<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON , D.C. 20549
FORM 10Q
Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act Of 1934
For the Quarter Ended March 31, 1998
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 of the
Company issued including 63,951 shares in the treasury of the Company.
On March 31, 1998, 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>
March 31, September 30,
1998 1997
<S> <C> <C>
ASSETS
Current assets:
Cash 209,561 47,445
Accounts receivable 184,835 132,029
Prepaid expenses and other
current assets 16,680 16,183
-------- --------
Total current assets 411,076 195,657
Property and equipment:
Furniture, fixtures &
equipment 107,685 94,537
Leasehold improvements 31,660 31,660
-------- --------
Total property and equipment 139,345 126,197
Less accumulated depreciation (111,034) (111,034)
-------- --------
Net property and equipment 28,311 15,163
-------- --------
Total assets 439,387 210,820
======= =======
</TABLE>
See accompanying notes to consolidated financial statements
2
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First Mutual, Inc.
Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
March 31, September 30,
1998 1997
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Current portion of long-term debt 511,379 525,411
Demand loans from officer and
affiliate 152,008 103,571
Accounts payable and
accrued expenses 376,205 359,111
---------- ----------
Total current liabilities 1,039,592 988,093
---------- ----------
Total liabilities 1,039,592 988,093
---------- ----------
Net capital deficiency:
Common stock, $.10 par value
per share authorized 4,000,000
shares issued 3,479,567
Outstanding 3,415,616
331,957 331,957
Additional paid-in capital 3,644,837 3,644,837
Accumulated deficit (4,540,545) (4,717,613)
Treasury stock, 63,951 shares
of common stock at cost (36,454) (36,454)
---------- ----------
Total net capital deficiency (600,205) (777,273)
---------- ----------
Total liabilities and stockholders'
equity 439,387 210,820
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
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<TABLE>
<CAPTION>
First Mutual, Inc.
Statement of Income
(unaudited)
Three months ended Six Months ended
March, March,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue:
Health care services 1,101,704 849,631 2,075,050 1,694,554
--------- --------- --------- ---------
Total revenue 1,101,704 849,631 2,075,050 1,694,554
--------- --------- --------- ---------
Costs and expenses:
Cost of health care services 816,873 564,265 1,551,486 1,258,855
Selling, general and administrative 172,803 247,402 318,631 301,556
--------- --------- --------- ---------
Total costs: 989,676 811,667 1,870,117 1,560,411
Income from operations 112,028 37,964 204,933 134,143
Interest Income 0 15,350 0 15,350
Interest expense, net (13,858) (13,828) (27,865) (30,481)
--------- --------- --------- ---------
Net income 98,170 39,486 177,068 119,012
========= ========= ========= =========
Income per share .03 .01 .05 .06
Weighted average number
of shares 3,415,616 3,415,616 3,415,616 2,162,912
</TABLE>
See accompanying notes to consolidated financial statements
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First Mutual, Inc.
Statement of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Six Months ended
March 31, 1998 March 31, 1997
-------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) 177,068 119,012
Items not affecting cash:
Depreciation 0 0
(Increase) decrease in accounts receivable (52,806) (37,523)
(Increase) decrease in prepaid and
other current assets (497) 16,183
Increase (decrease) in accounts payable
and accrued expenses 17,094 (39,240)
------- --------
Net cash provided by operating activities 140,859 58,432
------- --------
Cash flows from financing activities:
Payment on note payable 34,405 (250,019)
Issuance of common stock 0 240,936
Increase Purchases of property and equipment (13,148) 0
------- --------
Net cash used for financing activities 21,257 (9,083)
------- --------
Net change in cash 162,116 49,349
Cash, beginning of period 47,445 45,802
------- --------
Cash, end of period 209,561 95,151
======= ========
Cash paid during the year:
Interest 30,481 27,865
</TABLE>
See accompanying notes to consolidated financial statements
5
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FIRST MUTUAL, INC.
STATEMENT OF ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
MARCH 31,
(Unaudited)
1998 1997
---------- ----------
<S> <C> <C>
Accumulated Deficit Beginning
of Period (4,717,613) (4,791,046)
Net Income 177,068 119,012
---------- ----------
Accumulated Deficit End of Period (4,540,545) (4,672,034)
========== ==========
</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 March 31, 1998 were $1,101,704
resulting in net income of $98,170.
For the quarter ended March 31, 1998, Community Group, Inc. had income from
operations of $183,858. 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 the quarter ended March 31, 1998
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 $227,000 and to provide collateral to secure the aggregate
principal amount of the loan.
3) David B. Slater allowed the Registrant to defer payments of principal and
interest, 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 has 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 Registrant has not generated
any surplus cash and/or liquidity.
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In the future, management of the Registrant 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 March 31, 1998, the balance owed by the Company to David and Barbara
Slater and an affiliate is $152,008. David and Barbara Slater have also
guaranteed $227,000 of an additional $680,000 bank loan to the Registrant which
has a principal balance of $511,379 at March 31, 1998. The note is due and
payable in November 1998. If the Company fails to refinance the existing loan,
the Registrant 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 March 31, 1998.
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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> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 209,561
<SECURITIES> 0
<RECEIVABLES> 184,835
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 411,076
<PP&E> 107,685
<DEPRECIATION> 111,034
<TOTAL-ASSETS> 439,387
<CURRENT-LIABILITIES> 1,039,592
<BONDS> 663,387
331,957
0
<COMMON> 0
<OTHER-SE> (932,162)
<TOTAL-LIABILITY-AND-EQUITY> 439,387
<SALES> 2,075,050
<TOTAL-REVENUES> 2,075,050
<CGS> 0
<TOTAL-COSTS> 1,551,486
<OTHER-EXPENSES> 318,631
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,865
<INCOME-PRETAX> 177,068
<INCOME-TAX> 0
<INCOME-CONTINUING> 177,068
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 177,068
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
