<PAGE>
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, 1998
Commission File Number 0-4328
FIRST MUTUAL , INC.
(formerly MUTUAL ENTERPRISES, INC.)
DELAWARE 04-2434444
140 Gould Street, Needham, MA 02494
Registrant's Telephone number including area code: (781) 453-2606
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 December 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, 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
<TABLE>
<CAPTION>
First Mutual, Inc.
Consolidated Balance Sheets
(unaudited)
December 31, September 30,
1998 1998
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash $ 49,539 $139,634
Accounts receivable 289,824 103,426
Due from officer and affiliate 68,120 0
Prepaid expenses and other
current assets 45,198 16,183
-------- --------
Total current assets 452,681 259,243
Property and equipment:
Furniture, fixtures &
equipment 112,460 112,460
Leasehold improvements 31,660 31,660
-------- --------
Total property and equipment 144,120 144,120
Less accumulated depreciation (118,951) (118,951)
-------- --------
Net property and equipment 25,169 25,169
Net Intangible Assets 27,379 27,379
-------- --------
Total assets 505,229 311,791
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
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First Mutual, Inc.
Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
December 31, September 30,
1998 1998
---- ----
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 489,782 $ 497,114
Demand loans from officer and affiliate 0 57,457
Accounts payable and
accrued expenses 534,850 356,882
----------- -----------
Total current liabilities 1,024,632 911,453
Total liabilities 1,024,632 911,453
----------- -----------
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 (4,459,743) (4,540,002)
Treasury stock, 63,951 shares
of common stock at cost (36,454) (36,454)
----------- -----------
Total net capital deficiency (519,403) (599,662)
----------- -----------
Total liabilities and stockholders'
equity 505,229 311,791
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
First Mutual, Inc.
Statement of Income
(unaudited)
<TABLE>
<CAPTION>
Three months ended
December 31,
----------------
1998 1997
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<S> <C> <C>
Revenue:
Health care services $1,138,377 $973,346
---------- --------
Total revenue 1,138,377 973,346
---------- --------
Costs and expenses:
Cost of health care services 877,069 734,613
Selling, general and administrative 167,061 145,828
---------- --------
Total costs: 1,044,130 880,441
Income from operations 94,247 92,905
Interest expense, net 13,988 14,007
---------- --------
Net income $ 80,259 $ 78,898
========== ========
Income per share .02 .02
Weighted average number
of shares 3,415,616 3,415,616
</TABLE>
See accompanying notes to consolidated financial statements
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First Mutual, Inc.
Statement of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Three Months ended
-------------------------------------
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 80,259 $ 78,898
Items not affecting cash:
(Increase) decrease in accounts receivable (186,398) (2,405)
(Increase) decrease in prepaid and
other current assets (29,015) (1,019)
(Increase) decrease in Due to (from) officer
and affiliate (125,577) 0
Increase (decrease) in accounts payable
and accrued expenses 177,968 (73,517)
-------- -----------
Net cash provided by operating activities (82,763) 1,957
-------- -----------
Cash flows from financing activities:
Increase (Payment) on note payable (7,332) 39,678
Purchases of property and equipment 0 (8,819)
-------- -----------
Net cash used for financing activities (7,332) 30,859
-------- -----------
Net change in cash (90,095) 32,816
Cash, beginning of period 139,634 47,445
-------- -----------
Cash, end of period 49,539 80,261
======== ===========
Cash paid during the year:
Interest $ 13,988 $ 14,007
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
FIRST MUTUAL, INC.
STATEMENT OF ACCUMULATED DEFICIT
DECEMBER 31,
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
Accumulated Deficit Beginning
of Period $(4,540,002) $(4,718,241)
Net Income 80,259 79,526
----------- -----------
Accumulated Deficit End of Period (4,459,743) (4,638,715)
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
<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, 1998.
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, 1998 were $1,138,377
resulting in net income of $80,259.
For the quarter ended December 31, 1998, Community Group, Inc. had income from
operations of $137,937. 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, 1998
<PAGE>
Liquidity and Capital Reserves:
Cash flows in fiscal 1998 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.
On June 15, 1999 the Bank of Newport loan was paid in full by David B.
Slater and Barbara W. Slater. The Registrant has entered into an agreement with
David B. Slater and Barbara W. Slater whereby the Registrant will repay $500,000
to Mr. and Mrs. Slater over a 7 year period beginning in July 1999 at an
interest rate of 12.5%.
On July 2, 1999, the Registrant entered into a line of credit agreement
with Eastern Bank whereby the Registrant can borrow up to $150,000 with interest
at a rate of 1% over the bank's base rate to be repaid monthly. The loan must
be paid in full for a period of 30 consecutive days during each 12 month period.
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.
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.
<PAGE>
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, 1998.
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)
/s/ David B. Slater
----------------------
DATE: August 23, 1999 David B. Slater
Director and Principal
Executive Officer
/s/ Diane M. Fleming
----------------------
DATE: August 23, 1999 Diane M. Fleming
Clerk and Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 49,539
<SECURITIES> 0
<RECEIVABLES> 289,824
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 452,681
<PP&E> 144,120
<DEPRECIATION> 118,951
<TOTAL-ASSETS> 505,229
<CURRENT-LIABILITIES> 1,024,632
<BONDS> 489,782
331,957
0
<COMMON> 0
<OTHER-SE> (851,360)
<TOTAL-LIABILITY-AND-EQUITY> 505,229
<SALES> 1,138,377
<TOTAL-REVENUES> 1,138,377
<CGS> 0
<TOTAL-COSTS> 877,069
<OTHER-EXPENSES> 167,061
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,988
<INCOME-PRETAX> 80,259
<INCOME-TAX> 0
<INCOME-CONTINUING> 80,259
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 80,259
<EPS-BASIC> .02
<EPS-DILUTED> .02
</TABLE>
