U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] Quarterly report under Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1999
[_] 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.
---------------------------------------------------------------
(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 September 30, 1998
Transitional Small Business Disclosure Format (check one):
Yes No x
---- ----
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
FORM 10-QSB INDEX
<PAGE>
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, 1998 Statements of Operations and Retained
Earnings for the Three Months ended March 31, 1999
(unaudited) .................................................
Statement of Cash Flows for the Three Months Ended
March 31, 1999 (unaudited) ..................................
Notes to Financial Statements (unaudited) ...................
MATZEL & MUMFORD AT HERITAGE LANDING, L.L.C.
Balance Sheets as of March 31, 1999 (unaudited) and
December 31, 1998 Statements of Operations and Retained
Earnings for the Three Months ended March 31, 1999
(unaudited) .................................................
Statement of Cash Flows for the Three Months Ended
March 31, 1999 (unaudited) ..................................
Notes to Financial Statements (unaudited) ...................
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
Balance Sheets as of March 31, 1999 (unaudited) and
December 31, 1998 Statements of Operations and
Partners' Capital for the Three Months ended March 31,
1999 (unaudited) ............................................
Statement of Cash Flows for the Three Months Ended
March 31, 1999 (unaudited) ..................................
Notes to Financial Statements (unaudited) ...................
MATZEL & MUMFORD AT PHILLIPSBURG, L.L.C.
Balance Sheets as of March 31, 1999 (unaudited) and
December 31, 1998 Statements of Operations and
Partners' Capital for the Three Months ended March 31,
1999 (unaudited) ............................................
Statement of Cash Flows for the Three Months Ended
March 31, 1999 (unaudited) ..................................
Notes to Financial Statements (unaudited) ...................
Item 2. Management's Plan of Operation ...............................
<PAGE>
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, 1999
<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 31,1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
3/31/99 12/31/98
----------- ----------
(unaudited) (audited)
ASSETS
<S> <C> <C>
Cash ..................................................... $ 779,307 $ 383,498
Prepaid income taxes ..................................... 100
Mortgages receivable ..................................... 3,284,850 3,682,859
Deferred costs, net ...................................... 132,894 143,525
----------- -----------
TOTAL ASSETS ............................................. $ 4,197,151 $ 4,209,882
=========== ===========
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 ..................................... (52,849) (40,218)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY ............................... 447,151 459,782
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............... $ 4,197,151 $ 4,209,882
=========== ===========
</TABLE>
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<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
Revenue .......................................... $ 144,469
Interest expense ................................. 138,699
---------
Income(loss) before G & A and amortization ....... 5,770
General & administrative expenses ................ 7,770
Amortization ..................................... 10,631
---------
Net Income ....................................... (12,631)
Retained Earnings, beginning of period ........... $ (40,218)
Retained Earnings, end of period ................. $ (52,849)
=========
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<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ..................................... $ (12,631)
Adjustments to reconcile net loss to net cash
used in operating activities
Amortization ............................... 10,631
Decrease in mortgages receivable ........... 398,009
Increase in prepaid income taxes ........... (100)
Decrease in accounts payable ............... (100)
---------
NET CASH USED IN OPERATING ACTIVITIES ............. 395,809
DECREASE IN CASH .................................. 395,809
CASH, Beginning of period ........................ 383,498
CASH, End of period .............................. $ 779,307
=========
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<PAGE>
MATZEL & MUMFORD MORTGAGE FUNDING, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
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, 1999
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.
-5-
<PAGE>
MATZEL & MUMFORD AT HERITAGE LANDING, L.L.C.
FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 1999
<PAGE>
MATZEL & MUMFORD AT HERITAGE LANDING, 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 HERITAGE LANDING, L.L.C.
BALANCE SHEETS
AS OF MARCH 31, 1999 AND DECEMBER 31, 1998
03/31/99 12/31/98
(unaudited) (audited)
----------- ---------
ASSETS
Cash ........................................... $ 39,119 $ 174,375
Performance Bond ............................... 147,491 170,568
Due from affiliate ............................. 11,905
Inventories .................................... 8,001,965 4,937,916
---------- ----------
TOTAL ASSETS ................................... $8,200,480 $5,282,859
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage payable--M&M Mortgage Funding ......... $ 787,500 $ 787,500
Mortgage payable ............................... 5,612,227 3,193,159
Notes payable .................................. 664,850 819,569
Accounts payable ............................... 547,206 16,472
Customer deposits .............................. 197,085 70,863
Due to affiliate ............................... 391,612 395,296
---------- ----------
TOTAL LIABILITIES .............................. 8,200,480 5,282,859
---------- ----------
PARTNERS' CAPITAL ---------- ----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL ........ $8,200,480 $5,282,859
========== ==========
-1-
<PAGE>
MATZEL & MUMFORD AT HERITAGE LANDING, L.L.C.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)
Depreciation
Adjustments to reconcile net loss to net cash
used in operating activities
Increase in inventories ................................. (3,064,049)
Decrease in performance bonds ........................... 23,077
Increase (decrease) in customer deposits ................ 126,222
Increase (decrease) in accounts payable ................. 530,734
-----------
NET CASH USED IN OPERATING ACTIVITIES .......................... (2,384,016)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage payable .......................... 2,419,068
Payments of notes payable ............................... (154,719)
Payments from affiliate ................................. (15,589)
----------
NET CASH PROVIDED BY FINANCING ACTIVITIES ...................... 2,248,760
----------
DECREASE IN CASH ............................................... (135,256)
CASH, Beginning of period ..................................... 174,375
----------
CASH, End of period ........................................... $ 39,119
==========
-2-
<PAGE>
MATZEL & MUMFORD AT HERITAGE LANDING, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
NATURE OF BUSINESS AND ORGANIZATION
Matzel & Mumford at Heritage Landing, L.L.C. ("M & M at
"Heritage Landing") is a New Jersey limited liability
company formed on April 1, 1998, for the purpose of
purchasing land in the Township of South River, New
Jersey and developing and constructing 132 single-family
homes on that land.
On October 12, 1998, M&M at Heritage Landing commenced
the purchase of the land by closing on 36 lots. On
November 24, 1998, M&M at Heritage Landing closed on an
additional 34 lots. The Company has a commitment to
purchase an additional 36 lots by November 24, 1999 and
the remaining lots prior to August 24, 2000 at a total
remaining purchase price of $1,738,800. As of March 31,
1999, the Company has commenced construction of homes.
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.
-3-
<PAGE>
MATZEL & MUMFORD AT HERITAGE LANDING, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
MEMBERS CAPITAL
The two managing members have pledged a total of $1,000
in capital contributions.
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, 1999:
Land ......................... $2,241,528
Land improvements and
construction costs ......... 4,501,196
Project overhead ............. 435,469
Financing costs .............. 369,329
Sales and marketing .......... 454,443
----------
$8,001,965
==========
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, 1999 are $609,329.
-4-
<PAGE>
MATZEL & MUMFORD AT HERITAGE LANDING, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 3 - NOTES PAYABLE
The Company has two notes payable in the amount of $664,850 due to two
investment limited partnerships, for which one of the members of the
Company is a general partner. The notes are unsecured, have no fixed
maturity, and provide for interest payable quarterly at 12%. These
notes can be called in whole or in part by the lenders with forty five
days written notice.
NOTE 4 - MORTGAGES PAYABLE
March 31, 1999
- ----------------------------------------------------------------------
Land, Improvements and construction loan (a) $ 4,948,477
Second purchase money mortgage (b) $ 663,750
- ----------------------------------------------------------------------
$ 5,612,227
- ----------------------------------------------------------------------
(a) The Company has a commitment from a bank for a revolving loan of
up to $5,835,000 for the acquisition and improvement of land and
the construction of 132 homes. The loan bears interest at prime
(7.75% at March 31, 1999) plus1/2%, has a term of two years with a
one year extension at no additional cost and is collateralized by
a first mortgage on section one consisting of 49 lots and homes
construction thereon.
(b) The Company has a second mortgage payable to the seller on 24 of
the lots purchased on November 24, 1998. Interest at 71/2% is
payable monthly until November 24, 2001, when the outstanding
principal balance is due. The seller is also entitled to
additional fees of 3.75% of gross sales of the house in excess of
$210,000 to $240,000 and 10% of the gross sales price of $240,000
to $400,000.
NOTE 5 - MORTGAGE PAYABLE - RELATED PARTY
The Company has a mortgage payable to Matzel & Mumford Mortgage
Funding, Inc., an entity controlled by the members of M&M at Heritage
Landing. Interest is 16% is payable quarterly until December 31, 2000,
when the outstanding principal is due. The note is collateralized by a
first mortgage on the land and improvements relating to the 21 lots
under development.
-5-
<PAGE>
MATZEL & MUMFORD AT HERITAGE LANDING, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company has an agreement with the Matzel & Mumford Organization,
Inc. ("MMO") whereby MMO provides construction management services at a
fee of 3.50% 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 $240,000 in management fees of which $240,000 have
been capitalized in inventories at March 31, 1999.
Also included in due to/from affiliates are net cash advances from an
affiliated company of the managing member of the Company. The advances
are short term in nature and bear no interest. The amounts are to be
repaid from available cash flow.
-6-
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 1999
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
INDEX TO FINANCIAL STATEMENTS
Page
----
Balance Sheets ............................................. 1
Statement of Operations and Partner's Capital .............. 2
Statement of Cash Flows .................................... 3
Notes to the Financial Statements .......................... 4 - 8
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
BALANCE SHEETS
AS OF MARCH 31, 1999 AND DECEMBER 31, 1998
<TABLE>
03/31/99 12/31/98
(unaudited) (audited)
----------- ---------
<CAPTION>
ASSETS
<S> <C> <C>
Cash .................................................................. ($ 2,618) $ 220,360
Performance bonds ..................................................... 198,040 198,040
Notes receivable ...................................................... 44,550 44,500
Utility deposits ...................................................... 47,823 47,823
Fixed assets, net ..................................................... 2,945 3,927
Due from affiliates ................................................ 391,883
Inventories ........................................................... 8,197,014 8,509,304
----------- -----------
TOTAL ASSETS .......................................................... $ 8,879,637 $ 9,024,004
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgages payable ..................................................... $ 5,600,402 $ 5,311,329
Mortgages payable - related party ..................................... 2,097,350 2,495,359
Accounts payable and accrued expenses ................................. 736,237 769,031
Due to affiliates ..................................................... 48,816
Customer deposits ..................................................... 74,372 254,480
----------- -----------
TOTAL LIABILITIES ..................................................... 8,508,361 8,879,015
----------- -----------
PARTNERS' CAPITAL ..................................................... 371,276 144,989
----------- -----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL ............................... $ 8,879,637 $13,247,589
=========== ===========
</TABLE>
-1-
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 1999
Sales ...................................................... $ 3,467,579
Cost of sales .............................................. 2,789,468
-----------
Gross profit ............................................... 678,111
Selling, general and administrative expenses ............... 253,768
-----------
Income from operations ..................................... 424,343
Depreciation ............................................... 982
Interest income ............................................ 10,076
-----------
Net income ................................................. 433,437
Distributions .............................................. (207,150)
Member's capital, Beginning of period ...................... 144,989
-----------
Member's capital, End of Period ............................ $ 371,276
===========
-2-
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ........................................... 433,437
Depreciation ................................................ 982
Adjustments to reconcile net loss to net cash
used in operating activities
Decrease in inventories ................................. 312,290
Increase (decrease) in customer deposits ................ (180,108)
Increase (decrease) in accounts payable and accrued
expenses ............................................... (32,794)
NET CASH USED IN OPERATING ACTIVITIES .......................... 533,807
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage payable .......................... 1,843,642
Payments of construction and land mortgages ............. (1,952,578)
Distributions to members ................................ (207,150)
Payments to affiliates .................................. (440,699)
NET CASH PROVIDED BY FINANCING ACTIVITIES ...................... (756,785)
-----------
DECREASE IN CASH ............................................... (222,978)
CASH, Beginning of period ...................................... 220,360
-----------
CASH, End of period ............................................ ($ 2,618)
===========
-3-
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
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, 1999
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, 1999:
Land .......................... $2,869,551
Land improvements and
construction costs .......... 4,096,254
Project overhead .............. 157,986
Financing costs ............... 824,207
Sales and marketing ........... 249,016
----------
$8,197,014
==========
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 31,1999 are $993,712.
-5-
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 3 - MORTGAGES PAYABLE
03/31/99 12/31/98
---------- ----------
Land and construction mortgages (a) .......... $2,258,395 $2,595,755
Land and construction mortgages (b) .......... $3,342,007 2,715,574
---------- ----------
$5,600,402 $5,311,329
========== ==========
(a) The note is a revolver, in the maximum amount of $4,000,000 is to
be used to fund construction. The note bears interest at the prime
rate (7.75% at March 31, 1999), plus 1%, and matures in May 1999.
Interest is payable monthly and principal is payable at 100% of
all funds advanced on a per lot basis. The Note balance is $ as of
March 31, 1999.
(b) The Company has a commitment from a bank for land acquisition,
improvement and construction not to exceed $5,387,000 for phase
three as follows:
o Note A in the maximum amount of $2,387,000 is to fund land
acquisition and improvements. The note has a term of 18
months, is due in February 2000 and bears interest at the
prime rate, plus1/2%. 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 $92,400,
whichever is greater. The Note has a balance of $2,036,853 at
March 31, 1999.
o Note B in the maximum amount of $3,000,000 is to fund
construction. The note has a term of 18 months, is due in
February 200 and bears interest at the prime rate, plus1/2%.
Interest is payable with each closing at 100% of all funds
advanced for construction on a per lot basis. The Note has a
balance of $ 1,305,154 at March 31, 1999.
The above loan is collateralized by a first mortgage on the land and
improvements in phase three (31 lots) of the project and is guaranteed
by the managing members.
NOTE 4 - MORTGAGES PAYABLE - RELATED PARTY
The Company has mortgages payable to Matzel & Mumford Mortgage Funding,
an entity controlled by the members of M&M at Freehold. Interest is
payable quarterly as follows:
-6-
<PAGE>
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
o The first Note has a maximum commitment of $1,700,000 and is to
finance the construction of five homes. The Note as of March 31,
1999 was paid in full.
o The second Note has a maximum commitment of $2,620,000 and is to
finance the construction of seven homes. The note is due on
November 7, 1999 and had an outstanding balance of $1,282,000 at
March 31, 1999. The Note is collateralized by a first mortgage on
the seven building lots.
o The third Note has a maximum commitment of $600,000 and was used
to finance the land acquisition of phase three (31 lots). The Note
is due at November 15, 1999 and had an outstanding balance of
$559,350 at March 31, 1999. The Note is collateralized by a second
mortgage on the 31 building lots.
o The fourth Note has a maximum commitment of $800,000 and is
finance the construction of 2 homes. The Note is due on February
22, 2001 and had an outstanding balance of $256,000 at March 31,
1999. The Note is collateralized by a first mortgage on two
building lots.
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company has an agreement with MMO whereby MMO provides construction
management services at a fee of 3% 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 $1,110,000 in management fees
of which $169,505 have been capitalized in inventories at March 31,
1999.
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.
-7-
<PAGE>
MATZEL & MUMFORD AT PHILLIPSBURG, L.L.C.
FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 1999
<PAGE>
MATZEL & MUMFORD AT PHILLIPSBURG, L.L.C.
INDEX TO FINANCIAL STATEMENTS
Page
-------
Balance Sheets ....................................... 1
Statement of Cash Flows .............................. 2
Notes to the Financial Statements .................... 3 - 5
<PAGE>
MATZEL & MUMFORD AT PHILLIPSBURG, L.L.C.
BALANCE SHEETS
AS OF MARCH 31, 1999 AND DECEMBER 31, 1998
03/31/99 12/31/98
(unaudited) (audited)
----------- ----------
ASSETS
Cash ............................................. $ 845 $ 5,691
Due from affiliate ............................... 9,094
Inventories ...................................... 1,904,769 1,314,740
TOTAL ASSETS ..................................... $1,914,708 $1,320,431
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage payable--M&M Mortgage Funding ........... $ 400,000 $ 400,000
Mortgage payable ................................. 892,817 837,000
Accounts payable ................................. 191,659 50,431
Due to affiliate ................................. 430,232 33,000
---------- ----------
TOTAL LIABILITIES ................................ 1,914,708 1,320,431
---------- ----------
PARTNERS' CAPITAL ................................ ---------- ----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL .......... $1,914,708 $1,320,431
========== ==========
-1-
<PAGE>
MATZEL & MUMFORD PHILLIPSBURG, L.L.C.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)
Adjustments to reconcile net loss to net cash
used in operating activities
Increase in inventories ................................ (590,029)
Increase (decrease) in accounts payable ................ 141,228
---------
NET CASH USED IN OPERATING ACTIVITIES ......................... (448,801)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage payable ......................... 55,817
Proceeds from affiliates ............................... 397,232
Payments to affiliates ................................. (9,094)
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES ..................... 443,955
---------
DECREASE IN CASH .............................................. (4,846)
CASH, Beginning of period ..................................... 5,691
---------
CASH, End of period ........................................... $ 845
=========
-2-
<PAGE>
MATZEL & MUMFORD AT PHILLIPSBURG, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
NATURE OF BUSINESS AND ORGANIZATION
Matzel & Mumford at Phillipsburg, L.L.C. ("M & M at "Phillipsburg") is
a New Jersey limited liability company formed on September 24, 1998,
for the purpose of purchasing land in Phillipsburg, New Jersey and
developing and constructing 26 single-family homes on that land. The
Company has begun the construction of homes
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 PHILLIPSBURG, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
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, 1999:
Land ........................ $ 1,126,652
Land improvements and
construction costs ........ 459,749
Project overhead ............ 136,108
Financing costs ............. 68,120
Sales and marketing ......... 114,140
-----------
$ 1,904,769
===========
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, 1999 are $128,120.
-4-
<PAGE>
MATZEL & MUMFORD AT PHILLIPSBURG, L.L.C.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 3 - MORTGAGES PAYABLE
March 31, 1999
- ----------------------------------------------------------------
Land, Improvements and construction loan (a) $892,817
- ----------------------------------------------------------------
(a) The Company has a commitment from a bank for a land acquisition
and construction in the amount of $2,811,000. The loan bears
interest at prime (7.75% at March 31, 1999) plus1/2% which is
payable monthly. The loan is collateralized by a first mortgage on
the land and improvements, the guarantee of The Matzel & Mumford
Organization, Inc. ("MMO") and members of the Company. The loan
matures on December 1, 2000.
NOTE 4 - MORTGAGE PAYABLE - RELATED PARTY
The Company has a mortgage payable to Matzel & Mumford Mortgage
Funding, Inc., an entity controlled by the members of M&M at
Phillipsburg. Interest is 16% is payable quarterly until October 12,
2000, when the outstanding principal is due. The note is collateralized
by a second mortgage on the land and improvements of the Company.
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company has an agreement with the Matzel & Mumford Organization,
Inc. ("MMO") whereby MMO provides construction management services at a
fee of 3.50% of the gross selling price of each house. MMO is entitled
to receive monthly draws of $20,000 per month. Since inception, the
Company has incurred $60,000 in management fees of which $60,000 have
been capitalized in inventories at March 31, 1999. 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.
-5-
<PAGE>
ITEM 2. MANAGEMENT'S PLAN OF OPERATION
Matzel & Mumford Mortgage Funding, Inc. (the "Funding Company") is a
finance company 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 1999, the Funding Company made one new
first mortgage loan to M & M at Freehold, LLC ("Freehold"). The first new
mortgage loan was in the amount of $800,000 on two building lots for the
construction of sold homes of which $256,000 is outstanding at March 31, 1999.
Freehold is an entity organized to develop, market and build a 126 lot
subdivision known as "Seven Oaks" located on Burlington Road in Freehold, New
Jersey. Freehold will use a portion of the proceeds to repay Amboy National Bank
(first mortgage holder) for its existing acquisition and improvement funding.
The remaining funds will be used for the construction of the houses on a
percentage of completion method. Repayment of the loans from Freehold to the
Funding Company will come from proceeds of the houses as they are closed with
third party purchasers. As of March 31, 1999, of the 126 lots, Freehold had
written 115 contracts with prospective home buyers, of which 9 were for lots
financed by the Funding Company.
As of March 31, 1999, the Funding Company had an aggregate of
$3,284,850 of loans outstanding, allocated to Freehold as follows: an aggregate
of $1,538,000 secured by a first mortgage on the above two referenced loans and
an aggregate of $559,350 secured by a second mortgage; M & M at Heritage Landing
an aggregate of $787,500 secured by a first mortgage and to M & M at
Phillipsburg an aggregate of $400,000 secured by a first mortgage. The financial
statements of M & M at Freehold, M & M at Heritage Landing, and M & M at
Phillipsburg are included with this Quarterly Report. The Funding Company also
had $715,150 deposited in a cash collateral account with First Union National
Bank, as trustee for the holders of the Notes.
During the first quarter of 1999, M & M at Freehold repaid in full its
previously outstanding loan of $1,700,000 from the Funding Company for
construction of five homes.
Subsequent to March 31, 1999, the Funding Company was repaid $490,000
by M & M at Heritage Landing ("Heritage Landing"). The outstanding loan balance
to M & M at Heritage Landing is $297,500 and is collateralized by a first
mortgage on 9 building lots.
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.
The company has completed an initial assessment of its Year 2000 status
and has developed and implemented a plan successfully to address the Company's
exposure to the "Year 2000" issue. The Year 2000 issue is the result of computer
programs being written using two digits rather four to define the applicable
year. Computer systems that have time sensitive software may recognize the date
"00" as the year 1900 rather than 2000. This could result in a major system
failure or miscalculations. Pursuant to its plan, the Company implemented the
Year 2000 conversion in July 1998 which included upgrading its software and
purchasing a new network server. The cost of the compliance of the Year 2000
conversion on all of its systems was $30,000. Major suppliers will be contacted
in order to assess their status as to Year 2000 compliance.
<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.
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).
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: May 17, 1999 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: May 17, 1999 By: /s/ ROGER MUMFORD
----------------------------------------
Roger Mumford, Director
By: /s/ BRUCE MATZEL
---------------------------------------
Bruce Matzel, Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
MATZEL & MUMFORD AT MORTGAGE FUNDING, LLC
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 779,307
<SECURITIES> 0
<RECEIVABLES> 3,284,950
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,064,257
<PP&E> 132,894
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,197,151
<CURRENT-LIABILITIES> 0
<BONDS> 3,750,000
10,000
0
<COMMON> 0
<OTHER-SE> 437,151
<TOTAL-LIABILITY-AND-EQUITY> 4,197,151
<SALES> 144,469
<TOTAL-REVENUES> 144,469
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 18,401
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 138,699
<INCOME-PRETAX> (12,631)
<INCOME-TAX> 0
<INCOME-CONTINUING> (12,631)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,631)
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