<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 March 31, 1999
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
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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____
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As of March 31, 1999 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, 1999, there was no available market price for the shares of common
stock of the registrant.
<PAGE>
Part I. Financial Information
Item I. Condensed Consolidated Financial Statements
First Mutual, Inc.
Consolidated Balance Sheets
(unaudited)
ASSETS March 31, September 30,
1999 1998
Current assets:
Cash 189,942 139,634
Accounts receivable 17,938 103,426
Prepaid expenses and other
current assets 7,948 16,183
Demand Loans to officer and affiliate 14,053 0
-------- --------
Total current assets 229,881 259,243
Property and equipment:
Furniture, fixtures &
equipment 128,644 112,460
Leasehold improvements 31,660 31,660
-------- --------
Total property and equipment 160,304 144,120
Less accumulated depreciation (118,951) (118,951)
-------- --------
Net Property and equipment 41,353 25,169
-------- --------
Net Intangible Assets 27,379 27,379
Total assets 298,613 311,791
======== ========
See accompanying notes to consolidated financial statements
<PAGE>
First Mutual, Inc.
Consolidated Balance Sheets
(unaudited)
LIABILITIES AND STOCKHOLDERS' March 31, September 30,
EQUITY 1999 1998
Current liabilities:
Current portion of long-term debt 482,449 497,114
Demand loans from officer and affiliate 0 57,457
Accounts payable and
accrued expenses 332,541 356,882
---------- ----------
Total current liabilities 814,990 911,453
---------- ----------
Total liabilities 814,990 911,453
---------- ----------
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 (4,456,717) (4,540,002)
Treasury stock, 63,951 shares
of common stock at cost (36,454) (36,454)
---------- ----------
Total net capital deficiency (516,377) (599,662)
---------- ----------
Total liabilities and stockholders'
equity 298,613 311,791
========== ==========
See accompanying notes to consolidated financial statements
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First Mutual, Inc.
Statement of Income
(unaudited)
<TABLE>
<CAPTION>
Three months ended Six Months ended
March, March,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Health care services 1,194,251 1,101,704 2,332,628 2,075,050
--------- --------- --------- ---------
Total revenue 1,194,251 1,101,704 2,332,628 2,075,050
--------- --------- --------- ---------
Costs and expenses:
Cost of health care services 904,431 816,873 1,781,500 1,551,486
Selling, general and administrative 272,865 172,803 439,926 318,631
--------- --------- --------- ---------
Total costs: 1,177,296 989,676 2,221,426 1,870,117
Income from operations 16,955 112,028 111,202 204,933
Interest expense, net (13,929) (13,858) (27,917) (27,865)
--------- --------- --------- ---------
Net income 3,026 98,170 83,285 177,068
========= ========= ========= =========
Income per share .00 03 .02 .05
Weighted average number
of shares 3,415,616 3,415,616 3,415,616 3,415,616
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
First Mutual, Inc.
Statement of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Six Months ended
March 31, 1999 March 31, 1998
-------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) 83,285 177,068
Items not affecting cash:
(Increase) decrease in accounts receivable 85,488 (52,806)
(Increase) decrease in prepaid and
other current assets 8,235 (497)
(Increase) decrease in Due to (from)
officer and affiliate (71,510) 0
Increase (decrease) in accounts payable
and accrued expenses (24,341) 17,094
-------- ---------
Net cash provided by operating activities 81,157 140,859
-------- ---------
Cash flows from financing activities:
Payment on note payable (14,665) 34,405
Purchases of property and equipment (16,184) (13,148)
-------- ---------
Net cash used for financing activities (30,849) 21,257
-------- ---------
Net change in cash 50,308 162,116
Cash, beginning of period 139,634 47,445
-------- ---------
Cash, end of period 189,942 209,561
======== =========
Cash paid during the year:
Interest 13,926 30,481
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
FIRST MUTUAL, INC.
STATEMENT OF ACCUMULATED DEFICIT
MARCH 31,
(Unaudited)
1999 1998
-------------------
Accumulated Deficit Beginning
of Period (4,540,002) (4,717,612)
Net Income 83,285 177,610
---------- ----------
Accumulated Deficit End of Period (4,456,717) (4,540,002)
========== ==========
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 March 31, 1999 were $1,194,251
resulting in net income of $3,026.
For the quarter ended March 31, 1999, Community Group, Inc. had income from
operations of $122,714. 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, 1999
<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, 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.
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.
<PAGE>
CASH FLOWS:
The Company operates on budgets with governmental agencies. Cash flows from
these contractual obligations allow for limited annual expansion of programs.
PART II. OTHER INFORMATION
See Part II of Form 10-K for the year ended September 30, 1998. No significant
changes have occurred since that report and no reports on Form 8-K were filed
during the quarter ended March 31, 1999.
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> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1998
<PERIOD-END> MAR-01-1999
<CASH> 189,942
<SECURITIES> 0
<RECEIVABLES> 17,938
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 229,881
<PP&E> 128,644
<DEPRECIATION> 118,951
<TOTAL-ASSETS> 298,613
<CURRENT-LIABILITIES> 814,990
<BONDS> 482,449
331,957
0
<COMMON> 0
<OTHER-SE> (848,334)
<TOTAL-LIABILITY-AND-EQUITY> 298,613
<SALES> 1,194,251
<TOTAL-REVENUES> 1,194,251
<CGS> 0
<TOTAL-COSTS> 904,431
<OTHER-EXPENSES> 272,865
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,929
<INCOME-PRETAX> 3,026
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,026
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,026
<EPS-BASIC> .000
<EPS-DILUTED> .000
</TABLE>
