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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 Q
Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act Of 1934
For the Quarter Ended December 31, 1997
Commission File Number 0-4328
FIRST MUTUAL, INC.
(formerly MUTUAL ENTERPRISES, INC.)
DELAWARE 04-2434444
120 Boylston Street, Boston, MA 02116
Registrant's Telephone number including area code: (617) 426-4020
Securities registered pursuant to Section 12(g) of the Act:
Common stock $.10 par value per share
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
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10Q or any
amendments to this Form 10Q.
Yes X No
--- ---
As of August 31, 1998 there were 3,479,567 shares of common stock (par value
$.10 per share) of the Company issued including 63,951 shares in the treasury of
the Company.
On December 31, 1997, there was no available market price for the shares of
common stock of the registrant.
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Part I. Financial Information
Item I. Condensed Consolidated Financial Statements
First Mutual, Inc.
Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
<S> <C> <C>
ASSETS
Current assets:
Cash 80,261 47,445
Accounts receivable 134,434 132,029
Prepaid expenses and other
current assets 17,202 16,183
-------- --------
Total current assets 231,897 195,657
Property and equipment:
Furniture, fixtures &
equipment 103,356 94,537
Leasehold improvements 31,660 31,660
-------- --------
Total property and equipment 135,016 126,197
Less accumulated depreciation (111,034) (111,034)
-------- --------
Net property and equipment 23,982 15,163
Total assets 255,879 210,820
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
2
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First Mutual, Inc.
Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Current portion of long-term debt 518,519 525,411
Demand loans from officer and affiliate 150,141 103,571
Accounts payable and
accrued expenses 285,594 359,111
---------- ----------
Total current liabilities 954,254 988,093
Total liabilities 954,254 988,093
---------- ----------
Net capital deficiency:
Common stock, $.10 par value
per share authorized 4,000,000
authorized shares ,
3,479,567 issued, 3,415,616
outstanding 331,957 331,957
Additional paid-in capital 3,644,837 3,644,837
Accumulated deficit (4,638,715) (4,717,613)
Treasury stock, 63,951 shares
of common stock at cost (36,454) (36,454)
---------- ----------
Total net capital deficiency (698,375) (777,273)
---------- ----------
Total liabilities and stockholders'
equity 255,879 210,820
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
3
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First Mutual, Inc.
Statement of Income
(unaudited)
<TABLE>
<CAPTION>
Three months ended
December 31,
1997 1996
--------- -------
<S> <C> <C>
Revenue:
Health care services 973,346 844,923
------- -------
Total revenue 973,346 844,923
------- -------
Costs and expenses:
Cost of health care services 734,613 694,590
Selling, general and administrative 145,828 54,154
------- -------
Total costs: 880,441 748,744
Income from operations 92,905 96,179
Interest expense, net 14,007 16,653
------- -------
Net income 78,898 79,526
======= =======
Income per share .02 .09
Weighted average number
of shares 3,415,616 846,258
</TABLE>
See accompanying notes to consolidated financial statements
4
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First Mutual, Inc.
Statement of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Three Months ended
December 31, 1997 December 31, 1996
----------------- ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) 78,898 79,526
Items not affecting cash:
Depreciation 0 0
(Increase) decrease in accounts receivable (2,405) 699
(Increase) decrease in prepaid and
other current assets (1,019) 16,183
Increase (decrease) in accounts payable
and accrued expenses (73,517) 117,940
------- ---------
Net cash provided by operating activities 1,957 214,348
------- ---------
Cash flows from financing activities:
Increase (Payment) on note payable 39,678 (140,248)
Purchases of property and equipment (8,819) 0
------- ---------
Net cash used for financing activities 30,859 (140,248)
------- ---------
Net change in cash 32,816 74,100
Cash, beginning of period 47,445 45,802
------- ---------
Cash, end of period 80,261 119,902
======= =========
Cash paid during the year:
Interest 14,007 16,653
</TABLE>
See accompanying notes to consolidated financial statements
5
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FIRST MUTUAL, INC.
STATEMENT OF ACCUMULATED DEFICIT
DECEMBER 31,
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Accumulated Deficit Beginning
of Period (4,718,241) (4,790,418)
Net Income 79,526 78,898
---------- ----------
Accumulated Deficit End of Period (4,638,715) (4,711,520)
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
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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, 1997.
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.
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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, 1997 were $973,346
resulting in net income of $78,898.
For the quarter ended December 31, 1997, Community Group, Inc. had income from
operations of $147,938. The Community Group receives funding from the
Commonwealth of Massachusetts that has enabled it to meet its obligations.
ABC Mobile Systems had no activity during quarter ended December 31, 1997
Liquidity and Capital Reserves:
Cash flows in fiscal 1997 were stable. In 1986-1987 the Company experienced a
severe cash shortage. Those shortages were met by:
1) Loans to the Registrant, aggregating $865,093, payable on demand with
interest at 2% over the rate charged the Registrant on The Bank of Newport
(the Bank) loan to David B. Slater, President and Chief Executive Officer of
the Registrant and his wife, Barbara W. Slater.
2) The Company has entered into a refinancing arrangement with the Bank for an
aggregate principal amount of $680,000, with interest at Prime +2% payable
in 240 installments of principal and interest all due November 1998. The
Company is currently seeking to refinance this loan. In connection with this
refinancing, David B. Slater, principal stockholder and President and Chief
Financial Officer of the Registrant and his wife, Barbara W. Slater were
required by the bank to personally guarantee and to provide collateral to
secure $227,000 of the aggregate principal amount of the loan.
3) David B. Slater allowed the Registrant to defer payments of principal and
interest payments, salary and rents due to the Slaters.
As consideration for (i) personal loans in the aggregate amount of $865,093 made
by Mr. Slater and his wife, Barbara W. Slater (the "Slaters"), (ii) personal
guarantees and collateral provided by the Slaters in connection with the
refinancing, (iii) deferral of principal and interest on such personal loans and
(iv) deferral of rents due on facilities leased by the Company from Mr. Slater
and salary due, the Company issued warrants to purchase a total of 2,569,358
shares of the Company's common stock, $.10 par value per share, to the Slaters
at an exercise price of $.10 per share.
On January 2, 1997, Mr. and Mrs. Slater exercised all of their outstanding
warrants, increasing their aggregate ownership in the Registrant to 86.83%. In
view of the above debt repayment requirements the Company has not generated any
surplus cash and/or liquidity.
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In the future, management of the Company expects to reduce costs in Community
Group, expand into new and similar programs and negotiate future increases in
rates under state contracts.
CASH FLOWS:
The Company operates on budgets with governmental agencies. Cash flows from
these contractual obligations allow for limited annual expansion of programs.
As of December 31, 1997, the balance owed by the Company to David and Barbara
Slater and an affiliate is $150,141. David and Barbara Slater have also
guaranteed $227,000 of an additional $680,000 bank loan to the Company which has
a principal balance of $518,519 at December 31, 1997. The note is due and
payable in November 1998. If the Company fails to refinance the existing loan,
the Company would not have sufficient capital to remain in operation.
There are no unused sources of liquidity.
PART II. OTHER INFORMATION
See Part II of Form 10-K for the year ended September 30, 1997. No significant
changes have occurred since that report and no reports on Form 8-K were filed
during the quarter ended December 31, 1997.
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SIGNATURES
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: September 21, 1998 -------------------------
David B. Slater
Director and Principal
Executive Officer
DATE: September 21, 1998 -------------------------
Diane M. Fleming
Clerk and Director
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 80,261
<SECURITIES> 0
<RECEIVABLES> 134,434
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 231,897
<PP&E> 135,016
<DEPRECIATION> 111,034
<TOTAL-ASSETS> 255,879
<CURRENT-LIABILITIES> 954,254
<BONDS> 668,660
0
0
<COMMON> 331,957
<OTHER-SE> (1,030,332)
<TOTAL-LIABILITY-AND-EQUITY> 255,879
<SALES> 973,346
<TOTAL-REVENUES> 973,346
<CGS> 0
<TOTAL-COSTS> 734,613
<OTHER-EXPENSES> 145,828
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,007
<INCOME-PRETAX> 78,898
<INCOME-TAX> 0
<INCOME-CONTINUING> 78,898
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78,898
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
