FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1995
Commission file number 0-4328
FIRST MUTUAL, INC.
(formerly MUTUAL ENTERPRISES, INC.)
DELAWARE 04-2434444
120 Boylston Street, Boston, MA 02116
Registrants telephone number, including area code: (617) 426-4020
Securities registered pursuant to Section 12(g) of the Act
Common Stock $.10 par value
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 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 ___ NO X
On September 30, 1995 there were 910,209 shares of common stock
of the Company issued including 63,951 shares in the treasury of
the Company.
On September 30, 1995 there was no available market price for
the common stock shares of the Company.
PART I
ITEM 1. BUSINESS
First Mutual, Inc. (Formerly Mutual Enterprises, Incorporated)
("Registrant" or "Company") was organized under Delaware Law in
March, 1968 and conducts its business through its operating and
wholly owned subsidiaries.
(a) ABC MOBILE SYSTEMS, INC.
Through its wholly owned subsidiary ABC Mobile Systems, Inc.,
the Company operated as a franchiser of a wholesale mobile
automobile brake business, offering complete automotive brake
repair service and replacement parts sales to customers at the
customer's place of business. However, because of competitive
and economic reasons including among others the closures of
repair facilities at a significant number of gas stations
nationally and the significant increase in promotion speciality
brake repair service alternatives of the motoring public, the
company ceased selling new franchises in 1986. As of September
30, 1995, with the exception of 10 franchises operated by 2 non
paying franchisees, no other franchises remain operational and
the company is inactive.
(b) COMMUNITY GROUP, INC.
The Community Group, Inc. ("Community Group"), a wholly-owned
subsidiary, was organized under Massachusetts law in 1972, and
provides habilitative and training services for mentally
retarded adults through the operation of residential facilities
located in Wakefield, Lynn, Melrose and Weymouth and an 8,000
square foot Training Center in Wakefield, Massachusetts. The
Company seeks to develop within each client a sense of personal
dignity, awareness of and respect for human rights, the ability
to adjust in social situations with peers and others and to help
each in attaining the highest possible degree of independence.
The support services currently available within the program
comprise psychological consultation and testing, counselling,
speech therapy and tutoring. Medical services include on-call
relationships with local physicians, neurologists, audiologists,
ophthalmologists, psychiatrists and physical therapists.
The program of the Community Group meets the requirements of and
has the approval of the following agencies: Mass. Department of
Social Services, Mass. Department of Mental Retardation, Mass.
Office for Children, Mass. Department of Special Education.
Annual contracts with the approved agencies constituted 92% of
the revenues in fiscal years 1995 and 1994 with the balance
constituting revenues earned through contracts with outside
vendors for work performed at Community Group's Training Center.
Contracts are generally issued as clients are accepted by the
Company and funding is made by the respective agency.
Facilities operated by Community Group must comply with the
licensing requirements of the Department of Social Services and
Mental Retardation and meet the requirements of municipal
building codes, health codes and local fire codes. In granting
and renewing a facility's license, a health agency considers,
among other things, the physical buildings and equipment, the
qualifications of the administrative, direct care and other
support staff, the quality of care, training and service and the
continuing compliance of such facility with the laws and
regulations applicable to its operations.
In general, the terms of the contracts for Community Group, Inc.
are to provide residential and employment training services for
contracted clients. Contracts run for one year with four options
or renewal years before they come up for competitive bidding.
Revenues are received on a per day rate, payable bi-monthly.
New contracts covering 4 residences were re-bid and awarded to
Community Group in fiscal year 1994. New Contracts for the 9
remaining residences were re-bid and awarded to Community Group
in fiscal year 1994. The contract for the Training Center was
rebid and awarded to Community Group in fiscal year 1995.
If Community Group did not receive a renewal of any one of its
contracts, it would be difficult if not impossible for the
company to survive, as its central office and administrative
overhead requirements which are allocated prorata among all
operations would not be able to be adequately reduced to absorb
the shortfall in revenues and cash flow which a non-renewal
would cause.
(c) BWS INTERNATIONAL, LTD.
BWS Group, Inc. a wholly-owned subsidiary of the Company with no
operations of its own, was organized under Massachusetts law
February 22, 1983 to enter into the business of marketing goods
and services in the luxury market of discriminating buyers and
in particular as a holding company through its wholly owned
subsidiaries, BWS International, Inc. ( a Delaware Corporation),
BSDJ, Inc. ( Texas Corporation) and BSNJ, Inc. ( a New Jersey
Corporation) to operate women's speciality clothing retail
stores in Boston, MA, Dallas, TX, and Short Hills, NJ. Due to
poor sales all stores were closed between 1988 and March 1991
.The Dallas Corporation was dissolved in July, 1987 and the
Boston and New Jersey Corporations remain inactive.
Registrant employed 91 persons on September 30, 1995, all of
whom were employed by the Community Group, Inc.
WORKING CAPITAL:
The registrant has a working capital problem. Working capital
shortfalls in the past have been funded principally through
loans from an officer/shareholder.
REVENUES:
The Department of Mental Retardation in the Commonwealth of
Massachusetts accounted for 92% of the revenue of the Health
Care Service in 1995 and 1994. In 1993 it accounted for 93%. No
other customer in any division accounts for more than 10% of the
revenues.
COMPETITIVE CONDITION:
1. The Community Group, Inc.:
In accordance with governmental regulations, every five years,
all health service contracts including those of Community Group
are newly offered to all interested parties for competitive
bidding. The Company must therefore compete in price, service,
and quality on each of its contacts. Of Community Group's 8
residential and one training center programs, 4 contracts
expired and were rebid in 1993, all of which have since been
renewed and reorganized so that now 2 contracts cover these 4
residences, 4 contracts covering 9 residences expired and were
rebid in 1994. The training center contract was rebid and
awarded to Community Group in fiscal year 1995. Although since
its inception in 1972, Community Group has without interruption
or exception been granted consecutive contracts, the loss of any
one contract would materially, negatively effect the existence
and viability of the company making it difficult if not
impossible to survive, as all central office overhead and costs
are allocated among all its programs pro-rata and would not be
able to be adequately reduced.
2. ABC Mobile Brake:
ABC Mobile Brake no longer sells franchises or is actively
operational.
ITEM 2. PROPERTIES
The Company subleases executive offices of approximately 1,500
square feet at 120 Boylston Street, Boston, MA 02116 at a
monthly rental of $2,125 including electric. The office is
subleased by Community Group with no guaranty by the registrant.
In addition, a subsidiary of the Registrant, (Community Group),
leases a residence at 40 Avon Street, Wakefield, MA 01880 as a
tenant at will at the rental of $2,000 per month. The residence
was purchased for use by Community Group, Inc. in 1978 by David
B. Slater, the chairman of the Registrant and his wife at a time
when Community Group was evicted from other residential
facilities because of actions by its mentally retarded
residents, and was experiencing difficulty in securing other
suitable facilities. The rental being paid by Community Group is
believed to be its fair market value and is comparable to the
rental being paid by Community Group for other leased residences
of lesser market value. The lease contains provision for payment
by the subsidiary of real estate taxes and insurance.
ITEM 3. LEGAL PROCEEDINGS
As of the date of this report the Company is aware of the
following legal proceedings:
A suit against ABC Mobile Systems in the Superior Court of the
State of California filed November 22, 1985, wherein the said
corporation is being sued as one of approximately 20 defendants
in an action by Edna Smith, et al., on behalf of the surviving
members of the family of Francis L. Smith for wrongful death,
strict liability, negligence, fraud and conspiracy alleging the
plaintiff died due to a fatal exposure to asbestos, part of
which exposure was sustained while an employee of an automobile
service station which installed asbestos brake linings on
customers' cars, which linings were sold by ABC Mobile Systems
to its franchisee who on at least one occasion resold same to
the service station. The plaintiff seeks a sum in excess of
$15,000, legal costs and damages. The Company is unable to
express an opinion as to the outcome of this case but is not a
party to the suit.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS.
(a) Market Information
On September 30, 1995 there was no available market price for
shares of the common stock.
(b) No cash dividends have been declared by the Company during
1995 and 1994 fiscal years. The approximate number of holders of
common stock on September 30, 1995 was 670.
ITEM 6. SELECTED FINANCIAL DATA
Set forth in exhibit 1 are selected consolidated financial data
derived from the income statements of the Company for the
periods ended September 30, 1995, 1994, 1993, 1992, and 1991
derived from the balance sheets for the Company for the same
periods. The selected consolidated financial data should be read
in conjunction with the financial statements included and are
qualified by reference to such financial statements and related
notes.
Comparability:
An item that may materially effect the comparability of the
information reflected below is the closing of BWS International,
LTD (Boston, MA), in March of 1991.
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EXHIBIT 1
1995 1994 1993 1992 1991
Operating Data
Revenues $2,869,838
$3,116,933 $2,976,471 $2,860,133 $3,057,343
Operating Income or (Loss) 160,658 (90,950)
185,615 129,456 (178,464)
Other Income (Expense) (80,288)
285,463 (101,014) (124,298) (214,752)
Income (Loss) Before
Extraordinary Item 80,370
194,513 84,601 5,158 (393,216)
Income (Loss) Per Share
Before Extraordinary Item .09
0.23 .10 .006 (.46)
Net Income or (Loss) 80,370
194,513 84,601 5,158 (393,216)
Income (Loss) Per Share .09
0.23 .10 .01 (.46)
Balance Sheet Data
Cash and Temporary Investments $49,419 $73,908
$(30,297) $118,761 $112,704
Accounts Receivable Net of
Allowance for Doubtful Accounts 125,099 131,189
232,322 64,218 57,893
Current Assets 190,701
205,097 213,221 221,141 188,897
Current Liabilities 791,326
709,284 811,921 1,283,533 1,259,516
Working Capital (600,625)
(504,187) (598,700)(1,062,392) (1,070,529)
Total Assets 190,701
222,305 236,007 295,291 330,585
Long Term Obligations 646,398
565,801 594,522 618,265 636,046
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
In fiscal year ended September 30, 1995 consolidated revenues
were $2,869,838 resulting in income from operations of $160,658
and net income of $80,370 .
Community Group, Inc. for fiscal 1995 had operating income of
$259,107 before interest expense of $122,051 resulting in net
income of $137,056. During fiscal year 1995 Community Group
continued implementing a new type of program called supported
living for some of its clients. Under the concept of supported
living, clients lead a more independent, less supervised
lifestyle. The introduction of this type of program during
fiscal 1994 caused Community Group to incur one time start up
costs which contributed to a decrease in net income from fiscal
1993 and 1994.
During fiscal 1995, Community Group received funding from the
Commonwealth of Massachusetts that along with income from
outside workshop contracts, enabled Community Group to meet its
obligations.
During fiscal 1994 the Company had other income of $291,491
resulting from a final settlement with its franchisers and
apparel vendors regarding litigation initiated by First Mutual
regarding unfair practices.
Other income of $163,000 was also reported during fiscal 1994
from two limited partnerships which since ceased operation this
income was a noncash forgiveness of debt.
Cash flows in fiscal 1995 were relatively stable but in prior
years the company experienced an extremely large cash shortage.
That shortage has been met by:
(1) Cash advances to the company and/or its subsidiaries due on
demand but presently being amortized on a ten year basis, by
David B. Slater, Chairman of the Company, and his wife Barbara
W. Slater and,
(2) Restructured bank financing totalling $680,000, payable in
10 years with monthly installments based on a twenty year
amortization schedule. David and Barbara Slater personally have
guaranteed $227,000 of this loan.
In return for David and Barbara Slater's personal guarantee of
$227,000 of the Company's bank loan and their cash advances to
the Company, the Company has granted each of them a 10 year
option on 450,000 shares of its authorized but not issued
shares, at $.10 per share. In addition, in return for forgiving
$243,743 of debt due from BSDJ, Inc. and BSNJ, Inc. the Company
has granted David and Barbara Slater each a ten year option on
304, 679 shares of its authorized, but not issued shares at $.10
per share. If all these options are ever exercised for all
1,509,358 shares represented thereby, the total shares owned by
David Slater and his family will increase from the current
455,450 shares representing 53.8% of the currently outstanding
shares of the Company to a total of 1,964,808 shares
representing 83.4% of what would then be the outstanding shares
of the Company. In view of the above debt repayment
requirements the Registrant will generate no surplus cash and/or
liquidity
In the future, management seeks to cut costs in Community Group,
Inc., expand into new similar programs and negotiate future
increases in rates under state contracts.
ABC Mobile Brake has essentially ceased operations.
BWS Group, Inc. has discontinued all retail operations
permanently.
First Mutual, Inc. continues to seek business opportunities it
can participate in without capital requirement, utilizing its
franchising, management and health services expertise.
CASH FLOWS:
To cover cash flow needs in past years the Company was able to
borrow adequate funds from officers and stockholders.
In the past, cash flow for Community Group has always been
negative from May through July of any fiscal year. The
Commonwealth of Massachusetts funds programs by providing most
funds in the first ten months of each fiscal year. Thus, for two
months, limited cash funding is received. As of September 30,
1995, the balance owed by the registrant to David and Barbara
Slater totalled $254,902. David and Barbara have also
guaranteed $227,000 of an additional $680,000 bank loan to
Community Group.
There are no unused sources of liquidity. Loans from officers
and stockholders are demand notes with interest at 2% higher
than bank debt.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Financial Statements immediately after the Signature Page.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
NONE.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The terms of the directors are for the ensuing year and/or until
successors have been elected and qualified.
DAVID B. SLATER, age 61. Director since 1968. Chairman of the
Board, President and Chief Executive Officer of the Registrant;
Executive Director of The Community Group, Inc.
DIANE M. FLEMING, age 35. Director since December 1987 and
Corporate Secretary of the Registrant since September 1987.
Assistant to the Executive Director of The Community Group, Inc.
ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS
(See exhibit 2)
EXHIBIT 2
(A)
Name of Capacities in Salaries &
Forms of Insurance Aggregate
Individual & which Directors Fees
Remuneration Benefits Contingent
Identity of Group Renumeration
Forms of
was Received
Remuneration
DAVID B. President, Chief $120,750
$7,188
SLATER Exec. Officer,
Chairman of the
Board
All Officers & $170,365
$7,188
Directors as a
Group
* The Company maintains medical insurance for all employees. An
additional benefit applicable to Mr. Slater included herein is
Key man life insurance costing $7,188 in fiscal 1995.
Registrant provides a 401K retirement plan for all employees.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
(See exhibit 3)
EXHIBIT 3
Amount &
Title Name &
Nature of Percent
of Address of
Beneficial of
Class Beneficial Owner
Ownership Class
------------------- ---------------------------------
- ---------------- ----------------
Common Stock David B. Slater*
334,200 39.5%
410 South Street
Needham, MA 02192
Barbara W. Slater
121,250 14.3%
410 South Street
Needham, MA 02192
owned owned
---------------- ---------------
Officers and Directors
455,450 53.8%
as a Group (2 persons)
There are no arrangements known to Registrant, including any
pledge by any person of securities of the Registrant or any of
its subsidiaries, the operation of which may at a subsequent
date result in a change in control of the Registrant.
* Does not include 121,250 shares of Common Stock owned by
Barbara W. Slater and children to which Mr. Slater disclaims any
beneficial ownership. On December 24, 1987 the Company granted
to David B. Slater and Barbara W. Slater a ten year warrant to
purchase 450,000 shares each of the Company's capital stock at
$.10 per share in consideration for their personal guarantee of
the last one third of the Company's $680,000 loan from the Bank
of Newport. In 1990 the Company granted to David B. Slater and
Barbara W. Slater a ten year warrant to purchase 304,679 shares
each of the Company's capital stock at $.10 per share in
consideration for their forgiving $243,743 in loans they made to
BSDJ, Inc. and BSNJ, Inc.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following building which has been leased to a subsidiary of
the Registrant is owned by David B. Slater and his wife:
40 Avon Street, Wakefield, MA
The Registrant is of the opinion that the month to month rental
arrangement of $2,000 is fair and on terms comparable to that
obtained in the area for similar type facilities. Leasee also
pays all Real Estate taxes, insurance and maintenance costs.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
1. The following documents are filed as part of this 10-K
report:
Balance Sheets - September 30, 1995 and 1994
Statements of Income and Accumulated Deficit - years ended
September 30, 1995, 1994 and 1993
Statements of Cash Flows years ended September 30, 1995 and 1994
Notes to financial Statements -
All other schedules are omitted as the required information is
inapplicable or the required information is included in the
financial statements or related notes.
2. No reports were filed on Form 8-K during the fiscal year
ended September 30, 1995.
3. Exhibits.
(a) Copies of leases have been filed with the Company's
Report on Form 10K for the prior fiscal year and pursuant to
Rule 12b-32 are hereby incorporated by reference.
(b) The Registrant's wholly owned subsidiaries as follows:
ABC Mobile Systems (a California Corporation, dba ABC Mobile
Brake);
The Community Group, Inc. (a Massachusetts Corporation, dba
Community Group);
BWS International, Ltd. ( a Massachusetts Corporation, dba Saint
Laurent Rive Gauche);
Sizzleboard International, Inc. (a Massachusetts Corporation,
inactive since 1975);
BSNJ, Inc. (a New Jersey Corporation, dba Saint Laurent Rive
Gauche).
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FIRST MUTUAL, INC.
(Formerly Mutual Enterprises, Incorporated)
David B. Slater
Chairman and President
Pursuant to the requirement of the Securities Exchange Act of
1934 this report has been signed by he following persons on
behalf of the Registrant and in the capacities and on the dates
indicated:
DATE:
David B. Slater
February 29, 1996
Director and
Principal Executive Officer
Diane M. Fleming
February 29, 1996
Clerk and Director
December 31, 1995
To the Board of Directors
First Mutual, Inc.
Boston, Massachusetts
We have audited the accompanying balance sheet of First Mutual,
Inc. as of September 30, 1995 and 1994 and the related
statements of income, accumulated deficit, and cash flows for
the years then ended. These financial statements are the
responsibility of the organization's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audit in accordnace with general accepted
auditing standards. These standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of First Mutual, Inc. as of September 30, 1995 and 1994 and the
results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting
principles.
Parsons & Company
Andover, Massachusetts
First Mutual, Inc.
Balance Sheet
As of September 30, 1995 and 1994
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ASSETS
September September
30, 1995 30, 1994
Current Assets:
Cash
$49,419 $73,908
Accounts receivable
125,099 131,189
Prepaid expenses
16,183 17,208
Total Current Assets
190,701 222,305
Property and Equipment:
Furnitures, fixtures & equipment 76,846
76,846
Leasehold improvements
31,660 31,660
Total Property and Equipment 108,506
108,506
Less accumulated depreciation (108,506)
(108,506)
Net Property and Equipment
0 0
Total Assets
190,701 $222,305
The accompanying notes are an integral part of these financial
statements
First Mutual, Inc
Balance Sheet
As of September 30, 1995 and 1994
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LIABILITIES AND STOCKHOLDER EQUITY
September September
30, 1995 30, 1994
Liabilities:
Current portion of long-term debt
$27,000 $30,000
Demand loans from officer, (note 5)
150,000 150,000
Accounts payable & accrued expenses 614,326
529,284
Total current liabilities
791,326 709,284
Demand loans from officer, (note 5)
104,902 274,613
Long-term debt net of current portion
541,496 565,801
Total liabilities
1,437,724 1,549,698
Net Capital Deficiency:
Common stock, $.10 par value per share
91,021 91,021
authorized 2,000,000 shares issued
910,209, outstanding 846,258
Additional paid-in capital
3,644,837 3,644,837
Accumulated deficit
(4,946,427) (5,026,797)
Treasury stock, 63,951 shares
of common stock at cost
(36,454) (36,454)
Total net capital deficiency
(1,247,023) (1,327,393)
Total liabilities and stockholders' equity
190,701 222,305
The accompanying notes are an integral part of these financial
statements
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First Mutual, Inc
Statement of Income
For the years ending September 30, 1995, 1994, and 1993
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September September September
30, 1995 30, 1994 30, 1993
Revenue:
Health care services
$2,869,838 $3,116,933 $2,976,471
Total revenue
2,869,838 3,116,933 2,976,471
Costs and expenses:
Cost of health care services 1,610,731
2,912,589 2,657,174
General and administrative
98,449 295,294 133,682
Total costs & expenses 2,709,180
3,207,883 2,790,856
Income from operations 160,658
(90,950) 185,615
Other Income (Expenses):
Investment income
0 163,000 0
Litigation income
0 291,941 0
Excise tax
0 (41,855) 0
Interest expense
(80,288) (127,623) (101,014)
Total other income (expense) (80,288)
285,463 (101,014)
Net income
80,370 194,513 84,601
Income per share (notes 1&6)
Income before extraordinary item
$.09 $.23 $.10
Weighted average number of common share
outstanding (common stock equivalents are
anti-dilutive in both profit and loss years)
846,258 846,258 846,258
The accompanying notes are an integral part of these financial
statements
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First Mutual, Inc
Statement of Cash Flows
For the years ending September 30, 1995 and 1994
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September September
30, 1995 30, 1994
CASH FLOWS FROM OPERATIONS
Net income
$80,370 $194,513
Items not affecting cash:
Depreciation
0 6,602
(Increase) in accounts receivable
6,090 101,133
(Increase) decrease in prepaid and
other assets
1,025 10,172
Increase (decrease) in accrued payroll
and payroll taxes
85,042 (112,637)
Net cash flows from operations
172,527 199,783
CASH FLOWS FROM INVESTMENTS:
Additions to other assets
0 0
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on debt
(197,016) (95,578)
activities
Net change in cash
(24,489) 104,205
Cash, beginning of year
73,908 (30,297)
Cash, end of year
$49,419 $73,908
Cash paid during the year:
Interest
80,288 127,623
The accompanying notes are an integral part of these financial
statements
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First Mutual, Inc.
Statement of Accumulated Deficit
For the years ending September 30, 1995 and 1994
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September September
30, 1995 30, 1994
Accumulated Deficit Beginning of Year
$(5,026,797) $(5,221,310)
Net Income
80,370 194,513
Accumulated Deficit End of Year
$(4,946,427) $(5,026,797)
First Mutual, Inc.
Notes to Financial Statements
September 30, 1995
NATURE OF BUSINESS AND STATUS OF OPERATIONS
First Mutual, Inc. formerly Mutual Enterprises Incorporated
(Mutual), currently has only one operating subsidiary, Community
Group, Inc., which was organized in Massachusetts in 1972 and
provides rehabilitation and residential services for mentally
retarded adults. The company operates residence facilities and
a sheltered training center.
Substantially all of the Company's revenues arise from
contractual services provided to Massachusetts Departments of
Mental Retardation, and Mental Health, and negotiated with the
Department of Mental Retardation.
Losses in past years, due primarily to insufficient occupancy
levels, had contributed to a condition where current liabilities
substantially exceed current assets. The deficiency has been
funded by personal advances and bank loans partially personally
guaranteed by David B. Slater. These advances originally
amounted to $928,000 and currently $245,902 at September 30,
1995. Also see notes 4 and 5.
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of
First Mutual, Inc. and its wholly-owned subsidiaries (the
Company) which consist of the following companies:
The Community Group, Inc.
ABC Mobile Systems
BWS International, Ltd. (terminated operations March 1991)
BWS Group, Inc. (inactive)
BSNJ, Inc. (terminated operations in 1989)
Sizzleboard International, Inc. (inactive)
DEPRECIATION
Property, plant and equipment are depreciated on the straight
line basis over their estimated useful lives. Leasehold
improvements are amortized on the straight line basis over the
terms of their respective lives.
INCOME TAXES
The company and its subsidiaries file a consolidated Federal
income tax return. The benefits attributable to investment tax
credits and net operating losses can be applied to future years.
No provision is made for current year income taxes due to use of
the net operating loss. Net operating losses attributable to
future years is $1,300,000 and expire through 2005. Available
tax credits approximate $9,344 and expire through 1999.
EARNINGS PER SHARE
Earnings per share of common stock is computed on the base of
weighted average number of shares of common stock and common
stock equivalents. For purpose of computing weighted average
common stock and common stock equivalents outstanding, the
warrants discussed in note 8 are not included because the
effects would have been antidilutive.
NOTE 2 OPERATING LEASES
The company leases facilities and vehicles under operating
leases. Future minimum lease payments under operating leases
for the three year period subsequent to September 30, 1995 are
as follows:
9/30/96 $68,066
9/30/97 $42,000
NOTE 3 RELATED PARTY TRANSACTIONS
The company leases a facility for its health service division
from David Slater under a month to month lease.
Advances from officer represent advances made by David Slater
and bear interest at a rate 2% higher than bank debt, which is
guaranteed personally by Mr. Slater.
NOTE 4 PRIOR PERIOD ADJUSTMENT
Deferred revenue recorded in prior period was recognized in the
current period and should not have been deferred in accordance
with Generally Accepted Accounting Principals.
NOTE 7 DEBT
Long-term debt consist of the following:
$680,000, Prime + 2, payable in 240 installments of principal
and interest through December 1997 secured by all business
assets and guaranteed by David Slater.
For
the years ended September 30,
1995
1994 1993
$ 567,496
$ 595,801 $614,522
Long-term debt maturing in the next five years is as follows:
September 30, 1996 $ 27,000
September 30, 1997 $541,496
NOTE 8 COMMON STOCK WARRANTS
The Company has granted 1,509,358 warrants, with seven years
remaining in their lives, to purchase shares of the Company's
common stock. These warrants were issued to Mr. & Mrs. David
Slater for their assistance and personal guarantees in obtaining
financing for the Company and foregoing interest on advances
they made to the Company.
If Mr. & Mrs. slater were to exercise all of the applicable
warrants, their ownership of the Company would increase to 83.4%
of the Company.
</TABLE>
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<ARTICLE> 5
<S>
<C>
<PERIOD-TYPE>
12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END>
SEP-30-1995
<CASH>
49,419
<SECURITIES>
0
<RECEIVABLES>
125,099
<ALLOWANCES>
0
<INVENTORY>
0
<CURRENT-ASSETS>
190,701
<PP&E>
108,506
<DEPRECIATION>
108,506
<TOTAL-ASSETS>
190,701
<CURRENT-LIABILITIES> 791,326
<BONDS>
646,398
<COMMON>
91,021
0
0
<OTHER-SE>
(1,328,044)
<TOTAL-LIABILITY-AND-EQUITY> 190,701
<SALES>
0
<TOTAL-REVENUES> 2,869,838
<CGS>
0
<TOTAL-COSTS>
2,610,731
<OTHER-EXPENSES>
98,449
<LOSS-PROVISION>
0
<INTEREST-EXPENSE>
80,288
<INCOME-PRETAX>
80,370
<INCOME-TAX>
0
<INCOME-CONTINUING> 80,370
<DISCONTINUED>
0
<EXTRAORDINARY>
0
<CHANGES>
0
<NET-INCOME>
80,370
<EPS-PRIMARY>
.09
<EPS-DILUTED>
.09
</TABLE>
