of Principal Executive Offices)
(732) 888-1055
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 500 shares common stock, no par value
as of March 31, 1998
Transitional Small Business Disclosure Format (check one):
Yes No X
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<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
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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 March 31, 1998 (unaudited) and December 31, 1997
Statements of Operations and Retained Earnings for the Three Months
ended March 31, 1998 (unaudited) ...................................
Statement of Cash Flows for the Three Months Ended March 31, 1998
(unaudited) ........................................................
Notes to Financial Statements (unaudited) ............................
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
Balance Sheets as of March 31, 1998 (unaudited) and December 31, 1997
Statements of Operations and Retained Earnings for the Three Months
ended March 31, 1998 (unaudited) ...................................
Statement of Cash Flows for the Three Months Ended March 31, 1998
(unaudited).........................................................
Notes to Financial Statements (unaudited).............................
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
Balance Sheets as of March 31, 1998 (unaudited) and December 31, 1997
Statements of Operations and Partners' Capital for the Three Months
ended March 31, 1998 (unaudited)....................................
Statement of Cash Flows for the Three Months Ended March 31, 1998
(unaudited).........................................................
Notes to Financial Statements (unaudited).............................
Item 2. Management's Plan of Operation ..................................
<PAGE>
Page
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings ...............................................
Item 2. Changes in Securities ...........................................
Item 3. Defaults Upon Senior Securities .................................
Item 4. Submission of Matters to a Vote of Security Holders..............
Item 5. Other Information ....... .......................................
Item 6. Exhibits and Reports on Form 8-K ................................
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC
FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 1998
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
INDEX TO FINANCIAL STATEMENTS
Page
----
Balance Sheets ....................................................... 1
Statement of Operations and Retained Earnings ......................... 2
Statement of Cash Flows ............................................... 3
Notes to the Financial Statements ..................................... 4 - 5
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC
BALANCE SHEETS
AS OF MARCH 31,1998 AND DECEMBER 31, 1997
3/31/98 12/31/97
---------- ----------
(unaudited) (audited)
ASSETS
Cash .............................................. $ 197,402 $ 945,616
Prepaid income taxes .............................. 100
Mortgages receivable .............................. 3,853,480 3,096,545
Deferred costs, net ............................... 175,418 186,049
---------- ----------
TOTAL ASSETS ...................................... $4,226,400 $4,228,210
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable .................................. 6,671 $ 125
Notes Payable ..................................... $3,750,000 3,750,000
---------- ----------
TOTAL LIABILITIES ................................. 3,756,671 3,750,125
---------- ----------
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 .............................. (30,271) (21,915)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY ........................ 469,729 478,085
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........ $4,226,400 $4,228,210
========== ==========
-1-
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
Revenue .......................................................... $148,048
Interest expense ................................................. 138,699
--------
Income (loss) before G & A and amortization ...................... 9,349
General & administrative expenses ................................ 7,074
Amortization ..................................................... 10,631
--------
Net Income ....................................................... (8,356)
Retained Earnings, beginning of period ........................... $(21,915)
Retained Earnings, end of period ................................. $(30,271)
========
-2-
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................................... $ (8,356)
Adjustments to reconcile net loss to net cash
used in operating activities
Amortization ............................................. 10,631
Increase in mortgages receivable ......................... (756,935)
Increase in prepaid income taxes ......................... (100)
Increase in accounts payable ............................. 6,546
---------
NET CASH USED IN OPERATING ACTIVITIES ........................... (748,214)
DECREASE IN CASH ................................................ (748,214)
CASH, Beginning of period ....................................... 945,616
---------
CASH, End of period ............................................. $ 197,402
=========
-3-
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
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.
-4-
<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
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.
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 1998
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
INDEX TO FINANCIAL STATEMENTS
Page
----
Balance Sheets ............................... ........................... 1
Statement of Operations and Retained Earnings ............................ 2
Statement of Cash Flows................................................... 3
Notes to the Financial Statements ........................................ 4 - 8
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
BALANCE SHEETS
AS OF MARCH 31, 1998 AND DECEMBER 31, 1997
03/31/98 12/31/97
(unaudited) (audited)
----------- ----------
ASSETS
Cash ........................................... $ 62,112 $ 53,028
Performance Bond ............................... 312,973 188,600
Inventories .................................... 11,573,430 8,776,775
----------- ----------
TOTAL ASSETS ................................... $11,948,515 $9,018,403
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage payable--M&M Mortgage Funding ......... $ 3,253,480 $2,496,545
Mortgage payable ............................... 6,767,207 5,046,744
Note payable ................................... 300,000 300,000
Accounts payable ............................... 832,110 163,174
Customer deposits .............................. 774,013 581,526
Due to affiliate ............................... 14,082 422,194
----------- ----------
TOTAL LIABILITIES .............................. 11,940,892 9,010,183
----------- ----------
PARTNERS' CAPITAL .............................. 7,623 8,220
----------- ----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL ........ $11,948,515 $9,018,403
=========== ==========
-1-
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 1998
Sales ............................................................ $318,714
Cost of sales .................................................... 313,696
--------
Gross profit ..................................................... 5,018
Selling, general and administrative expenses ..................... 9,978
--------
Income from operations ........................................... (4,960)
Interest income .................................................. 4,363
--------
Net income (loss) ................................................ (597)
Member's capital, Beginning of period ............................ 8,220
--------
Member's capital, End of Period .................................. $ 7,623
========
-2-
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ........................................ (597)
Adjustments to reconcile net loss to net cash
used in operating activities
Increase in performance bonds ........................ (124,373)
Increase in inventories .............................. (2,796,655)
Increase (decrease) in accounts payable .............. 668,936
Increase (decrease) in customer deposits ............. 192,487
-----------
NET CASH USED IN OPERATING ACTIVITIES ....................... (2,060,202)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgages payable ...................... 2,723,613
Payments on mortgages payable ........................ (246,215)
Proceeds to affiliate ................................ (408,112)
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES ................... 2,069,286
-----------
INCREASE IN CASH ............................................ 9,084
CASH, Beginning of period ................................... 53,028
-----------
CASH, End of period ......................................... $ 62,112
===========
-3-
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
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.
REVENUE RECOGNITION
Revenues arising from home sales will be recognized under the full
accrual method. Under this method, income is recognized when all terms
relating to the sale of a unit are complete, consideration is
exchanged, and title is conveyed to the buyer.
INVENTORIES
Inventories are stated at the lower of cost or estimated net
realizable value, which is determined by reducing the anticipated net
sales proceeds by the estimated costs necessary to complete or improve
the property to the condition used in arriving at the anticipated
selling price.
Inventory costs are comprised of direct unit and allocated costs.
Development costs are capitalized until the property is complete and
title has been conveyed to the buyer. Development costs generally
include land and improvements, house construction, project overhead,
interest and a portion of construction management fees. Interest
incurred is capitalized based upon interest on specifically related
debt.
A portion of the construction management fees paid to a related party
is capitalized by the Company.
MEMBERS CAPITAL
The two managing members have pledged a total of $1,000 in capital
contributions.
-4-
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
NOTE 1 -- SUMMARY OF ACCOUNTING POLICIES (continued)
INCOME TAXES
The Company is organized and operates as a limited liability company
which is not subject to Federal or state income taxes. Accordingly, no
provision for income taxes has been made. The earnings or losses of
the Company are included on each member's tax return, according to the
terms of the operating agreement.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the period. Actual results could differ from those
estimates.
NOTE 2 -- INVENTORIES
Inventories relating to the development of single-family homes consist
of the following at March 31, 1998:
Land .................................................. $ 3,562,251
Approval costs ........................................ 810,996
Land improvements and
construction costs .................................. 4,565,506
Project overhead ...................................... 868,807
Financing costs ....................................... 1,417,394
Sales and marketing ................................... 348,476
-----------
$11,573,430
===========
All expenses incurred for development of the project are capitalized.
Selling expenses which do not benefit future periods and general and
administrative expenses are treated as period costs and are expensed
as incurred. Interest and management fees capitalized during the
period ended March 31, 1998 are $2,027,466.
-5-
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
NOTE 3 -- NOTE PAYABLE
On June 16, 1997, the Company entered into a financing arrangement
with an individual in the amount of $300,000 bearing interest at
15.00%. Repayment of principal calls for $10,000 per closing, for
closings 11 through 40, but no later than June 15, 1999. The first
interest payment commences on six months from the date of the note and
then every three months thereafter. The note is collateralized by a
financial guarantee bond, which is guaranteed by the managing member's
of the Company.
The fair value of the note payable approximates fair value of
instruments with similar terms and average maturities.
NOTE 4 -- MORTGAGES PAYABLE
March 31, 1998
--------------
Land and improvement -- related party (a) ........... $ 3,253,480
Land and construction (b) ........................... 6,371,054
1st mortgage (c) .................................... 396,153
-----------
$10,020,687
===========
----------
(a) The Company has a mortgage payable to Matzel & Mumford Mortgage
Funding, Inc., an entity controlled by members of M & M at South
Brunswick. The note is in the maximum amount of $3,400,000 and is
to fund land acquisition and site improvements for phase two (51
lots) and is payable interest only at 16.00%. Interest payments
are payable quarterly until November 15, 1999, when the
outstanding principal balance is due. The note is collateralized
by a first mortgage on the property.
(b) The Company has a commitment from a bank for land acquisition and
construction not to exceed $6,400,000 as follows:
Note A in the maximum amount of $4,000,000 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%, and
matures in June 1998.
-6-
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
NOTE 4 -- MORTGAGES PAYABLE (Continued)
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 $120,000. The loan is
collateralized by a first mortgage on the land and
improvements of phase one (40 lots) of the project and is
guaranteed by the managing member's of the Company. At March
31, 1998, the Note has a balance of $3,880,000.
Note B, a revolver, in the maximum 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 loan is collateralized by a
first mortgage on the units being constructed. The note
balance is $2,491,054 as of March 31, 1998.
Note C in the amount of $500,000 is fund the construction of
two model homes. The note has a term of 18 months expiring
July 1998 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. The loan is collateralized
by the model homes being constructed. The note balance is
$396,153 as of March 31, 1998.
The fair value of the mortgages approximates fair value of instruments
with similar terms and average maturities.
NOTE 5 -- 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 $620,000
in management fees which have been capitalized in inventories at March
31, 1998.
-7-
<PAGE>
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
NOTE 5 -- 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>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 1998
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
INDEX TO FINANCIAL STATEMENTS
Page
----
Balance Sheets ............................... .......................... 1
Statement of Operations and Partner's Capital............................ 2
Statement of Cash Flows.................................................. 3
Notes to the Financial Statements ....................................... 4 - 8
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
BALANCE SHEETS
AS OF MARCH 31, 1998 AND DECEMBER 31, 1997
03/31/98 12/31/97
(unaudited) (audited)
----------- -----------
ASSETS
Cash ........................................... $ 78,417 $ 361,379
Cash - restricted .............................. 229,020 229,020
Notes receivable ............................... 44,500 44,500
Utility deposits ............................... 38,570 38,570
Fixed assets, net .............................. 6,383 7,856
Due from affiliates ............................ 851,076 809,711
Inventories .................................... 12,426,643 11,756,553
----------- -----------
TOTAL ASSETS ................................... $13,674,609 $13,247,589
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgages payable .............................. $11,643,956 $11,587,034
Accounts payable ............................... 966,267 709,668
Customer deposits .............................. 951,275 891,680
----------- -----------
TOTAL LIABILITIES .............................. 13,561,498 13,188,382
----------- -----------
PARTNERS' CAPITAL .............................. 113,111 59,207
----------- -----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL ........ $13,674,609 $13,247,589
=========== ===========
-1-
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 1998
Sales ........................................................... $2,778,889
Cost of sales ................................................... 2,641,460
----------
Gross profit .................................................... 137,429
Selling, general and administrative expenses .................... 83,335
----------
Income from operations .......................................... 54,094
Depreciation .................................................... 1,473
Interest income ................................................. 1,283
----------
Net income ...................................................... 53,904
Member's capital, Beginning of period ........................... 59,207
----------
Member's capital, End of Period ................................. $ 113,111
==========
-2-
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ........................................... $ 53,904
Depreciation ................................................ 1,473
Adjustments to reconcile net loss to net cash
used in operating activities
Increase in inventories ................................. (670,090)
Increase (decrease) in customer deposits ................ 59,545
Increase (decrease) in accounts payable ................. 256,649
-----------
NET CASH USED IN OPERATING ACTIVITIES .......................... (298,519)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage payable .......................... 2,289,952
Payments of construction and land mortgages ............. (2,233,030)
Proceeds to affiliate ................................... (41,365)
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES ...................... 15,557
-----------
DECREASE IN CASH ............................................... (282,962)
CASH, Beginning of period ...................................... 361,379
-----------
CASH, End of period ............................................ $ 78,417
===========
-3-
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
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.
REVENUE RECOGNITION
Revenues arising from home sales will be recognized under the full
accrual method. Under this method, income is recognized when all terms
relating to the sale of a unit are complete, consideration is
exchanged, and title is conveyed to the buyer.
INVENTORIES
Inventories are stated at the lower of cost or estimated net
realizable value, which is determined by reducing the anticipated net
sales proceeds by the estimated costs necessary to complete or improve
the property to the condition used in arriving at the anticipated
selling price.
Inventory costs are comprised of direct unit and allocated costs.
Development costs are capitalized until the property is complete and
title has been conveyed to the buyer. Development costs generally
include land and improvements, house construction, project overhead,
interest and a portion of construction management fees. Interest
incurred is capitalized based upon interest on specifically related
debt.
A portion of the construction management fees paid to a related party
is capitalized by the Company.
MEMBERS CAPITAL
The two managing members have pledged a total of $1,000 in capital
contributions.
-4-
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
NOTE 1 -- SUMMARY OF ACCOUNTING POLICIES (continued)
INCOME TAXES
The Company is organized and operates as a limited liability company
which is not subject to Federal or state income taxes. Accordingly, no
provision for income taxes has been made. The earnings or losses of
the Company are included on each member's tax return, according to the
terms of the operating agreement.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the period. Actual results could differ from those
estimates.
NOTE 2 -- INVENTORIES
Inventories relating to the development of single-family homes consist
of the following at March 31, 1998:
Land ....................................... $ 5,833,074
Approval costs ............................. 880,943
Land improvements and
construction costs ....................... 3,551,422
Project overhead ........................... 447,895
Financing costs ............................ 1,157,943
Sales and marketing ........................ 555,366
-----------
$12,426,643
===========
All expenses incurred for development of the project are capitalized.
Selling expenses which do not benefit future periods and general and
administrative expenses are treated as period costs and are expensed
as incurred. Interest and management fees capitalized during the
period ended March 31, 1998 are $1,394,128.
-5-
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
NOTE 3 -- MORTGAGES PAYABLE
03/31/98 12/31/97
----------- -----------
Land and construction mortgages(a) ...... $ 6,771,484 $ 6,843,090
1st mortgage(b) ......................... 1,099,268 1,099,268
2nd mortgage(c) ......................... 600,000 600,000
2nd mortgage(d) ......................... 1,133,204 979,676
3rd mortgage(e) ......................... 940,000 1,000,000
3rd mortgage(b) ......................... 1,100,000 1,065,000
----------- -----------
$11,643,956 $11,587,034
=========== ===========
(a) The company has a commitment from a bank for land acquisition and
construction not to exceed $10,330,000 as follows:
Note A in the maximum amount of $6,030,000 is to fund land
acquisition and improvements. The note has a term of 18
months, is due in May 1998, 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
amount advanced for land acquisition and site improvements,
or $110,210. The Note has a balance of $3,825,600 at March
31, 1998.
Note B in the amount of $700,000 matures in May 1998 and
bears interest at 18%. Interest is payable monthly and
principal is due at maturity. At March 31, 1998, this Note
had a balance of $150,000.
Note C, a revolver, in the maximum amount of $3,000,000, is
to be used to fund construction. The note bears interest at
the prime rate, plus 1%, and matures in May 1998. Interest
is payable monthly and principal is paid at par upon closing
of a unit. The Note balance is $2,795,884 as of March 31,
1998.
The loan is collateralized by a first mortgage on the land and
improvements of phases one and two (95 lots) of the project and
is guaranteed by the managing members.
(b) The Company has a first mortgage to the seller in the original
amount of $1,699,268, of which $600,000 was payable on November
15, 1997, and another $600,000 is payable on November 15, 1998
with the balance due on November 15, 1999. The mortgage bears
interest at 9.25%, which is payable at the time of the related
principal payment. The note is collateralized by a first mortgage
on phase three (31 lots) of the project.
-6-
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
NOTE 3 -- MORTGAGES PAYABLE (continued)
(c) The Company has a second mortgage to Matzel & Mumford Mortgage
Funding, an entity controlled by the members of M & M at
Freehold, which is payable interest only at 16%. Interest
payments are payable quarterly until November 15, 1999 when the
outstanding principal balance is due. The is collateralized by a
second mortgage on phase three (31 lots) of the project.
(d) The Company has a second mortgage from a bank for site
improvements on phase two (49 lots) not to exceed $2,415,000. The
note matures in May 1998 and bears interest at the prime rate,
plus 1 1/2%. Interest is payable monthly and principal is payable
with each closing at the rate of 120% of the cost of the related
improvements or $59,143 per lot.
(e) The Company has a third mortgage payable on phases one and two to
an investor group in the amount of $1,000,000. The note bears
interest at the rate of 20%, of which 6% is deferred until the
twenty first closing when the deferred portion is payable.
Thereafter, interest is payable in full quarterly. Principal is
payable $20,000 per house beginning with the 21st through the
50th closing and $40,000 from the 51st through the 60th closing
with the balance, if any, due on January 31, 2000.
(f) The Company has a fourth 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. The Company made a
principal repayment in the amount of $250,000 during the year,
which was at an interest rate of 25%. 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 76th closing through the 95th closing with the
unpaid balance, if any, due December 31, 2001. The note is
collateralized by a fourth mortgage on the land and improvements
of phases one and two and the guarantee of the managing members.
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 $50,000 per month. Since inception, the Company has
incurred
-7-
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
NOTE 4 -- RELATED PARTY TRANSACTIONS (continued)
$510,000 in management fees of which $236,185 have been capitalized in
inventories at March 31, 1998.
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 first quarter of 1998, the Funding Company made loan advances to
Matzel & Mumford at South Brunswick, LLC ("South Brunswick") for site
improvements under the $3.4 million first mortgage.
As of March 31, 1998, the Funding Company had an aggregate of $3,853,480 of
loans outstanding, allocated as follows: to Matzel & Mumford at South Brunswick,
L.L.C. ("South Brunswick"), (an aggregate of $3,253,480 secured by a first
mortgage), and to Matzel & Mumford at Freehold, LLC (an aggregate of $600,000
secured by a second mortgage). The financial statements of each of these
entities are included with this Quarterly Report. The Funding Company also had
$146,520 deposited in a cash collateral account with First Union National Bank,
as trustee for the holders of the Notes.
During the first quarter of 1998, none of the loans outstanding were repaid
and no new loans have been identified.
Subsequent to March 31, 1998, the Funding Company has not identified any
new 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.
None
ITEM 6.
(A) EXHIBITS.
3(a) Certificate of Incorporation of Matzel & Mumford Mortgage Funding,
Inc. (the "Funding Company") (incorporated by reference to Exhibit
3(a) to Registration Statement on Form SB-2 of Matzel & Mumford
Mortgage Funding, Inc. (Registration Number 33-98178) (the "Notes
Registration Statement")).
3(b) By-Laws of the Funding Company (incorporated by reference to Exhibit
3(b) to the Notes Registration Statement).
4(a) Indenture (including form of Notes) dated as of January 25, 1996,
between the Funding Company and First Union National Bank, as Trustee
(incorporated by reference to Exhibit 4(a) to the Notes Registration
Statement).
4(b) Resolutions of the Board of Directors of the Funding Company
establishing specific terms of the Notes (incorporated by reference to
Exhibit 4(b) of Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1996).
10(a) Form of Loan Agreement (incorporated by reference to Exhibit 10(a) to
the Notes Registration Statement).
10(b) Form of Mortgage and Security Agreement (incorporated by reference to
Exhibit 10(b) to the Notes Registration Statement).
<PAGE>
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.
<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: April 21, 1998 By: /s/ ROGER MUMFORD
----------------------------------------
Roger Mumford, Director
By: /s/ BRUCE MATZEL
----------------------------------------
Bruce Matzel, Director
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
MATZEL & MUMFORD AT MORTGAGE FUNDING, LLC
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 197,402
<SECURITIES> 0
<RECEIVABLES> 3,853,580
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,050,982
<PP&E> 175,418
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,226,400
<CURRENT-LIABILITIES> 6,671
<BONDS> 3,750,000
10,000
0
<COMMON> 0
<OTHER-SE> 459,729
<TOTAL-LIABILITY-AND-EQUITY> 4,226,400
<SALES> 148,048
<TOTAL-REVENUES> 148,048
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 17,705
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 138,699
<INCOME-PRETAX> (8,356)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,356)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,356)
<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 SOUTH BRUNSWICK, LLC
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 375,085
<SECURITIES> 0
<RECEIVABLES> 0
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<INVENTORY> 11,573,430
<CURRENT-ASSETS> 11,948,515
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<CURRENT-LIABILITIES> 11,940,892
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 7,623
<TOTAL-LIABILITY-AND-EQUITY> 11,948,515
<SALES> 318,714
<TOTAL-REVENUES> 323,077
<CGS> 313,696
<TOTAL-COSTS> 313,696
<OTHER-EXPENSES> 9,978
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (597)
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<INCOME-CONTINUING> (597)
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<CHANGES> 0
<NET-INCOME> (597)
<EPS-PRIMARY> 0
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
MATZEL & MUMFORD AT FREEHOLD, LLC
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 307,437
<SECURITIES> 0
<RECEIVABLES> 934,146
<ALLOWANCES> 0
<INVENTORY> 12,426,643
<CURRENT-ASSETS> 13,668,226
<PP&E> 6,383
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,674,609
<CURRENT-LIABILITIES> 13,561,498
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 113,111
<TOTAL-LIABILITY-AND-EQUITY> 13,674,609
<SALES> 2,778,889
<TOTAL-REVENUES> 2,780,172
<CGS> 2,641,460
<TOTAL-COSTS> 2,641,460
<OTHER-EXPENSES> 84,808
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 53,904
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,904
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
