<PAGE>

                      Securities and Exchange Commission
                          Washington, D.C. 20549-1004

                                  FORM  10-K

               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                    THE SECURITIES AND EXCHANGE ACT OF 1934

                 For the fiscal year ended September 30, 1998
                         Commission file number 0-4328

                              FIRST MUTUAL, INC.
                     (formerly  MUTUAL ENTERPRISES, INC.)

        DELAWARE                                             04-2434444
140 Gould Street, Needham,                                    MA 02494

       Registrants 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.

                                         ___________

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 registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K.

YES X            NO____
   - -

On September 30, 1998 there were 3,479,567 shares of common stock of the
Registrant issued including 63,951 shares in the treasury of the Registrant.

On September 30, 1998 there was no available market price for the shares of
common stock of the Registrant.
<PAGE>

PART  I

ITEM 1. BUSINESS

First Mutual, Inc. (Formerly Mutual Enterprises, Incorporated) ("Registrant")
was organized as a Delaware corporation in March, 1968 and conducts its business
through The Community Group, Inc., its wholly owned subsidiary and only active
and operating company.

(a) ABC MOBILE SYSTEMS, INC.

Through its now inactive wholly owned subsidiary ABC Mobile Systems, Inc. ("ABC
Mobile") the Registrant operated as a franchiser of a wholesale mobile
automobile brake business, offering complete automotive brake repair service and
replacement parts sales to customers at the customer's place of business.
Because of competitive and economic reasons, including the closures of repair
facilities at a significant number of gas stations nationally and the
significant increase in specialty brake repair service alternatives for the
motoring public, the Registrant ceased selling new brake business franchises in
1986 and thereafter sold outright its existing franchises to its existing
franchise owners. As of September 30, 1998 no franchises of ABC Mobile remained
operational.

(b) COMMUNITY GROUP, INC.

The Community Group, Inc. ("Community Group"), the sole operating wholly-owned
subsidiary of the registrant, was organized as a Massachusetts corporation in
1972. Community Group provides habilitative and training services for
developmentally disabled adults through the operation of residential facilities
located in Wakefield, Lynn, Lowell, Melrose, Dracut and Weymouth and an 8,000
square foot Training Center in Wakefield, Massachusetts. Community Group seeks
to develop within each client a sense of personal dignity, awareness of and
respect for human rights, the ability to adjust in social situations with peers
and others and to help each in attaining the highest possible degree of
independence. The support services currently offered by Community Group comprise
arranging psychological consultation and testing, counseling, speech therapy and
tutoring. Other services include on-call relationships with local physicians,
neurologists, audiologists, ophthalmologists, psychiatrists and physical
therapists and other appropriate professionals.

The programs offered by the Community Group are required to meet the
requirements of and obtain the approval of the Massachusetts Department of
Mental Retardation. Annual contracts executed by Community Group and the
Massachusetts Department of Mental Retardation, constitute approximately of 93%
of the revenues received by Community Group in fiscal year 1998. Contracts are
executed as clients are accepted by Community Group and funding is provided by
the Massachusetts Department of Mental Retardation.
<PAGE>

Facilities operated by Community Group must comply with the licensing
requirements of the Department of Social Services and Mental Retardation and
meet the requirements of municipal building codes, health codes and local fire
codes. In granting and renewing a facility's license, a health agency considers,
among other things, the physical aspects (building and furnishings), the
qualifications of the administrative, direct care and other support staff, the
quality of care, training and service and the continuing compliance of such
facility with the laws and regulations applicable to its operations.

In general, the terms of the contracts by and between the above agencies and
Community Group, obligate Community Group to provide residential and employment
training services for clients. Contracts typically have a one year term with
four options to renew for successive one year periods. At the end of the five
year period the contracts come up for competitive bidding. All client contracts
of The Community Group which have been competitively re-bid in the past have
been renewed with The Community Group. Revenues are received by Community Group
on a per day rate basis, payable bimonthly.

Contracts representing 67% of Community Group's gross revenue are due to be
rebid in fiscal year 1999. Contracts representing 15% of Community Group's gross
revenue are due to be rebid in fiscal year 2000. Contracts representing the
remaining 18% of Community Group's gross revenue are due to be rebid in fiscal
year 2002.

If any of the above contracts with Community Group are terminated or fail to be
renewed or any health agency fails to renew any facility of The Community Group,
it could have a material adverse effect on the Registrant's business, financial
condition and results of operations.

(c) BWS INTERNATIONAL, LTD.

BWS Group, Inc., an inactive wholly-owned subsidiary of the Registrant, was
organized as a Massachusetts corporation on February 22, 1983 to enter into the
business of retailing luxury women's fashions. Through its now inactive wholly
owned subsidiaries, BWS International, Inc. (a Delaware corporation), BSDJ, Inc.
(a Texas corporation) and BSNJ, Inc. (a New Jersey corporation), the registrant
operated retail stores in Boston, Massachusetts, Dallas, Texas and Short Hills,
New Jersey featuring Yves Saint Laurent (YSL) clothing and accessories. Due to
poor sales, all stores were closed by 1991 and the companies remain inactive.

EMPLOYMENT

Registrant employed 139 persons on September 30, 1998, all of whom were employed
by the Community Group.
<PAGE>

REVENUES:

The Department of Mental Retardation in the Commonwealth of Massachusetts
accounted for in excess of 93% of the revenue received by Community Group in
1998 and 1997.

WORKING CAPITAL:

The registrant experienced a severe working capital shortage during the period
1986 through 1987 creating a negative net worth. Cash shortages were funded by
personal loans aggregating $865,093 from David B. Slater, President and Board
Chairman and its principal stockholder and his wife Barbara Slater and by bank
refinancing of $680,000 personally guaranteed and collateralized by David and
Barbara Slater as a condition of the refinancing.

Principally because of these additional debt service requirements,  working
capital shortfalls continued. These shortfalls were funded by Mr. Slater
allowing the Registrant to defer principal and interest payments, his salary,
and rent due on facilities leased by the Registrant from him, so that the
Registrant could meet its other obligations See "Certain Transactions."

COMPETITIVE CONDITION:

1.  The Community Group, Inc.:
    --------------------------

In accordance with governmental regulations, every five years, all health
service contracts including those of Community Group are offered to all
interested parties for competitive bidding. The Community Group must therefore
compete in price, service, and quality on each of its contracts. Contracts
representing 67% percent of Community Group's revenue are due to be rebid in
fiscal year 1999; 15% are due to be rebid in fiscal 2000 and the remaining 18%
are due to be rebid in fiscal 2002. Although since its inception in 1972,
Community Group has without interruption or exception been granted consecutive
contracts, there can be no assurance that Community Group will continue to be
granted renewals of its existing health service contracts and/or will be able to
enter into additional health service contracts on terms favorable to Community
Group. Failure of Community Group to renew such contracts or enter into
additional contracts could have a material adverse effect on the business,
financial condition and results of operation of Community Group and the
Registrant.

2.  ABC Mobile:
    -----------

ABC Mobile is a defendant with other defendants in lawsuit in California. No
motions or correspondence have taken place in this litigation in more that five
years.
<PAGE>

ITEM 2. PROPERTIES

The Community Group, leases a single family residence in Wakefield,
Massachusetts owned by David B. Slater and his wife, a two family residence in
Weymouth, Massachusetts owned 50% by David B. Slater and his wife and two
apartments in a four apartment residential property in Wakefield, Massachusetts
owned 75% by David B. Slater and his wife. David B. Slater is President and
Chief Executive Officer and principal stockholder of the Registrant. Rents being
paid by The Community Group on the foregoing properties which include the
requirement to pay real estate taxes, maintenance and insurance costs, which the
Registrant believes are at fair market value are as follows:

<TABLE>
<CAPTION>
                                      Monthly  Commencing  Terminating
<S>                                   <C>      <C>         <C>
1.40 Avon Street, Wakefield            $2,250     11/1/97     10/31/12
2.6 A Columbia Road, Wakefield         $1,000      1/1/98     12/31/13
3.6 B Columbia Road, Wakefield         $1,100      1/1/98     12/31/13
4.1023/1025 Front Street,Weymouth      $2,000      1/1/98     12/31/13
</TABLE>

The monthly rents for each of the above facilities increases each 36 months by
approximately 10%. The registrant believes that existing facilities are adequate
for its near term needs.

ITEM 3. LEGAL PROCEEDINGS

The Registrant's wholly owned subsidiary ABC Mobile Brake is a party in a
litigation in which no action has been taken in the last five years.

As of the date of this report the Registrant is aware of the following pending
legal proceedings to its inactive subsidiary, ABC Mobile Systems:

ABC Mobile is a defendant along with twenty (20) other defendants in an action
brought in the Superior Court of the State of California on November 22, 1985 by
Edna Smith, et al., on behalf of the surviving members of the family of Francis
L. Smith for wrongful death, strict liability, negligence, fraud and conspiracy.
The plaintiffs in the action allege that a cause of the decedent's death was his
exposure to asbestos, part of which exposure was allegedly sustained while an
employee of an automobile repair and service station which installed asbestos
brake linings on customers' cars and which station on one singular occasion was
a customer of an ABC Mobile Brake franchise owner. The plaintiff seeks a sum in
excess of $15,000, legal costs and damages. The Registrant is not a party to
this suit.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

NONE
<PAGE>

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS.

(a)  Market Information
On September 30, 1998 there was no established trading market for shares of the
Registrant's common stock.

Stockholders:
-------------

The approximate number of record holders of common stock on September 30, 1998
was 670.

Dividends:
----------

No cash dividends have been declared by the Registrant during 1998 and 1997
fiscal years.

ITEM 6. SELECTED FINANCIAL DATA

Set forth in exhibit 1 are selected consolidated financial data derived from the
income statements of the Registrant for the periods ended September 30, 1998,
1997, 1996, 1995, and 1994 derived from the balance sheets for the Registrant
for the same periods. The selected consolidated financial data should be read in
conjunction with the Management's Discussion of Financial Condition and Results
of Operations and the financial statements and related notes included therein
and are qualified by reference to such financial statements and related notes.
<PAGE>

EXHIBIT 1
                               September 30,
                               -------------

<TABLE>
<CAPTION>
                                      1998        1997         1996        1995         1994
<S>                               <C>         <C>          <C>           <C>          <C>
Operating Data
Revenues                          $4,112,643  $3,358,161   $3,181,963    $2,869,838   $3,116,933
Operating Income or (Loss)           171,450     130,178      231,943     160,658        (90,950)
Other Income (Expense)                 6,160     (56,745)     (76,562)    (80,288)       285,463
Income (Loss) Before                 177,610      73,433      155,381      80,370        194,513
Income (Loss) Per Share
  Before Extraordinary Item            .05         .02          .18        0.09          .23
Income (Loss) Per Share                .05         .02          .18        0.09          .23

Balance Sheet Data
Cash and Temporary Investments        $139,634    $   47,445   $   45,802    $ 49,419    $  73,908
Accounts Receivable Net of
  Allowance for Doubtful Accounts      103,426       132,029       78,142     125,099      131,189
Current Assets                         259,243       195,657      140,127     190,701      205,097
Current Liabilities                    911,453       988,093      606,989     791,326      709,284
    Working Capital                   (652,210)     (792,436)    (466,862)   (600,625)    (504,187)
Total Assets                           311,791       210,820      141,584     190,701      222,305
Long Term Obligations                        0             0      626,237     646,398      565,801
Equity                                (599,662)     (777,273)  (1,091,642) (1,247,023)  (1,052,780)
</TABLE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

Overview:
---------

96% of the Registrant's revenue is generated  from its wholly owned subsidiary
Community Group, Inc.  Community Group, Inc. operates as a provider of
habilitative and training services to developmentally disabled adults.

Currently there are 35 residential facilities and a training center in greater
Boston. Community Group, Inc. has 139 employees. The Community Group receives
its income substantially through governmental contracts for the care of
developmentally disabled adults.
<PAGE>

Results of Operations:
----------------------

The Registrant operates on approved annual budgets substantially funded by
contracts with governmental agencies. As a result of previous losses the
Registrant has a negative net worth, limited liquidity, and no operational debt
facility. Working capital needs have been met by advances from David Slater,
President and Board Chairman.

For the fiscal year ended September 30, 1998, the Registrant's consolidated
revenues were $4,112,643 resulting in income from operations of $171,450 and net
income of $177,610.

Community Group, Inc. had for fiscal year ended September 30, 1998 operating
income of $203,672  before net  interest expense of $15,922 resulting in net
income of $187,750.

During fiscal year ended September 30, 1998 Community Group continued
implementing a new supported living program for some of its clients. Under the
concept of supported living, clients lead a more independent, less supervised
lifestyle. Community Group during fiscal 1998 continued to expand by providing
additional supported living services.

The Registrant's expense structure is controlled through contracts with
governmental agencies. Budgets are predetermined and monitored. The Registrant
does no marketing. The registrant has a debt of $497,114 with an interest rate
of 9.5% as of September 30, 1998. The Registrant does not conduct any financing
operations.

LIQUIDITY AND CAPITAL RESERVES:
Cash flows in fiscal 1998 were stable. In 1986 - 1987  the Registrant
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 that bank's loan to
    David B. Slater, President and Chief Executive Officer of the Registrant and
    his wife, Barbara W. Slater.

 2) Bank refinancing of $680,000.  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 collateralize $227, 000 (1/3 rd) of this loan.

 3) David B. Slater allowed the Registrant to defer payments of principal and
interest payments, salary and rents due the Slaters.
<PAGE>

In return for their $865,093 loan to the Registrant and guarantee and
collateralization of its bank refinancing at that time, as well as for allowing
the Registrant to defer payments of principal and interest payments, rents due
of facilities leased by the registrant from Mr. Slater and salary due as
required by the cash flow of the registrant, the Registrant granted warrants to
purchase a total of 2,569,358 shares of the Registrant's common stock to David
B. Slater and Barbara W. Slater at an exercise price of $.10 per share.

Mr. and Mrs. Slater have exercised all of the applicable warrants, increasing
their aggregate ownership in the Registrant to 88.1%. 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 similar programs and negotiate future increases in rates
under state contracts.

ABC Mobile Systems and BWS Group, Inc. have ceased operations permanently.

CASH FLOWS:
The Registrant operates on budgets with governmental agencies. Cash flows from
these contractual obligations allow for limited annual expansion of programs.

As of September 30, 1998, the balance owed by the registrant to David and
Barbara Slater and affiliate is $57,457. David and Barbara Slater have also
guaranteed $227,000 of a $680,000 bank loan to the Registrant which has a
principal balance of $497,114 at September 30, 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.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Financial Statements immediately after the Signature Page.

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

NONE.
<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The terms of the directors are for the ensuing year and/or until successors have
been elected and qualified.  No officer or Director is involved in any legal
proceeding.

DAVID B. SLATER, age 64. Director since 1968. Chairman of the Board, President
and Chief Executive Officer of the Registrant; Executive Director of The
Community Group, Inc.

DIANE M. FLEMING, age 38. Director since December 1987 and Corporate Secretary,
Director of Administration of the Registrant since September 1987.

ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS
(See exhibit 2)
EXHIBIT 2
(A)
Name of              Capacities in         Cash compensation,
Individual &         which                including salaries, fees
Identity of Group    Remuneration         directors' fees, commissions,
was Received         and bonuses

DAVID B.             President, Chief     $185,000
SLATER               Exec. Officer,
                     Chairman of the
                     Board

All Officers &                            $249,872
Directors as a
Group

No other forms of compensation are provided to officers and directors.

The Registrant maintains medical insurance for all employees. Registrant
provides a 401K retirement plan for all employees.
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

(See exhibit 3)

EXHIBIT 3

<TABLE>
<CAPTION>
                                                Amount &
    Title                  Name &              Nature of        Percent
     of                  Address of            Beneficial         of
    Class             Beneficial Owner         Ownership         Class
-------------      -----------------------     ----------     -----------
<S>                <C>                         <C>            <C>
Common Stock           David B. Slater and      3,065,499            88.1%
                       Barbara W. Slater
                       410 South Street
                       Needham, MA 02192

                                                    owned           owned
                                               ----------     -----------
                    Officers and Directors      3,065,499            88.1%
                   as a Group (2 persons)
</TABLE>
David B. Slater & Barbara Slater disclaim any beneficial ownership in the shares
of their children or any other person.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The following facilities leased to a subsidiary of the Registrant are owned by
David B. Slater and his wife:

<TABLE>
<CAPTION>
                                                 Monthly  Commencing  Terminating
<S>                                              <C>      <C>         <C>
1. 40 Avon Street, Wakefield                      $2,000     11/1/97     10/31/12
2. 6 A Columbia Road, Wakefield                   $1,000      1/1/98     12/31/13
3. 6 B Columbia Road, Wakefield                   $1,100      1/1/98     12/31/13
4. 1023/1025 Front Street, Weymouth$2,000                     1/1/98     12/31/13
</TABLE>

The Registrant is of the opinion that the rentals are on terms comparable to
that obtained in the area for similar type facilities. Leasee also pays all real
estate taxes, insurance and maintenance costs on all rentals on properties 1 and
4.
<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

1.  The following documents are filed as part of this 10-K report:

Balance Sheets - September 30, 1998 and 1997
Statements of Income and Accumulated Deficit - years ended September 30, 1998,
1997 and 1996
Statements of Cash Flows years ended September 30, 1998 and 1997
Notes to financial Statements -
All other schedules are omitted as the required information is inapplicable or
the required information is included in the financial statements or related
notes.

2.  No reports were filed on Form 8-K during the fiscal year ended September 30,
    1998.

3.  Exhibits.

(a) Copies of leases have been filed with the Registrant's Report on Form 10K
for the prior fiscal year and pursuant to Rule 12b-32 are hereby incorporated by
reference.

(b) The Registrant's wholly owned subsidiaries as follows:

ABC Mobile Systems (a California Corporation, DBA ABC Mobile Brake); (Inactive)
The Community Group, Inc. (a Massachusetts Corporation, d.b.a. Community Group);
BWS International, Ltd. ( a Massachusetts Corporation, DBA Saint Laurent Rive
Gauche); (Inactive) Sizzleboard International, Inc. (a Massachusetts
Corporation, inactive since 1975); (Inactive) BSNJ, Inc. (a New Jersey
Corporation, DBA Saint Laurent Rive Gauche). (Inactive)

<PAGE>

Pursuant to the requirements of Section 13 or 15 (d) 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)
David B. Slater
Chairman and President

Pursuant to the requirement of the Securities Exchange Act of 1934 this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated:

/s/ David B. Slater
----------------------------                    DATE:
David B. Slater                                 July 30, 1999
Director and
Principal  Executive Officer


/s/ Diane M. Fleming
----------------------------
Diane M. Fleming                                July 30, 1999
Clerk and Director
<PAGE>

December 31, 1998

To the Board of Directors
First Mutual, Inc.
Needham, Massachusetts

I have audited the accompanying balance sheet of First Mutual, Inc. as of
September 30, 1998 and the related statements of income, accumulated deficit,
and cash flows for the years then ended.  These financial statements are the
responsibility of the organization's management.  Our responsibility is to
express an opinion on these financial statements based on my audits. I also
audited the financial statements for First Mutual, Inc. as of September 30,
1997. The financial statements of First Mutual, Inc. as of September 30, 1996,
were audited by other auditors whose report dated December 31, 1996, expressed
an unqualified opinion on those statements.

I conducted my audit in accordance with generally accepted auditing standards.
These standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement.  An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of First Mutual, Inc. as of September
30, 1998, 1997 and 1996 and the results of its operations and its cash flows for
the years then ended in conformity with generally accepted accounting
principles.

Peter Arnold, CPA
December 2, 1998
<PAGE>

First Mutual, Inc.
Balance Sheet
As of September 30, 1998 and 1997

<TABLE>
<CAPTION>
ASSETS
                                               September            September
                                                30, 1998             30, 1997
<S>                                            <C>                  <C>
Current Assets:
Cash                                           $ 139,634            $  47,445
Accounts receivable                              103,426              132,029
Prepaid expenses                                  16,183               16,183

Total Current Assets                             259,243              195,657

Property and Equipment:
Furniture's, fixtures & equipment                112,460               94,537
Leasehold improvements                            31,660               31,660

Total Property and Equipment                     144,120              126,197

Less accumulated depreciation                   (118,951)            (111,034)

Net Property and Equipment                        25,169               15,163
Net Intangible Assets                             27,379

Total Assets                                     311,791              210,820
</TABLE>


The accompanying notes are an integral part of these financial statements
<PAGE>

First Mutual, Inc.
Balance Sheet
As of September 30, 1998 and 1997

<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER EQUITY
                                              September     September
                                               30, 1998      30, 1997
<S>                                           <C>           <C>
Liabilities:
Current portion of long-term debt             $   497,114   $   525,411
Demand loans from officer, (note 5)                57,457       103,571
Accounts payable & accrued expenses               356,882       359,111

Total current liabilities                         911,453       988,093

Total liabilities                                 911,453       988,093


Net Capital Deficiency:
Common stock, $.10 par value:
 4,000,000 shares
 authorized,  3,479,567 issued,
 3,415,616 outstanding                            331,957       331,957

Additional paid-in capital                      3,644,837     3,644,837
Accumulated deficit                            (4,540,002)   (4,717,613)
Treasury stock, 63,951 shares
of common stock at cost                           (36,454)      (36,454)

Total stock holders' equity                      (599,662)     (777,273)

Total liabilities and stockholders' equity        311,791       210,820
</TABLE>


The accompanying notes are an integral part of these financial statements
<PAGE>

First Mutual, Inc.
Statement of Income
For the years ending September 30, 1998, 1997, and 1996

<TABLE>
<CAPTION>
                                                             September     September     September
                                                              30, 1998      30, 1997      30, 1996
<S>                                                          <C>           <C>         <C>
Revenue:
Health care services                                         4,112,643     3,358,161   $ 3,181,963

Total revenue                                                4,112,643     3,358,161     3,181,963

Costs and expenses:
Cost of health care services                                 3,678,971     3,045,716     2,753,092
General and administrative                                     262,222       182,267       196,928

Total costs & expenses                                       3,941,193     3,227,983     2,950,020

Income from operations                                         171,450       130,178       231,943

Other Income (Expenses):
Interest income                                                 22,879        15,402             0
Interest expense                                               (16,719)      (72,147)      (76,562)

Total other income (expense)                                     6,160       (56,745)      (76,562)

Net income                                                     177,610        73,433       155,381

Accumulated deficit beginning                               (4,717,613)   (4,791,046)  (4,946,427)
Accumulated deficit ending                                  (4,540,003)   (4,717,613)   (4,791,046)

Income per share (notes 1&5)
Income before extraordinary item                                  $.05          $.02          $.18

Weighted average number of common share
outstanding (common stock equivalents are
anti-dilutive in both profit and loss years)                 3,415,616     3,415,616       846,258
</TABLE>

The accompanying notes are an integral part of these financial statements
<PAGE>

First Mutual, Inc.
Statement of Cash Flows
For the years ending September 30, 1998, 1997 and 1996

<TABLE>
<CAPTION>
                                             September   September   September
                                              30, 1998    30, 1997    30, 1996
<S>                                          <C>         <C>         <C>
CASH FLOWS FROM OPERATIONS
Net income                                   $ 177,610   $  73,433   $ 155,381
Items not affecting cash:
Depreciation                                     8,861       2,528           0
(Increase) in accounts receivable               28,603     (53,887)     46,957
(Increase) decrease in prepaid and                   0       1,457           0
  other assets
Increase (decrease) in accounts payable &
accrued expenses                                (2,229)    (70,878)   (184,337)

Decrease in demand loan
officer and affiliate                          (46,114)   (150,875)          0

Net cash flows from operations                 166,731    (198,222)     18,001

CASH FLOWS FROM INVESTMENTS:
Additions to other assets                      (17,923)    (17,691)     (1,457)

Purchase of Capitalized Legal expenses         (28,322)          0           0

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on debt
  activities                                   (28,297)    (23,380)    (20,161)
Issuance of common stock                             0     240,936           0

Net change in cash                              92,189       1,643      (3,617)

Cash, beginning of year                         47,445      45,802      49,419

Cash, end of year                              139,634      47,445      45,802

Cash paid during the year:
Interest                                        56,600      72,147      76,562
</TABLE>

The accompanying notes are an integral part of these financial statements
<PAGE>

First Mutual, Inc.
Notes to Financial Statements
September 30, 1998

NATURE OF BUSINESS AND STATUS OF OPERATIONS

First Mutual, Inc. formerly Mutual Enterprises Incorporated (Mutual), currently
has only one operating subsidiary, Community Group, Inc., which was organized in
Massachusetts in 1972 and provides rehabilitation and residential services for
mentally retarded adults.  The company operates residence facilities and a
sheltered training center.

Substantially all of the Company's revenues arise from contractual services
provided to and negotiated with the Department of Mental Retardation.

Losses in past years, due primarily to insufficient occupancy levels, had
contributed to a condition where current liabilities substantially exceed
current assets.  The deficiency has been funded by personal advances and bank
loans partially personally guaranteed by David B. Slater.  These advances
originally amounted to $928,000 and currently are $103,571 at September 30,
1998.  Also see notes 4 and 5.

NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements include the accounts of First Mutual, Inc.
and its wholly-owned subsidiaries (the Company) which consist of the following
companies:

The Community Group, Inc.
ABC Mobile Systems (Inactive)
BWS International, Ltd. (Inactive)
BWS Group, Inc. (inactive)
BSNJ, Inc. (Inactive)
Sizzleboard International, Inc. (inactive)

BAD DEBTS

The company has no allowance for doubtful accounts at September 30, 1998, 1997,
and 1996.

DEPRECIATION

Property, plant and equipment are depreciated on the straight line basis over
their estimated useful lives.  Leasehold improvements are amortized on the
straight line basis over the terms of their respective lives.
<PAGE>

INCOME TAXES

The company and its subsidiaries file consolidated federal and Massachusetts
income tax returns.  The benefits attributable to investment tax credits and net
operating losses can be applied to future years. No provision is made for
current year income taxes due to use of the net operating loss carry forward.
Net operating losses attributable to future years is $1,100,000 and expire
through 2005.  Available tax credits approximate $9,344 and expire through 1999.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.

EARNINGS PER SHARE

Earnings per share of common stock is computed based on the  weighted average
number of shares of common stock and common stock equivalents outstanding.

NOTE 2  OPERATING LEASES
------------------------

The company leases facilities and vehicles under operating leases.  Future
minimum lease payments under operating leases for the five year period
subsequent to September 30, 1998 are as follows:

                                     September 30, 1999    $86,820
                                     September 30, 2000    $25,800
                                     September 30, 2001    $25,800
                                     September 30, 2002    $25.800
                                     September 30, 2003    $25.800

NOTE 3  Intangible Assets
-------------------------

Intangible assets consist of capitalized legal costs of $28,323 less accumulated
amortization of $944. These costs were incurred in connection with the potential
buy out of the company by a larger organization.
<PAGE>

NOTE 4 Related Party Transactions
---------------------------------

The Company leases a facility for its health service division from David B.
Slater under a month to month lease.

Advances from officer represent advances made by David Slater and bear interest
at a rate 2% higher than bank debt, which is guaranteed personally by Mr.
Slater.

NOTE 5 DEBT
-----------

Long-term debt consist of the following:

<TABLE>
<CAPTION>
                                                                                1998             1997
<S>                                                                          <C>              <C>
$680,000, with interest at
prime + 2%,  payable in 240 installments of principal
and interest through  June 1998 secured by all business assets.
This note is currently due and payable. The company is in
the process of refinancing.                                                  497,114          525,411
                                                                             =======          =======
</TABLE>

NOTE 6 COMMON STOCK WARRANTS
----------------------------

The Company granted 2,409,358 warrants to purchase shares of the company's
common stock. These warrants were issued to Mr. and Mrs. David Slater for their
assistance and personal guarantees in obtaining financing for the Company and
foregoing interest payments on advances they made to the Company.

On January 2, 1998, Mr. and Mrs. Slater exercised all of the applicable
warrants, increasing ownership in the Company to 88.1%.