<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 Q
Quarterly Report Under Section 13 or 15 (d) of the
Securities Exchange Act Of 1934
For the Quarter Ended December 31, 1996 Commission File Number 0-4328
FIRST MUTUAL, INC.
(formerly MUTUAL ENTERPRISES, INC.)
STATE OF INCORPORATION: DELAWARE
IRS EMPLOYER IDENTIFICATION NUMBER: 04-2434444
120 BOYLSTON STREET
BOSTON, MA 02116
TELEPHONE: (617)426-4020
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 and (2) has been subject to such filing requirements for
the past 90 days.
Yes No X
---- -----
As of December 31, 1996 there were 910,209 shares of common stock (par value
$.10 per share) of the Company issued including 63,951 shares in the treasury of
the Company.
1
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Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
First Mutual, Inc.
Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
ASSETS December 31, September 30,
1996 1996
<S> <C> <C>
Current assets:
Cash 119,902 45,802
Accounts receivable 77,443 78,142
Prepaid expenses 0 16,183
-------- --------
Total current assets 197,345 140,127
Property and equipment:
Furniture, fixtures &
equipment 78,303 78,303
Leasehold improvements 31,660 31,660
-------- --------
Total property and equipment 109,963 109,963
Less accumulated depreciation (108,506) (108,506)
-------- --------
Net property and equipment 1,457 1,457
Total assets 198,802 141,584
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE>
First Mutual, Inc.
Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' December 31, September 30,
EQUITY 1996 1996
<S> <C> <C>
Current liabilities:
Current portion of long-term debt 27,000 27,000
Demand loans from officer and affiliate 118,152 150,000
Accounts payable and
accrued expenses 547,929 429,989
---------- ----------
Total current liabilities 693,081 606,989
Demand loans from officer and affiliate 0 104,446
Long-term debt, net of
current portion 517,837 521,791
---------- ----------
Total liabilities 1,210,918 1,233,226
---------- ----------
Net capital deficiency:
Common stock, $.10 par value
per share authorized 2,000,000
shares issued 910,209, outstanding
846,248 91,021 91,021
Additional paid-in capital 3,644,837 3,644,837
Accumulated deficit (4,711,520) (4,791,046)
Treasury stock, 63,951 shares
of common stock at cost (36,454) (36,454)
---------- ----------
Total net capital deficiency (1,012,116) (1,091,642)
---------- ----------
Total liabilities and
stockholders' equity 198,802 141,584
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
First Mutual, Inc.
Statement of Income
(unaudited)
<TABLE>
<CAPTION>
Three months ended
December,
1996 1995
---- ----
<S> <C> <C>
Revenue:
Health care services 844,923 776,658
------- -------
Total revenue 844,923 776,658
------- -------
Costs and expenses:
Cost of health care services 694,590 610,454
Selling, general and admin 54,154 50,005
------- -------
Total costs: 748,744 660,459
Income from operations 96,179 116,199
Interest expense, net 16,653 (16,311)
------- -------
Net income/(loss) 79,526 99,888
======= =======
Income/(loss) per share 0.09 0.12
Weighted average number
of shares 846,258 846,258
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
First Mutual, Inc
Statement of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income 79,526 99,888
Items not affecting cash:
Depreciation 0 0
(Increase) decrease in accounts
receivable 699 5,592
(Increase) decrease in prepaid and
other current assets 16,183 (567)
Increase (decrease) in accounts
payable
and accrued expenses 117,940 13,595
-------- -------
Net cash provided by operating
activities 214,348 118,508
-------- -------
Cash flows from financing activities:
Payment on note payable (140,248) (43,415)
-------- -------
Net cash used for financing
activities (140,248) (43,415)
-------- -------
Net change in cash 74,100 75,093
Cash, beginning of period 45,802 49,419
-------- -------
Cash, end of period 119,902 124,512
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
FIRST MUTUAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared by
First Mutual, Inc. (the Company) pursuant to the rules and regulations of the
Securities and Exchange Commission regarding interim financial reporting.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principals for complete financial statements
and should be read in conjunction with the audited financial statements
included in the Company's Annual Report and Form 10-K for the fiscal year ended
September 30, 1996.
In the opinion of the management the accompanying unaudited condensed
consolidated financial statements have been prepared on the same basis as the
audited financial statements, and include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the results
of the interim periods presented. The operating results for the interim
periods presented are not necessarily indicative of the results expected for the
full fiscal year.
2. 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 income taxes due to
use of the net operating loss.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations:
Consolidated revenues for the quarter ended December 31, 1996 were $844,923
resulting in net income for the quarter of $79,526.
For the quarter ended December 31, 1996, Community Group, Inc. had income from
operations of $150,333 before interest expense of $7,256. The Community Group
receives funding from the Commonwealth of Massachusetts that has enabled
Community Group to meet its obligations.
ABC Mobile Systems had no activity during the quarter ended December 31, 1996.
6
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Liquidity and Capital Resources:
The Company had a cash balance of $119,902 and an accounts receivable balance of
$77,443 at December 31, 1996.
Cash flows in the quarter ended December 31, 1996 as in the fiscal year ended
September 30, 1996 were relatively stable. In prior years the Company
experienced a large cash shortfall which was met by:
(1) cash advances to the Company and/or subsidiaries due on demand but presently
being amortized on a ten year basis, by David Slater, Chairman of the Company,
and his wife Barbara W. Slater.
(2) restructured bank financing totaling $680,000, payable in 10 years with
monthly installments based on a twenty year amortization schedule. David and
Barbara Slater personally have guaranteed and collateralized $227,000 of this
loan.
In return for David and Barbara Slater's personal guarantee and
collateralization of $227,000 of the company's bank loan, 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 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.
There are no unused sources of liquidity. Loans from officers and stockholders
are demand notes with interest at 2% over the bank rate.
In the future, management seeks to cut costs in Community Group, Inc., expand to
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.
7
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PART II. OTHER INFORMATION
See Part II of Form 10-K for the year ended September 30, 1996. No significant
changes have occurred since that report and no reports on Form 8-K were filed
during the quarter ended December 31, 1996
8
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SIGNATURE
Pursuant to the requirements 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)
(Registrant)
DATE: November 3, 1997 David B. Slater
Director and Principal
Executive Officer
DATE: November 3, 1997 Diane M. Fleming
Clerk and Director
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 119,902
<SECURITIES> 0
<RECEIVABLES> 77,443
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 197,345
<PP&E> 109,963
<DEPRECIATION> 108,506
<TOTAL-ASSETS> 198,802
<CURRENT-LIABILITIES> 693,081
<BONDS> 517,837
0
0
<COMMON> 91,021
<OTHER-SE> (1,103,137)
<TOTAL-LIABILITY-AND-EQUITY> 198,802
<SALES> 844,923
<TOTAL-REVENUES> 844,923
<CGS> 0
<TOTAL-COSTS> 694,590
<OTHER-EXPENSES> 54,154
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,653
<INCOME-PRETAX> 79,526
<INCOME-TAX> 0
<INCOME-CONTINUING> 79,526
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 79,526
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
