UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF
      1934 For the quarterly period ended June 30, 2004

                                       OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

      For the transition period from _______ to _______

Commission file number  0-6234
                       --------

                                ACMAT CORPORATION
--------------------------------------------------------------------------------

       Connecticut                                       06-0682460
------------------------                    ------------------------------------
(State of Incorporation)                    (I.R.S. Employer Identification No.)


              233 Main Street, New Britain, Connecticut 06050-2350
--------------------------------------------------------------------------------
                    (Address of principal executive offices)


Registrant's telephone number including area code:                (860) 229-9000
                                                                  --------------

                                      NONE
--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)


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 filing requirements
for the past 90 days.

                                                    Yes  [X]  No  [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).         Yes [ ]   No  [X]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

                                                       Shares outstanding
Title of Class                                         at July 31, 2004
--------------                                         ------------------

   Common Stock                                              545,329
   Class A Stock                                           1,772,978

<PAGE>

                                TABLE OF CONTENTS


Part I  FINANCIAL INFORMATION                                            PAGE
                                                                         ----

   Item 1.Unaudited Financial Statements
          Consolidated Balance Sheets                                      3
          Consolidated Statements of Earnings                              4
          Consolidated Statements of Stockholders' Equity                  5
          Consolidated Statements of Cash Flows                            6
          Notes to Unaudited Consolidated Financial Statements             7

   Item 2.Management's Discussion and Analysis of
          Financial Conditions and Results of Operations                  14

Part II  OTHER INFORMATION

   Item 2.Changes in Securities, Use of Proceeds and Issue Purchases
          Of Equity Securities                                            26

   Item 4.Submission of Matters to a Vote of Security Holders             26

   Item 5.Controls and Procedures                                         27

   Item 6.Exhibits and Reports on Form 8-K                                27

   Signatures                                                             28



                                       2
<PAGE>

Part I Financial Information
Item I Financial Statements

                       ACMAT CORPORATION AND SUBSIDIARIES
                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                  June 30,       December 31,
Assets                                                                              2004            2003
                                                                               -------------    -------------
                                                                               (Unaudited)
<S>                                                                            <C>                <C>
Investments:
   Fixed maturities-available for sale at fair value (Cost of $49,448,670 in
     2004 and $53,057,097 in 2003)                                             $  49,046,330       53,355,212
   Equity securities, at fair value (Cost of $11,700,634 in 2004 and
     $10,240,559 in 2003)                                                         11,072,871       10,541,515
   Short-term investments, at cost which approximates fair value                  21,675,488          760,872
                                                                               -------------    -------------
     Total investments                                                            81,794,689       64,657,599
Cash and cash equivalents                                                         35,656,439       37,687,994
Accrued interest receivable                                                          425,187          341,451
Receivables, net of allowance for doubtful accounts of $360,606 in 2004            3,006,626        2,222,971
  and $302,606 in 2003
Reinsurance recoverable:
   Unpaid losses                                                                   3,531,055        4,376,220
   Paid losses                                                                       165,664        2,327,436
Prepaid expenses                                                                     123,509          210,127
Income tax receivable                                                                     --          330,883
Deferred income taxes                                                              2,417,361        2,155,028
Property & equipment, net                                                         10,911,129       11,195,363
Deferred policy acquisition costs                                                  1,719,258        1,639,325
Other assets                                                                       2,969,168        3,365,100
Intangibles                                                                        1,920,360        1,920,360
                                                                               -------------    -------------
                                                                                 144,640,445      132,429,857
                                                                               =============    =============
Liabilities & Stockholders' Equity

Accounts payable                                                                   2,579,386          848,427
Reserves for losses and loss adjustment expenses                                  22,392,221       20,848,566
Unearned premiums                                                                  6,612,473        6,357,447
Collateral held                                                                   52,257,201       41,718,225
Income taxes                                                                         280,738               --
Accrued liabilities                                                                  903,451        1,467,721
Long-term debt                                                                    17,634,733       19,107,293
                                                                               -------------    -------------
     Total liabilities                                                           102,659,203       90,347,679

Stockholders' Equity:
   Common Stock (No par value; 3,500,000 shares authorized; 545,329
      and 549,355 shares issued and outstanding)                                     545,329          549,355
   Class A Stock (No par value; 10,000,000 shares authorized; 1,772,978
      and 1,742,705 shares issued and outstanding)                                 1,772,978        1,742,705
   Retained earnings                                                              40,630,762       39,438,778
   Accumulated other comprehensive income (loss)                                    (967,827)         351,340
                                                                               -------------    -------------
   Total stockholders' equity                                                  $  41,981,242       42,082,178
                                                                               -------------    -------------
                                                                               $ 144,640,445      132,429,857
                                                                               =============    =============
</TABLE>

See Notes to Unaudited Consolidated Financial Statements.


                                       3
<PAGE>

                       ACMAT CORPORATION AND SUBSIDIARIES
                 Consolidated Statements of Earnings (Unaudited)

<TABLE>
<CAPTION>
                                                Three months ended             Six months ended
                                                      June 30                       June 30
                                             -------------------------     -------------------------
                                                2004           2003           2004           2003
                                             ----------     ----------     ----------     ----------
<S>                                          <C>             <C>            <C>            <C>
Contract revenues                            $2,933,947        286,820      5,258,474      1,011,113
Earned premiums                               3,527,510      3,118,193      6,927,094      5,377,996
Investment income, net                          766,602        620,919      1,518,317      1,255,238
Net realized capital gains                       20,651         22,649         20,651        248,771
Other income                                    197,235        303,597        363,561        464,253
                                             ----------     ----------     ----------     ----------
                                              7,445,945      4,352,178     14,088,097      8,357,371
                                             ----------     ----------     ----------     ----------


Cost of contract revenues                     2,895,480        305,244      5,205,496        943,629
Losses and loss adjustment expenses           1,407,142      1,077,195      2,789,432      1,863,319
Amortization of policy acquisition costs        616,860        597,346      1,266,116      1,024,696
General and administrative expenses           1,239,823      1,322,413      2,490,247      2,617,290
Interest expense                                224,350        267,049        458,708        554,429
                                             ----------     ----------     ----------     ----------
                                              6,383,655      3,569,247     12,209,999      7,003,363
                                             ----------     ----------     ----------     ----------

Earnings before income taxes                  1,062,290        782,931      1,878,098      1,354,008

Income taxes                                    377,579        278,341        674,063        471,831
                                             ----------     ----------     ----------     ----------

Net earnings                                 $  684,711        504,590      1,204,035        882,177
                                             ==========     ==========     ==========     ==========


Basic earnings per share                     $      .30            .22            .52            .38

Diluted earnings per share                   $      .29            .22            .51            .38
</TABLE>

See Notes to Unaudited Consolidated Financial Statements.


                                       4
<PAGE>

                       ACMAT CORPORATION AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
                             June 30, 2004 and 2003

<TABLE>
<CAPTION>

                                                                                                       Accumulated
                                                       Common          Class A                          Other              Total
                                                     Stock Par        Stock Par        Retained      Comprehensive     Stockholders'
                                                       Value            Value          Earnings       Income(Loss)        Equity
                                                    -----------      -----------      -----------      -----------      -----------
<S>                                                 <C>                <C>             <C>                <C>            <C>
Balance as of December 31, 2002                     $   553,355        1,756,405       37,972,590          571,358       40,853,708

Comprehensive income:
   Net unrealized gains on debt and equity
    securities, net of reclassification                      --               --               --           45,059           45,059

   Net unrealized losses on derivatives
     qualifying as cash flow hedges                          --               --               --          (90,131)         (90,131)

   Net earnings                                              --               --          882,177               --          882,177
                                                                                                                        -----------

Total comprehensive income                                                                                                  837,105

   Acquisition and retirement of 2,000 shares of
      Common Stock                                       (2,000)              --          (18,650)              --          (20,650)

   Acquisition and retirement of 11,300 shares of
      Class A Stock                                          --          (11,300)         (82,210)              --          (93,510)
                                                    -----------      -----------      -----------      -----------      -----------

Balance as of June 30, 2003                         $   551,355        1,745,105       38,753,907          526,286       41,576,653
                                                    ===========      ===========      ===========      ===========      ===========


Balance as of December 31, 2003                     $   549,355        1,742,705       39,438,778          351,340       42,082,178

Comprehensive income:
   Net unrealized losses on debt and equity
    securities, net of reclassification                      --               --               --       (1,425,492)      (1,425,492)

   Net unrealized gains on derivatives
     qualifying as cash flow hedges                          --               --               --          106,325          106,325

   Net earnings                                              --               --        1,204,035               --        1,204,035
                                                                                                                        -----------

Total comprehensive income (loss)                                                                                          (115,132)

   Acquisition and retirement of 4,026 shares of
      Common Stock                                       (4,026)              --          (42,580)              --          (46,606)

   Acquisition and retirement of 53,727 shares of
      Class A Stock                                          --          (53,727)        (651,721)              --         (705,448)

   Exercise of 84,000 shares of Class A Stock
      pursuant to Stock options                              --           84,000          682,250               --          766,250
                                                    -----------      -----------      -----------      -----------      -----------

Balance as of June 30, 2004                         $   545,329        1,772,978       40,630,762         (967,827)      41,981,242
                                                    ===========      ===========      ===========      ===========      ===========
</TABLE>

See Notes to Unaudited Consolidated Financial Statements.


                                       5
<PAGE>

                       ACMAT CORPORATION AND SUBSIDIARIES
                Consolidated Statements of Cash Flows (Unaudited)
                     Six Months Ended June 30, 2004 and 2003

<TABLE>
<CAPTION>
                                                                       2004              2003
                                                                   ------------      ------------
<S>                                                                <C>                    <C>
Cash flows from operating activities:
    Net earnings                                                   $  1,204,035           882,177
    Adjustments to reconcile net earnings to net cash used for
      operating activities:
      Depreciation and amortization                                     381,357           766,226
      Net realized capital gains                                        (20,651)         (248,771)
      Deferred income taxes                                             103,720            88,836
      Changes in:
         Accrued interest receivable                                    (83,736)           85,481
         Reinsurance recoverable                                      3,006,937        (1,519,156)
         Receivables, net                                              (783,655)         (276,557)
         Deferred policy acquisition costs                              (79,933)         (449,528)
         Prepaid expenses and other assets                              482,550           550,932
         Accounts payable and other accrued liabilities               1,273,014        (1,133,449)
         Reserves for losses and loss adjustment expenses             1,543,655           262,051
         Collateral held                                             10,538,976         9,259,769
         Income taxes, net                                              605,502           166,624
         Unearned premiums                                              255,026         1,903,297
                                                                   ------------      ------------
             Net cash provided by operating activities               18,426,789        10,338,203
                                                                   ------------      ------------

Cash flows from investing activities:
    Proceeds from investments sold or matured:
      Fixed maturities-sold                                           1,100,000         6,652,707
      Fixed maturities-matured                                        8,748,425        20,481,634
      Equity securities                                               1,522,629         2,082,649
    Purchases of:
      Fixed maturities                                               (6,343,863)      (25,656,946)
      Equity securities                                              (2,950,695)       (3,100,000)
Short-term investments, net                                         (20,914,616)      (18,225,381)
    Capital expenditures                                                 (4,610)          (97,906)
                                                                   ------------      ------------
         Net cash used for investing activities                     (18,842,730)      (17,863,243)
                                                                   ------------      ------------

Cash flows from financing activities:
    Repayments on long-term debt                                     (1,472,560)       (1,197,289)
    Issuance of Class A Stock                                           609,000                --
    Payments for acquisition & retirement of stock                     (752,054)         (114,160)
                                                                   ------------      ------------
         Net cash used for financing activities                      (1,615,614)       (1,311,449)
                                                                   ------------      ------------

Net change in cash                                                   (2,031,555)       (8,836,489)

Cash at beginning of period                                          37,687,994        18,724,560
                                                                   ------------      ------------

Cash at end of period                                              $ 35,656,439         9,888,071
                                                                   ============      ============
</TABLE>

See Notes to Unaudited Consolidated Financial Statements.


                                       6
<PAGE>

                       ACMAT CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

(1) Financial Statements

The consolidated financial statements include the accounts of ACMAT Corporation
("ACMAT" or the "Company") and its subsidiaries. The consolidated financial
statements have been prepared in conformity with accounting principles generally
accepted in the United States of America and are unaudited.

The interim financial information contained in this report has been prepared
from the books and records of the Company and its subsidiaries and reflects, in
the opinion of the management of the Company, all adjustments (consisting of
normal and recurring accruals) necessary to fairly present results of operations
for the periods indicated. All significant intercompany accounts and
transactions have been eliminated in consolidation.

These statements should be read in conjunction with the financial statements and
notes thereto included in the Company's annual report on Form 10-K for the year
ended December 31, 2003. Certain reclassifications have been made to prior years
10-Q financial statements to conform to current year presentation.

(2) Earnings Per Share

The following is a reconciliation of the numerators and denominators of the
basic and diluted EPS computations for the three-month periods ended June 30,
2004 and 2003:

<TABLE>
<CAPTION>
                                                                Weighted
                                                                Average
                                                                Shares          Per-Share
2004:                                           Earnings        Outstanding     Amount
                                                --------        -----------     ---------
<S>                                             <C>             <C>             <C>
Basic EPS:
         Earnings available to stockholders     $ 684,711       2,313,004       $.30

Effect of Dilutive Securities:
         Stock options                                 --          70,229
                                                ---------       ---------

Diluted EPS:
         Earnings available to stockholders     $ 684,711       2,383,233       $.29
                                                =========       =========       ====

2003:
Basic EPS:
         Earnings available to stockholders     $ 504,590       2,301,734       $.22

Effect of Dilutive Securities:
         Stock options                                 --          15,591
                                                ---------       ---------

Diluted EPS:
         Earnings available to stockholders     $ 504,590       2,317,325       $.22
                                                =========       =========       ====
</TABLE>


                                       7
<PAGE>

The following is a reconciliation of the numerators and denominators of the
basic and diluted EPS computations for the six-month periods ended June 30, 2004
and 2003:

<TABLE>
<CAPTION>
                                                               Weighted
                                                               Average
                                                               Shares         Per-Share
2004:                                            Earnings      Outstanding    Amount
                                                 --------      -----------    ---------
<S>                                             <C>             <C>           <C>
Basic EPS:
         Earnings available to stockholders     $1,204,035      2,301,357     $.52

Effect of Dilutive Securities:
         Stock options                                  --         64,495
                                                ----------     ----------

Diluted EPS:
         Earnings available to stockholders     $1,204,035      2,365,852     $.51
                                                ==========     ==========     ====

2003:
Basic EPS:
         Earnings available to stockholders     $  882,177      2,304,918     $.38

Effect of Dilutive Securities:
         Stock options                                  --         17,832
                                                ----------     ----------

Diluted EPS:
         Earnings available to stockholders     $  882,177      2,322,750     $.38
                                                ==========     ==========     ====
</TABLE>

(3) Supplemental Cash Flow Information

Income taxes refunds received during the six months ended June 30, 2004 was
$35,159 compared to income taxes paid of $216,100 for the six months ended June
30, 2003. Interest paid for the six months ended June 30, 2004 and 2003 was
$461,167 and $559,451, respectively.

(4) Comprehensive Income (Loss)

The following table summarizes reclassification adjustments for other
comprehensive income (loss) and the related tax effects for the six months ended
June 30, 2004 and 2003:

<TABLE>
<CAPTION>
                                                                                        2004              2003
                                                                                     -----------      -----------
<S>                                                                                  <C>              <C>
Unrealized losses on investments:
Unrealized holding losses arising during period                                      $(1,411,862)     $   209,248
Less reclassification adjustment for gains included in net income, net of income
   tax expense of $7,021 and $84,582 for 2004 and 2003, respectively                      13,630          164,189
Unrealized gain (loss) on derivatives qualifying as cash flow hedges                     106,325          (90,131)
                                                                                     -----------      -----------
Other comprehensive income (loss)                                                    $(1,319,167)     $   (45,072)
                                                                                     ===========      ===========
</TABLE>


                                       8
<PAGE>

(5) Stock-Based Compensation

The Company accounts for stock options under the recognition and measurement
principles of Accounting Principles Board Opinion No. 25 (APB 25), "Accounting
for Stock Issued to Employees", and related interpretations.

The stock options were awarded at an exercise price equal to the market value of
the underlying common stock on the date of the grant. Accordingly, there has
been no employee compensation cost recognized in earnings for the stock options.

FAS 123 provides an alternative to APB 25 whereby fair values may be ascribed to
options using a valuation model and amortized to compensation cost over the
vesting period of the options. The following tables illustrate the pro forma
effect on net income and earnings per share for each period indicated as if the
Company applied the fair value recognition provisions of FAS 123 to its stock
option program.

The pro forma fair value of stock-based compensation in the Company's Class A
Shares for the three and six months ended June 30, 2004 and 2003 is as follows:

<TABLE>
<CAPTION>
                                                                         Three Months Ended               Six Months Ended
                                                                     --------------------------      --------------------------
                                                                        2004            2003            2004           2003
                                                                     ----------      ----------      ----------      ----------
<S>                                                                  <C>                <C>           <C>               <C>
      Net earnings as reported                                       $  684,711         504,590       1,204,035         882,177
      Add: Stock-based employee compensation reported in net
        earnings, net of related tax effects                                 --              --              --              --
      Deduct: Stock-based compensation expense determined  under
        fair value based method, net of related tax effects             (37,083)        (32,067)       (155,930)        (64,134)
                                                                     ----------      ----------      ----------      ----------
      Net earnings, pro forma                                        $  647,628         472,523       1,048,105         818,043
                                                                     ==========      ==========      ==========      ==========

      Earnings per share
        Basic and diluted - as reported                               $.30/$.29       $.22/$.22       $.52/$.51       $.38/$.38
        Basic and diluted - pro forma                                 $.28/$.27       $.21/$.20       $.46/$.44       $.35/$.35
</TABLE>

The significant assumptions used during the year in estimating the fair value on
the date of the grant for options and granted in 2004 were as follows:

                                                                          2004
                                                                          ----
      Expected life of stock options, in years                               9
      Expected volatility of ACMAT stock                                    44%
      Risk-free interest rate                                              1.0
      Expected annual dividend yield                                        --
      Expected annual forfeiture rate                                       --

No options were granted in 2003.

(6) Investments

The Company's portfolio is comprised primarily of fixed maturity securities
rated AA or better by Standard and Poor's and includes mostly U.S. Treasuries
and tax-free municipal securities. The Company also makes investments in
collateralized mortgage obligations (CMOs).

                                       9
<PAGE>

Effective December 31, 2003, the Company adopted FASB Emerging Issues Task Force
(EITF) Issue 03-01, "The Meaning of Other-than-Temporary Impairment and Its
Application to Certain Investments (EITF 03-01). EITF 03-01 requires that
certain quantitative and qualitative disclosures be made for debt and marketable
equity securities classified as available for sale or held to maturity that are
impaired at the balance sheet date but for which an impairment has not been
recognized.

An investment in debt or equity security is impaired if its fair value falls
below its book value and the decline is considered to be other-than temporary.
Factors considered in determining whether a decline is other-than-temporary
include the length of time and the extent to which fair value has been below
cost, the financial condition and the near-term prospects of the issuer; and the
Company's ability and intent to hold the investment for a period of time
sufficient to allow for any anticipated recovery. Additionally, for certain
securitized financial assets with contractual cash flows (including asset backed
securities), EITF 99-20 requires the Company to periodically update its best
estimate of cash flows over the life of the security. If management determines
that the fair value of its securitized financial asset is less than its carrying
amount and there has been a decrease in the present value of the estimated cash
flows since the last revised estimate, considering both timing and amount, then
an other-than-temporary impairment charge is recognized. A debt security is
impaired if it is probable that the Company will not be able to collect all
amounts due under the security's contractual terms. Equity investments are
impaired when it becomes apparent that the Company will not recover its cost
over the expected holding period and consideration is given to the financial
condition of the issue. Further, for securities expected to be sold, an
other-than-temporary impairment charge is recognized if the Company does not
expect the fair value of a security to recover the cost prior to the expected
date of sale.

The Company's process for reviewing invested assets for impairments during any
quarter includes the following:

      o     Identification and evaluation of investments which have possible
            indications of impairment;

      o     Analysis of investments with gross unrealized investment losses that
            have fair value less than 80% of amortized cost during successive
            quarterly periods over a rolling one-year period;

      o     Management review of for other-than-temporary impairments based on
            the investee's current financial condition, liquidity, near term
            recovery prospects and other factors, as well as consideration of
            other investments that were not recommended for other-than-temporary
            impairments;

      o     Consideration of evidential matter, including an evaluation of
            factors or triggers that would or could cause individual investments
            to qualify as having other-than-temporary impairment and those that
            would not support other-than-temporary impairments;

      o     Determination of the status of each analyzed investment as
            other-than-temporary or not.

The gross unrealized investment losses and related fair value for fixed
maturities and equity securities at June 30, 2004 were as follows:

<TABLE>
<CAPTION>
                                                Less than 12 months           12 months or  longer                 Total
                                             --------------------------    --------------------------    --------------------------
                                                               Gross                        Gross                         Gross
                                                            Unrealized                    Unrealized                    Unrealized
                                             Fair Value        Loss        Fair Value        Loss        Fair Value        Loss
                                             -----------    -----------    -----------    -----------    -----------    -----------
<S>                                          <C>                 <C>         <C>              <C>         <C>               <C>
Fixed maturities:
United States government and
   government agencies                       $ 4,517,859         62,947      7,128,559        129,065     11,646,418        192,012
Mortgage-backed securities                     7,353,332        214,606      7,406,750        190,651     14,760,082        405,257
Industrial and miscellaneous                   1,776,422         33,578      3,851,500        148,500      5,617,922        182,078
                                             -----------    -----------    -----------    -----------    -----------    -----------
   Total fixed maturities                     13,637,613        311,131     18,386,809        468,216     32,024,422        779,347

Equity securities - common stocks:               175,700          9,300             --             --        175,700          9,300
Equity securities - redeemable preferred:      4,155,120        444,880      2,877,080        222,920      7,032,200        667,800
                                             -----------    -----------    -----------    -----------    -----------    -----------
   Total equity                                4,330,820        454,180      2,877,080        222,920      7,207,900        677,100
                                             -----------    -----------    -----------    -----------    -----------    -----------

   Total temporarily impaired securities     $17,968,433        765,311     21,263,889        691,136     39,232,322      1,456,477
                                             ===========    ===========    ===========    ===========    ===========    ===========
</TABLE>

For debt securities which are in an unrealized loss position as of June 30, 2004
these are losses generated by the increase in interest rates from the time these
securities were acquired. Our primary investment practice is to buy and hold
securities for the long term. Due to swings in the interest rate cycle, from
time to time we recognize there will be temporary unrealized gains and losses in
these fixed rate securities. Due to the positive cash flow nature of our
business, we have the ability and intent to hold these securities to maturity
and redemption at full par value. The Company has determined that all unrealized
losses at June 30, 2004 are temporary impairments.


                                       10
<PAGE>

(7) Accounting Changes

CONSOLIDATION OF VARIABLE INTEREST ENTITIES

In December 2003, the FASB issued Revised Interpretation No. 46R, "Consolidation
of Variable Interest Entities" (FIN 46R). FIN 46R clarifies the application of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements", to
certain entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. FIN 46R separates entities into two groups: (1)
those for which voting interests are used to determine consolidation and (2)
those for which variable interests are used to determine consolidation. FIN 46R
clarifies how to identify a variable interest entity and how to determine when a
business enterprise should include the assets, liabilities, non-controlling
interests and results of activities of a variable interest entity in its
consolidated financial statements. FIN 46R was effective for public companies
that have VIEs or potential VIEs that are special-purpose entities for periods
ending after December 15, 2003. Application by public companies for all other
types of entities is required for periods ending after March 15, 2004.

The Company holds mortgage-backed and asset-backed securities which are
considered variable interest entities. The adoption of FIN 46R did not have any
impact on the Company's results of operations or financial condition as no
consolidation was required.

HEDGING INSTRUMENTS

In April 2003, the FASB issued Statement of Financial Standards No.149,
"Amendment of Statement 133 on Derivative Investments and Hedging Activities"
(FAS 149), which amends and clarifies the accounting for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities under FAS 133. FAS 149 amends FAS 133 for decisions made as
part of the Derivatives Implementation Group process that effectively required
amendment to FAS 133. FAS 149 also clarifies under what circumstances a contract
with an initial net investment and purchases and sales of when-issued securities
that do not yet exist meet the characteristics of a derivative. In addition, it
clarifies when a derivative contains a Financing Component that warrants special
reporting in the statement of cash flows. FAS 149 is effective for contracts
entered into or modified after June 30, 2003 and for hedging relationships
designated after June 30, 2003. The adoption of FAS 149 did not have an impact
on the Company's results of operations, financial condition or liquidity.

(8) Segment Reporting

The Company has three reportable operating segments: ACMAT Contracting, ACSTAR
Bonding and United Coastal Liability Insurance. The Company's reportable
segments are primarily the three main legal entities of the Company, which offer
different products and services. The accounting policies of the segments are the
same as those described in the summary of significant accounting policies in the
Company's annual report on Form 10-K.

ACMAT Contracting provides construction contracting services to commercial and
governmental customers. ACMAT Contracting also provides underwriting services to
its insurance subsidiaries. In addition, ACMAT Contracting owns a commercial
office building in New Britain Connecticut and leases office space to its
insurance subsidiaries as well as third parties.

The United Coastal Liability Insurance operating segment offers specific lines
of liability insurance as an approved non-admitted excess and surplus lines
insurer in forty-six states, Puerto Rico, the Virgin Islands and the District of
Columbia. United Coastal offers claims made and occurrence policies for specific
specialty lines of liability insurance through certain excess and surplus lines
brokers who are licensed and regulated by the state insurance department(s) in
the state(s) in which they operate. United Coastal offers general, professional,
products, pollution, asbestos and lead liability insurance to specialty trade
contractors, environmental contractors, property owner, storage and treatment
facilities and professionals. United Coastal also offers products liability
insurance to manufacturers and distributors.

The Bonding operating segment provides, primarily through ACSTAR, surety bonds
written for prime, specialty trade, environmental, asbestos and lead abatement
contractors and miscellaneous obligations. ACSTAR also offers other
miscellaneous surety such as workers' compensation bonds, supply bonds,
subdivision bonds and license and permit bonds.


                                       11
<PAGE>

The Company evaluates performance based on earnings before income taxes and
excluding interest expense. The Company accounts for intersegment revenue and
expenses as if the products/services were to third parties. Information relating
to the three segments for the three and six-month periods ended June 30, 2004
and 2003 is summarized as follows:

<TABLE>
<CAPTION>
                                              Three Months ended               Six Months ended
                                         ---------------------------     ----------------------------
                                             2004           2003             2004            2003
                                         -----------     -----------     -----------      -----------
<S>                                      <C>               <C>             <C>              <C>
Revenues:
  ACSTAR Bonding                         $ 2,148,587       1,800,826       4,042,623        3,548,677
  United Coastal Liability Insurance       2,071,347       1,754,968       4,235,079        3,154,383
  ACMAT Contracting                        3,931,550       1,497,810       7,061,214        2,909,961
                                         -----------     -----------     -----------      -----------
                                         $ 8,151,484       5,053,604      15,338,916        9,613,021
                                         ===========     ===========     ===========      ===========

Operating Earnings (Loss):
  ACSTAR Bonding                         $   745,946         402,102       1,381,511        1,073,820
  United Coastal Liability Insurance         477,919         457,252       1,042,778          892,301
  ACMAT Contracting                           62,775         190,626         (87,483)         (57,684)
                                         -----------     -----------     -----------      -----------
                                         $ 1,286,640       1,049,980       2,336,806        1,908,437
                                         ===========     ===========     ===========      ===========

Depreciation and Amortization:
  ACSTAR Bonding                         $    51,205         189,095         107,619          319,120
  United Coastal Liability Insurance          14,146          57,693          44,494          203,304
  ACMAT Contracting                          114,478         122,004         229,244          243,802
                                         -----------     -----------     -----------      -----------
                                         $   179,829         368,792         381,357          766,226
                                         ===========     ===========     ===========      ===========
</TABLE>

Identifiable Assets:                        June 30, 2004      December 31, 2003
                                            ------------         ------------
  ACSTAR Bonding                            $ 86,753,237           73,704,644
  United Coastal Liability Insurance          39,963,974           41,015,316
  ACMAT Contracting                           17,923,234           17,709,897
                                            ------------         ------------
                                            $144,640,445          132,429,857
                                            ============         ============


The components of revenue for each segment for the three and six-month periods
ended June 30, 2004 and 2003 are as follows:

<TABLE>
<CAPTION>
                                             Three Months ended                  Six Months ended
                                        ----------------------------      ----------------------------
                                            2004             2003            2004             2003
                                        -----------      -----------      -----------      -----------
<S>                                     <C>                <C>              <C>              <C>
ACSTAR Bonding:
  Premiums                              $ 1,783,021        1,700,822        3,370,604        2,878,796
  Investment income, net                    384,263          248,840          724,494          572,326
  Capital gains                              20,651           22,649           20,651          202,794
  Other                                     (39,348)        (171,485)         (73,126)        (105,239)
                                        -----------      -----------      -----------      -----------
                                        $ 2,148,587        1,800,826        4,042,623        3,548,677
                                        ===========      ===========      ===========      ===========

United Coastal Liability Insurance:
  Premiums                              $ 1,744,489        1,417,371        3,556,490        2,499,200
  Investment income, net                    320,571          326,008          665,752          591,923
  Capital gains                                  --               --               --           45,977
  Other                                       6,287           11,589           12,837           17,283
                                        -----------      -----------      -----------      -----------
                                        $ 2,071,347        1,754,968        4,235,079        3,154,383
                                        ===========      ===========      ===========      ===========

ACMAT Contracting:
  Contract revenues                     $ 2,933,947          286,820        5,258,474        1,011,113
  Investment income, net                      3,240            1,818            6,956            7,232
  Intersegment revenue:
    Rental income                           248,247          232,040          426,949          410,742
    Underwriting services, agency
      commissions and funds
      administration services               626,818          718,971        1,134,101        1,133,997
  Other                                     119,298          258,161          218,084          346,877
                                        -----------      -----------      -----------      -----------
                                        $ 3,931,550        1,497,810        7,061,214        2,909,961
                                        ===========      ===========      ===========      ===========
</TABLE>


                                       12
<PAGE>

The following is a reconciliation of segment totals for revenue and operating
income to corresponding amounts in the Company's statement of earnings:

<TABLE>
<CAPTION>
                                                   Three Months ended              Six Months ended
                                                -------------------------     -------------------------
Revenue:                                           2004            2003          2004           2003
                                                ----------     ----------     ----------     ----------
<S>                                             <C>             <C>           <C>             <C>
      Total revenue for reportable segments     $8,151,484      5,053,604     15,338,916      9,613,021
      Intersegment eliminations                    705,539        701,426      1,250,819      1,255,650
                                                ----------     ----------     ----------     ----------
                                                $7,445,945      4,352,178     14,088,097      8,357,371
                                                ==========     ==========     ==========     ==========
</TABLE>

The adjustments and eliminations required to arrive at consolidated amounts
shown above consist principally of the elimination of the intersegment revenues
related to the performance of certain services and rental charges. Identifiable
assets are those assets that are used by each segment's operations. Foreign
revenues are not significant.

<TABLE>
<CAPTION>
Operating Earnings:
<S>                                            <C>              <C>            <C>            <C>
      Total operating earnings for reportable
        segments                               $ 1,286,640      1,049,980      2,336,806      1,908,437
      Interest expense                            (224,350)      (267,049)      (458,708)      (554,429)
                                               -----------    -----------    -----------    -----------
                                               $ 1,062,290        782,931      1,878,098      1,354,008
                                               ===========    ===========    ===========    ===========
</TABLE>

Operating earnings for ACMAT contracting are operating revenues less cost of
contract revenues and identifiable selling, general and administrative expenses.
Operating earnings for the bonding and liability insurance segments are revenues
less losses and loss adjustment expenses, amortization of policy acquisition
costs and identifiable, general and administrative expenses.


                                       13
<PAGE>

                                ACMAT CORPORATION

Item 2:  Management's Discussion and Analysis of
         Financial Conditions and Results of Operations

Management's discussion and analysis (MD&A) reviews our consolidated and segment
financial condition as of June 30, 2004 and December 31, 2003, our consolidated
results of operations for the three and six-month periods ended June 30, 2004
and 2003 and where appropriate, factors that may affect our future financial
performance. The MD&A should be read in conjunction with the consolidated
financial statements of the Company and related notes included in the Company's
annual report on Form 10-K for the year ended December 31, 2003.

EXECUTIVE SUMMARY

2004 Consolidated Results of Operations for the three months ended June 30,
2004 reflect:

o     Net earnings of $684,711, or $.30 per share basic and $.29 per share
      diluted.

o     Earned premiums increased 13%.

o     Favorable insurance premium rate environment.

o     Higher interest income and lower interest expense.

o     Higher construction contract revenues

2004 Financial Condition:

o     Total assets of $144.6 million, up $12.2 million from the prior year-end.

o     Total cash and invested assets of $117.4 million, up $15.1 million from
      the prior year-end.

o     Stockholders' Equity of $42 million, down $.1 million from the prior
      year-end reflecting decline in unrealized gains in investment portfolio.

o     Total debt reduced to $17.6 million from $19.1 million.

o     Cash flow provided from operations of $18.4 million, up from $10.3 million
      in the same period last year.

CONSOLIDATED OVERVIEW FOR THE THREE MONTHS ENDED JUNE 30, 2004:

                                              Three months ended June 30,
                                              ---------------------------
                                                2004               2003
                                              --------           --------
Net Earnings                                  $684,711            504,590
Basic Earnings Per Share                      $    .30           $    .22
Diluted Earnings Per Share                    $    .29           $    .22

The Company's discussions related to all items, other than net earnings, are
presented on a pretax basis, unless otherwise noted.

Net earnings were $684,711 or $.30 per share basic and $.29 per share diluted
for the three months ended June 30, 2004 compared to $504,590 or $.22 per share
basic and $.22 per share diluted for the same period in 2003. The increase in
net earnings for 2004 compared to 2003 is primarily due to an increase in earned
premiums, contract revenue and investment income. Net earnings for 2004
reflected the continuing favorable environment for the insurance operations in
2003 and 2004.

Consolidated revenues were as follows:

                                    Three months ended June 30,
                                    ---------------------------
                                       2004              2003
                                    ----------       ----------
      Contract revenues             $2,933,947          286,820
      Earned premium                 3,527,510        3,118,193
      Investment income                766,602          620,919
      Net realized capital gains        20,651           22,649
      Other income                     197,235          303,597
                                    ----------       ----------
         Consolidated revenues      $7,445,945        4,352,178
                                    ==========       ==========


                                       14
<PAGE>

Total consolidated revenues increased $3,093,767 or 71% for the three months
ended June 30, 2004 compared to the same period in 2003.

Contract revenues increased $2,647,127 or 923% for the three months ended June
30, 2004 compared to the same period in 2003 due primarily to the timing of four
large projects that were awarded in late 2003. Contract revenue depends greatly
on the successful securement of contracts bid and execution. The backlog at June
30, 2004 was $6,500,000 compared to $9,680,000 at December 31, 2003.

Earned premiums increased $409,317 or 13% for the three months ended June 30,
2004 compared to the same period in 2003 due to a 24% increase in net written
premiums in ACSTAR Bonding, primarily due to new business and strong customer
retention, offset by a 31% decrease in 2004 net written premiums in United
Coastal liability insurance. Net written premiums for United Coastal liability
insurance business for the three months ended June 30, 2004 compared to the same
period in 2003 decreased by 31% due to the non-renewal by several insureds with
large premium policies in 2004.

Investment income increased $145,683 or 23% for the three months ended June 30,
2004 compared to the same period in 2003 due primarily to higher average
invested assets resulting from strong cash flows from operations.

Net realized capital gains were $20,651 for the three months ended June 30, 2004
compared to $22,649 for the same period in 2003. The unrealized losses on the
debt securities as of June 30, 2004 are temporary. These losses are generated by
the increase in interest rates from the time these securities were acquired,
therefore there are no other than temporary impairments for the three months
ended June 30, 2004.

Other income decreased $106,362 or 35% for the three months ended June 30, 2004
compared to the same period in 2003. Other revenues consist primarily of rental
income and 2003 also included a one-time claim administration fee charged to
bonding customers.

Consolidated expenses for the three months ended June 30, 2004 were as follows:

                                            THREE MONTHS ENDED JUNE 30,
                                            ---------------------------
                                               2004             2003
                                            ----------       ----------
Cost of contract revenues                   $2,895,480          305,244
Losses and loss adjustment expenses          1,407,142        1,077,195
Amortization of policy acquisition costs       616,860          597,346
General and administrative expenses          1,239,823        1,322,413
Interest expense                               224,350          267,049
                                            ----------       ----------
                                            $6,383,655        3,569,247
                                            ==========       ==========

Consolidated expenses increased $2,814,408 or 79% for the three months ended
June 30, 2004 compared to the same period in 2003.

Cost of contract revenues increased $2,590,236 or 849% for the three months
ended June 30, 2004 compared to the same period in 2003. The 923% increase in
contract revenues in 2004 is due to the timing of four large projects that were
started later in 2003. The gross profit margin on construction projects was 1.3%
in 2004 compared to a gross loss of 6.0% in 2003. Gross margins fluctuate each
year based upon the profitability of specific projects.

Losses and loss adjustment expenses increased $329,947 or 31% for the three
months ended June 30, 2004 compared to the same period in 2003 primarily due to
the 13% increase in earned premiums and an increase in current year loss trends
for liability insurance.

Amortization of policy acquisition costs increased $19,514 or 3% for the three
months ended June 30, 2004 compared to the same period in 2003 primarily due to
the increase in earned premiums offset in part by a decrease in the average
commission rate.

General and administrative expenses decreased $82,590 or 6% for the three months
ended June 30, 2004 compared to the same period in 2003 primarily due to a
decrease in salary expense and depreciation expense.

Interest expense decreased $42,699 or 16% for the three months ended June 20,
2004 compared to the same period in 2003 primarily due to the decrease in
long-term debt.

The Company's effective tax rate was 35.5% and 35.6% for the three months ended
June 30 2004 and 2003, respectively.


                                       15
<PAGE>

Results of Operations by Segment For the Three Months Ended June 30, 2004:

The Company has three reportable operating segments: ACSTAR Bonding, United
Coastal Liability Insurance and ACMAT Contracting. The Company's reportable
segments are primarily the three main legal entities of the Company which offer
different products and services. The accounting policies of the segments are the
same as those described in the summary of significant accounting policies in the
Company's annual report on Form 10-K. The adjustments and eliminations required
to arrive at consolidated amounts shown above consist principally of the
elimination of the intersegment revenues related to the performance of certain
services and rental charges.

Operating earnings for ACMAT contracting are operating revenues less cost of
contract revenues and identifiable general and administrative expenses.
Operating earnings for the bonding and liability insurance segments are revenues
less losses and loss adjustment expenses, amortization of policy acquisition
costs and identifiable general and administrative expenses.


                               Three Months Ended June 30,
                               ---------------------------
ACSTAR BONDING:                  2004               2003
                               --------           --------
   Operating Earnings          $745,946           $402,102
                               --------           --------
   GAAP Combined Ratio             78.7%              82.2%
                               --------           --------

Operating earnings for the ACSTAR Bonding segment increased $343,844 or 86% for
the three month period ended June 30, 2004 compared to the same period in 2003.
The operating earnings in 2004 benefited from an increase in earned premiums,
investment income and a 3.5 point improvement in the GAAP combined ratio for the
three month period ended June 30, 2004 compared to the same period in 2003. The
improvement in the 2004 combined ratio results primarily from the increase in
earned premiums.

ACSTAR Bonding revenues for the three months ended June 30, 2004 were as
follows:

                               Three Months ended June 30,
                               ---------------------------
                                   2004            2003
                               -----------     -----------
Earned premium                 $ 1,783,021       1,700,822
Investment income                  384,263         248,840
Net realized capital gains          20,651          22,649
Other income (expense)             (39,348)       (171,485)
                               -----------     -----------
                               $ 2,148,587       1,800,826
                               ===========     ===========

Revenues increased $347,761 or 19% for the three month period ended June 30,
2004 compared to the same period in 2003.

Earned premiums increased $82,199 or 5% for the three month period ended June
30, 2004 compared to the same period in 2003 due to a 24% increase in net
written premiums primarily due to a growth in new business and strong customer
retention. ACSTAR continues to experience an increase in volume from an increase
in business opportunities that meet ACSTAR's underwriting requirements.

Investment income increased $134,423 or 54% for the three month period ended
June 30, 2004 compared to the same period in 2003 primarily as a result of
higher average invested assets resulting from strong cash flows from operations.
The average invested assets increased 37% to $77.8 million for the three months
ended June 30, 2004 compared to the same period in 2003. The increase in
investment income also resulted from an increase in investment yields to 1.98%
in 2004 from 1.76% in 2003.

Net realized capital gains were $20,651 for the three months ended June 30, 2004
compared to $22,649 for the same period in 2003.

Other income (expense) relates primarily to fees received from customers related
to funds administration services offset by the fees paid ACMAT to administer the
Funds Administration services. Funds administration fees, which represent
charges to bonding customers for administering payments to subcontractors and
vendors, fluctuates depending on the terms and conditions offered and accepted
for the bonding programs each year. The Funds Administration fees were $110,998
for the three months ended June 30, 2004 compared to $205,332 for the three
months ended June 30, 2003.


                                       16
<PAGE>

ACSTAR Bonding expenses for the three months ended June 30, 2004 compared to the
same period in 2003 were as follows:

                                             Three Months ended June 30,
                                             ---------------------------
                                                2004              2003
                                             ----------       ----------
Losses and loss adjustment expenses          $  534,897          510,247
Amortization of policy acquisition costs        541,229          564,737
General and administrative expenses             326,515          323,740
                                             ----------       ----------
                                             $1,402,641        1,398,724
                                             ==========       ==========

Expenses increased $3,917 or .3% for the three months ended June 30, 2004
compared to the same period in 2003.

Losses and loss adjustment expenses increased $24,650 or 5% for the three months
ended June 30, 2004 compared to the same period in 2003 primarily due to the
increase in earned premiums from higher business volume.

Amortization of policy acquisition costs decreased $23,508 or 4% for the three
months ended June 30, 2004 compared to the same period in 2003 primarily as a
result of the successful underwriting absorbing more of the fixed underwriting
costs.

General and administrative expenses increased $2,775 or 1% for the three months
ended June 30, 2004 compared to the same period in 2003.

UNITED COASTAL LIABILITY INSURANCE:

                           Three Months ended June 30,
                           ---------------------------
                             2004              2003
                          ----------        ----------
Operating Earnings        $  477,919        $  457,252
                          ----------        ----------
GAAP Combined Ratio             91.3%             91.6%
                          ----------        ----------

Operating earnings for the United Coastal Liability Insurance segment increased
$20,667 or 5% for the three months ended June 30, 2004 compared to the same
period in 2003. The operating earnings in 2004 benefited from a 23% increase in
earned premiums offset in part by an increase in current year loss trends.

United Coastal Liability Insurance revenues for the three months ended June 30,
2004 compared to the same period in 2003 were as follows:

                        Three months ended June 30,
                        ---------------------------
                           2004             2003
                        ----------       ----------
Earned premium          $1,714,489        1,417,371
Investment income          320,571          326,008
Other income                 6,287           11,589
                        ----------       ----------
                        $2,071,347        1,754,968
                        ==========       ==========

Revenues increased $316,379 or 18% for the three months ended June 30, 2004
compared to the same period in 2003.

Earned premiums increased $327,118 or 23% in 2004 for the three months ended
June 30, 2004 compared to the same period in 2003 due to a 73% increase in net
written premiums in 2003 offset in part by a 22% decrease in written premiums in
the first quarter of 2004. United Coastal business is comprised of insureds with
relatively large premium policies and each quarter can be impacted significantly
depending on the number of new policies written or non-renewals.

Investment income decreased $5,437 or 2% for the three months ended June 30,
2004 compared to the same period in 2003 as a result of lower average invested
assets resulting from dividends to the parent company in November 2003.

United Coastal Liability Insurance expenses for the three months ended June 30,
2004 were as follows:

                                               Three Months ended June 30,
                                               ---------------------------
                                                  2004             2003
                                               ----------       ----------
Losses and loss adjustment expenses            $  872,245          566,948
Amortization of policy acquisition costs          431,289          400,020
General and administrative expenses               289,894          330,748
                                               ----------       ----------
                                               $1,593,428        1,297,716
                                               ==========       ==========

Expenses increased $295,712 or 23% for the three months ended June 30, 2004
compared to the same period in 2003.


                                       17
<PAGE>

Losses and loss adjustment expenses increased $305,297 or 54% for the three
months ended June 30, 2004 compared to the same period in 2003 primarily due to
the 23% increase in earned premiums and an increase in current year loss trends
for liability insurance.

Amortization of policy acquisition costs increased $31,269 or 8% for the three
months ended June 30, 2004 compared to the same period in 2003 primarily due to
the 23% increase in earned premiums.

General and administrative expenses decreased $40,854 or 12% for the three
months ended June 30, 2004 compared to the same period in 2003 primarily due to
a decrease in depreciation expense.

                         THREE MONTHS ENDED JUNE 30
                         --------------------------
ACMAT CONTRACTING:         2004              2003
                         --------          --------
Operating Earnings       $ 62,775          $190,626
                         --------          --------

Operating earnings for the ACMAT Contracting segment decreased $127,851 or 67%
for the three months ended June 30, 2004 compared to the same period in 2003.

ACMAT Contracting revenues for the three months ended June 30, 2004 were as
follows:

                                                     Three months ended June 30
                                                     --------------------------
                                                        2004             2003
                                                     ----------      ----------
Contract revenues                                    $2,933,947         286,820
Investment income, net                                    3,240           1,818
Inter-segment revenue:
  Rental income                                         248,247         232,040
  Underwriting services, agency commissions and
    funds administration services                       626,818         718,971
Other income                                            119,298         258,161
                                                     ----------      ----------
                                                     $3,931,550       1,497,810
                                                     ==========      ==========

Contract revenues increased $2,647,127 or 923% for the three months ended June
30, 2004 compared to the same period a year ago due primarily to the timing of
four large projects that were started in late 2003. Contract revenue depends
greatly on the successful securement of contracts bid and execution. The backlog
at June 30, 2004 was $6,500,000 compared to $9,680,000 at December 31, 2003.

Inter-segment revenues consists primarily of rental income and underwriting
services, agency commissions and funds administration services. Underwriting
services fees and agency commissions decreased $92,153 or 13% for the three
months ended June 30, 2004 compared to the same period a year ago primarily due
to the decrease in Funds Administration fees. Other income consists primarily of
rental income and varies depending on the timing of tenants and their leases.
Other income decreased $138,863 or 54% for the three months ended June 30, 2004
compared to the same period a year ago due to the absence of a one-time claim
administration fee charged to ACSTA bonding customer.

ACMAT Contracting expenses for the three months ended June 30, 2004 were as
follows:

                                                2004             2003
                                             ----------       ----------
   Cost of contract revenues                 $2,895,480          305,244
   General and administrative expenses          973,295        1,001,940
                                             ----------       ----------
                                             $3,868,775        1,307,184
                                             ==========       ==========

Expenses increased $2,561,591 or 196% for the three months ended June 30, 2004
compared to the same period a year ago.

Cost of contract revenues increased $2,590,236 or 848% for the three months
ended June 30, 2004 compared to the same period a year ago primarily due to the
923% increase in contract revenues for the three months ended June 30, 2004
compared to the same period a year ago due to the timing of four large projects
that were awarded in late 2003. The gross profit margin on construction projects
was 1.3% in 2004 compared to a gross loss of 6.0% in 2003. Gross margins
fluctuate each year based upon the profitability of specific projects.

General and administrative expenses decreased $28,645 or 3% for the three months
ended June 30, 2004 compared to the same period a year ago primarily due to a
decrease in salary expense and depreciation expense.


                                       18
<PAGE>

CONSOLIDATED OVERVIEW FOR THE SIX MONTHS ENDED JUNE 30, 2004:


                                              Six months ended June 30,
                                              -------------------------
                                               2004             2003
                                              ----------     ----------
Net Earnings                                  $1,204,035        882,177
Basic Earnings Per Share                      $      .52     $      .38
Diluted Earnings Per Share                    $      .51     $      .38



Net earnings were $1,204,035 or $.52 per share basic and $.51 per share diluted
for the six months ended June 30, 2004 compared to $882,177 or $.38 per share
basic and $.38 per share diluted for the same period in 2003. The increase in
net earnings for 2004 compared to 2003 is primarily due to an increase in earned
premiums, contract revenue and investment income. Net earnings for 2004
reflected the continuing favorable rate environment for the insurance
operations in 2003 and 2004.

Consolidated revenues for the six months ended June 30, 2004 were as follows:

                                       Six months ended June 30,
                                       -------------------------
                                           2004          2003
                                       -----------   -----------
      Contract revenues                $ 5,258,474     1,011,113
      Earned premium                     6,927,094     5,377,996
      Investment income                  1,518,317     1,255,238
      Net realized capital gains            20,651       248,771
      Other income                         363,561       464,253
                                       -----------   -----------
         Consolidated revenues         $14,088,097     8,357,371
                                       ===========   ===========

Total consolidated revenues increased $5,730,726 or 69% for the six months ended
June 30, 2004 compared to the same period in 2003.

Contract revenues increased $4,247,361 or 420% for the six months ended June 30,
2004 compared to the same period in 2003 due primarily to the timing of four
large projects that were awarded in late 2003. Contract revenue depends greatly
on the successful securement of contracts bid and execution. The backlog at June
30, 2004 was $6,500,000 compared to $9,680,000 at December 31, 2003.

Earned premiums increased $1,549,098 or 29% for the six months ended June 30,
2004 compared to the same period in 2003 due to a 24% increase in net written
premiums in ACSTAR Bonding primarily due to a growth in new business and strong
customer retention offset by a 26% decrease in 2004 net written premiums in
United Coastal liability insurance. Net written premiums for United Coastal
liability insurance business for the six months ended June 30, 2004 compared to
the same period in 2003 decreased by 26% due to the non-renewal by several
insureds with large premium policies in 2004.

Investment income increased $263,079 or 21% for the six months ended June 30,
2004 compared to the same period in 2003 due primarily to higher average
invested assets resulting from strong cash flows from operations.

Net realized capital gains were $20,651 for the six months ended June 30, 2004
compared to $248,771 for the same period in 2003. During 2003, the Company sold
most of its tax-exempt investments in order to accelerate the use of an
alternative minimum tax credit carryforward generated with the recognition of
net life insurance proceeds in 2002 that were exempt for income tax purposes.

Other income decreased $100,692 or 22% for the six months ended June 30, 2004
compared to the same period in 2003. Other revenues consist primarily of rental
income and funds administration fees charged to bonding customers.


                                       19
<PAGE>

Consolidated expenses for the six months ended June 30, 2004 were as follows:

                                                 SIX MONTHS ENDED JUNE 30,
                                                 -------------------------
                                                     2004          2003
                                                 -----------   -----------
      Cost of contract revenues                  $ 5,205,496       943,629
      Losses and loss adjustment expenses          2,789,432     1,863,319
      Amortization of policy acquisition costs     1,266,116     1,024,696
      General and Administrative expenses          2,490,247     2,617,290
      Interest expense                               458,708       554,429
                                                 -----------   -----------
                                                 $12,209,999     7,003,363
                                                 ===========   ===========

Consolidated expenses increased $5,206,636 or 74% for the six months ended June
30, 2004 compared to the same period in 2003.

Cost of contract revenues increased $4,261,867 or 452% for the six months ended
June 30, 2004 compared to the same period in 2003 primarily due to the 420%
increase in contract revenues in 2004 due to the timing of four large projects
that were awarded later in 2003. The gross profit margin on construction
projects was 1.0% in 2004 compared to a gross loss of 7.2% in 2003. Gross
margins fluctuate each year based upon the profitability of specific projects.

Losses and loss adjustment expenses increased $926,113 or 50% for the six month
ended June 30, 2004 compared to the same period in 2003 primarily due to the 29%
increase in earned premiums and an increase in current year loss trends for
liability insurance.

Amortization of policy acquisition costs increased $241,420 or 24% for the six
months ended June 30, 2004 compared to the same period in 2003 primarily due to
the increase in earned premiums offset in part by a decrease in the average
commission rate.

General and administrative expenses decreased $127,043 or 5% for the six months
ended June 30, 2004 compared to the same period in 2003 primarily due to a
decrease in salary expense and depreciation expense.

Interest expense decreased $95,721 or 17% for the six months ended June 30, 2004
compared to the same period in 2003 primarily due to the decrease in long-term
debt.

The Company's effective tax rate was 35.9% and 34.8% for the six months ended
June 30 2004 and 2003, respectively. The 2004 increase in the effective tax rate
principally reflects the elimination of tax-exempt securities during the first
quarter of 2003.

Results of Operations by Segment For the Six Months Ended June 30, 2004:

                              Six Months Ended June 30,
                            ----------------------------
ACSTAR BONDING:                 2004            2003
                            ------------    ------------
  Operating Earnings        $  1,381,511    $  1,073,820
                            ------------    ------------
  GAAP Combined Ratio               79.0%           86.0%
                            ------------    ------------


Operating earnings for the ACSTAR Bonding segment increased $307,691 or 29% for
the six months ended June 30, 2004 compared to the same period in 2003. The
operating earnings in 2004 benefited from an increase in earned premiums,
investment income and a 7.0 point improvement in the GAAP combined ratio for the
six months ended June 30, 2004 compared to the same period in 2003. The
improvement in the 2004 combined ratio results primarily from the increase in
earned premiums. Operating earnings for the six months ended June 30, 2004 also
included realized capital gains of $20,651 compared to $202,794 for the same
period in 2003.

ACSTAR Bonding revenues for the six months ended June 30, 2004 were as follows:

                                Six Months ended June 30,
                               --------------------------
                                   2004           2003
                               -----------    -----------
  Earned premium               $ 3,370,604      2,878,796
  Investment income                724,494        572,326
  Net realized capital gains        20,651        202,794
  Other income (expense)           (73,126)      (105,239)
                               -----------    -----------
                               $ 4,042,623      3,548,677
                               ===========    ===========


                                       20
<PAGE>

Revenues increased $493,946 or 14% for the six months ended June 30, 2004
compared to the same period in 2003.

Earned premiums increased $491,808 or 17% for the six months ended June 30, 2004
compared to the same period in 2003 due to a 24% increase in net written
premiums primarily due to a growth in new business and strong customer
retention. ACSTAR continues to experience an increase in volume from an increase
in business opportunities that meet ACSTAR's underwriting requirements.

Investment income increased $152,168 or 27% for the six months ended June 30,
2004 compared to the same period in 2003 as a result of higher average invested
assets resulting from strong cash flows from operations. The average invested
assets increased 37% to $74.3 million for the six months ended June 30, 2004
compared to the same period in 2003. The increase in investment income was
offset by a decrease in investment yields to 1.95% in 2004 from 2.11% in 2003.

Net realized capital gains were $20,651 for the six months ended June 30, 2004
compared to $202,794 for the same period in 2003. During 2003, the Company sold
most of its tax-exempt investments in order to accelerate the use of an
alternative minimum tax credit carryforward generated with the recognition of
net life insurance proceeds in 2002 that were exempt for income tax purposes.

The unrealized losses on the debt securities as of June 30, 2004 are temporary.
Those losses are generated by the increase in interest rates from the time these
securities were acquired, therefore there are no other than temporary
impairments for the six months ended June 30, 2004.

Other income (expense) relates primarily to fees related to funds administration
services. Funds administration fees charged to bonding customers for
administering payments to subcontractors and vendors fluctuates, depending on
the terms and conditions offered and accepted for the bonding programs each
year.

ACSTAR Bonding expenses for the six months ended June 30, 2004 compared to the
same period in 2003 were as follows:

                                           Six Months ended June 30,
                                           -------------------------
                                              2004            2003
                                           ----------     ----------
Losses and loss adjustment expenses        $1,011,187        863,639
Amortization of policy acquisition costs    1,035,778        996,905
General and administrative expenses           614,147        614,313
                                           ----------     ----------
                                           $2,661,112      2,474,857
                                           ==========     ==========

ACSTAR Bonding expenses increased $186,255 or 8% for the six months ended June
30, 2004 compared to the same period in 2003.

Losses and loss adjustment expenses increased $147,548 or 17% for the six months
ended June 30, 2004 compared to the same period in 2003 primarily due to the
increase in earned premiums from higher business volume.

Amortization of policy acquisition costs increased $38,873 or 4% for the six
months ended June 30, 2004 compared to the same period in 2003.

General and administrative expenses decreased $166 for the six months ended
June 30, 2004 compared to the same period in 2003.

UNITED COASTAL LIABILITY INSURANCE:

                        Six Months ended June 30,
                      ----------------------------
                           2004           2003
                      ------------    ------------
Operating Earnings    $  1,042,778    $    892,301
                      ------------    ------------
GAAP Combined Ratio           89.8%           90.5%
                      ------------    ------------

Operating earnings for the United Coastal Liability Insurance segment increased
$150,477 or 17% for the six months ended June 30, 2004 compared to the same
period in 2003. The operating earnings in 2004 benefited from a 42% increase in
earned premiums offset in part by an increase in current year loss trends.

United Coastal Liability Insurance revenues for the six months ended June 30,
2004 compared to the same period in 2003 were as follows:

                             Six Months ended June 30,
                             -------------------------
                                2004           2003
                             ----------     ----------
Earned premium               $3,556,490      2,499,200
Investment income               665,752        591,923
Net realized capital gains           --         45,977
Other income                     12,837         17,283
                             ----------     ----------
                             $4,235,079      3,154,383
                             ==========     ==========


                                       21
<PAGE>

Revenues increased $1,080,696 or 34% for the six months ended June 30, 2004
compared to the same period in 2003.

Earned premiums increased $1,057,290 or 42% in 2004 for the six months ended
June 30, 2004 compared to the same period in 2003 due to a 73% increase in net
written premiums in 2003 offset in part by a 26% decrease in written premiums in
the first quarter of 2004 due to the non-renewal by several insureds with large
premium policies in 2004.

Investment income increased $73,829 or 12% for the six months ended June 30,
2004 compared to the same period in 2003 as a result of an increase in
investment yield offset in part by lower average invested assets resulting from
dividends to the parent company in November 2003. Investment yields increased to
3.91% for the six months ended June 30, 2004 from 3.29% for the same period a
year ago.

United Coastal Liability Insurance expenses for the six months ended June 30,
2004 were as follows:

                                           Six Months ended June 30,
                                           -------------------------
                                              2004           2003
                                           ----------     ----------
Losses and loss adjustment expenses        $1,778,245        999,680
Amortization of policy acquisition costs      877,365        693,733
General and administrative expenses           536,691        568,669
                                           ----------     ----------
                                           $3,192,301      2,262,082
                                           ==========     ==========

Expenses increased $930,219 or 41% for the six months ended June 30, 2004
compared to the same period in 2003.

Losses and loss adjustment expenses increased $778,565 or 78% for the six months
ended June 30, 2004 compared to the same period in 2003 primarily due to the 42%
increase in earned premiums and an increase in current year loss trends for
liability insurance.

Amortization of policy acquisition costs increased $183,632 or 26% for the six
months ended June 30, 2004 compared to the same period in 2003 primarily due to
the 42% increase in earned premiums.

General and administrative expenses decreased $31,978 or 6% for the six months
ended June 30, 2004 compared to the same period in 2003 primarily due to a
decrease in depreciation expense.

                            SIX MONTHS ENDED JUNE 30
                            ------------------------
ACMAT CONTRACTING:             2004         2003
                            ---------     ---------
Operating Earnings (Loss)   $ (87,483)    $ (57,684)
                            ---------     ---------

Operating losses for the ACMAT Contracting segment increased $29,799 or 52% for
the six months ended June 30, 2004 compared to the same period in 2003.

ACMAT Contracting revenues for the six months ended June 30, 2004 were as
follows:

                                                  Six Months ended June 30
                                                  ------------------------
                                                     2004          2003
                                                  ----------    ----------
Contract revenues                                 $5,258,474     1,011,113
Investment income, net                                 6,956         7,232
Inter-segment revenue:
  Rental income                                      426,949       410,742
  Underwriting services, agency commissions and
        funds administration services              1,134,101     1,133,997
Other income                                         218,084       346,877
                                                  ----------    ----------
                                                  $7,061,214     2,909,961
                                                  ==========    ==========

Contract revenues increased $4,247,361 or 420% for the six months ended June 30,
2004 compared to the same period a year ago due primarily to the timing of four
large projects that were awarded in late 2003. Contract revenue depends greatly
on the successful securement of contracts bid and execution. The backlog at June
30, 2004 was $6,500,000 compared to $9,680,000 at December 31, 2003.

Inter-segment revenues consists primarily of rental income and underwriting
services fees, agency commissions and funds administration services.
Underwriting services fees, agency commissions and funds administration services
increased $104 for the six months ended June 30, 2004 compared to the same
period a year ago. Other income consists primarily of rental income and varies
depending on the timing of tenants and their leases. Other income decreased
$128,359 or 23% for the six months ended June 30, 2004 compared to the same
period a year ago due to the absence of a one-time claim administration fee
charged to ACSTAR bonding customers.


                                       22
<PAGE>

ACMAT Contracting expenses for the six months ended June 30, 2004 were as
follows:

                                                 2004           2003
                                              ----------     ----------
      Cost of contract revenues               $5,205,496        943,629
      General and administrative expenses      1,943,201      2,024,016
                                              ----------     ----------
                                              $7,148,697      2,967,645
                                              ==========     ==========

Expenses increased $4,181,052 or 141% for the six months ended June 30, 2004
compared to the same period a year ago.

Cost of contract revenues increased $4,261,867 or 452% for the six months ended
June 30, 2004 compared to the same period a year ago primarily due to the 420%
increase in contract revenues for the three months ended June 30, 2004 compared
to the same period a year ago due to the timing of four large projects that were
started in late 2003. The gross profit margin on construction projects was 0.2%
in 2004 compared to 0.7% in 2003. The gross profit of the four current projects
was offset by costs associated with closing out older projects. Gross margins
fluctuate each year based upon the profitability of specific projects.

General and administrative expenses decreased $80,815 or 4% for the six months
ended June 30, 2004 compared to the same period a year ago primarily due to a
decrease in salary expense and depreciation expense.

CRITICAL ACCOUNTING ESTIMATES

The Company considers its most significant accounting estimates to be those
applied to reserves for losses and loss adjustment expenses and revenue
recognition on construction projects using the percentage of completion method.

Reserves for losses and loss adjustment expenses were $22,392,221 at June 30,
2004. The Company maintains reserves to cover estimated ultimate unpaid
liability for losses and loss adjustment expenses with respect to both reported
and incurred but not reported claims for insured risks incurred as of the end of
each accounting period. The amount of loss reserves for reported claims is
primarily based upon a case-by-case evaluation of the type of risk involved,
knowledge of the circumstances surrounding each claim and the policy provisions
relating to the type of claim. As part of the reserving process, historical data
is reviewed and consideration is given to the anticipated impact of various
factors such as legal developments and economic conditions, including the
effects of inflation. Reserves are monitored and evaluated periodically using
current information on reported claims. This is a critical accounting policy for
the insurance operations.

Management believes that the reserves for losses and loss adjustment expenses at
June 30, 2004 are adequate to cover the unpaid portion of the ultimate net cost
of losses and loss adjustment expenses, including losses incurred but not
reported. Reserves for losses and loss adjustment expenses are estimates at any
given point in time of what the Company may have to pay ultimately on incurred
losses, including related settlement costs based on facts and circumstances then
known. The Company also reviews its claims reporting patterns, past loss
experience, risk factors and current trends and considers their effect in the
determination of estimates of incurred but not reported reserves. Ultimate
losses and loss adjustment expenses are affected by many factors which are
difficult to predict, such as claim severity and frequency, inflation levels and
unexpected and unfavorable judicial rulings. Reserves for surety claims also
consider the amount of collateral held as well as the financial strength of the
principal and its indemnitors.

Revenue on construction contracts is recorded using the percentage of completion
method. Under this method revenues with respect to individual contracts are
recognized in the proportion that costs incurred to date relate to total
estimated costs. Revenues and cost estimates are subject to revision during the
terms of the contracts, and any required adjustments are made in the periods in
which the revisions become known. Provisions are made, where applicable, for the
entire amount of anticipated future losses on contracts in progress.
Construction claims are recorded as revenue at the time of settlement and profit
incentives and change orders are included in revenues when their realization is
reasonably assured. General and administrative expenses are not allocated to
contracts. This is a critical accounting policy for the ACMAT construction
segment.

LIQUIDITY AND CAPITAL RESOURCES:

The Company internally generates sufficient funds for its operations and
maintains a relatively high degree of liquidity in its investment portfolio. The
primary sources of funds to meet the demands of claim settlements and operating
expenses are premium collections, investment earnings and maturing investments.
The Company has no material commitments for capital expenditures and, in the
opinion of management, has adequate sources of liquidity to fund its operations
over the next year.


                                       23
<PAGE>

ACMAT, exclusive of its subsidiaries, has incurred negative cash flows from
operating activities primarily because of interest expense related to long-term
debt incurred by ACMAT to acquire and capitalize its insurance subsidiaries and
to repurchase Company stock.

ACMAT's principal sources of funds are dividends from its wholly-owned
subsidiaries, insurance underwriting fees from its subsidiaries, construction
contracting operations and rental income. Management believes that these sources
of funds are adequate to service its indebtedness. ACMAT has relied on dividends
from its insurance subsidiaries to repay debt.

The Company had net cash flow inflows from operations of $18,426,789 and
$10,338,203 for the six-month period ended June 30, 2004 and 2003, respectively.
The cash flow from operations is due primarily to the increase in cash
collateral. The Company's cash flow was used to repay long-term debt and
repurchase stock and purchase investments.

Net cash used for investing activities in the first six-months of 2004 amounted
to $18,842,730 compared to $17,863,243 for the same period in 2003. Purchases of
investments are made based upon excess cash available after the payment of
losses and loss adjustment expenses and other expenses. The Company's short term
investment strategy coincides with the relatively short maturity of its
liabilities which are comprised primarily of reserves for losses covered by
claims-made insurance policies, reserves related to surety bonds and collateral
held for surety obligations.

The terms of the Company's note agreements contain limitations on payment of
cash dividends, re-acquisition of shares, borrowings and investments and require
maintenance of specified ratios and minimum net worth levels, including cross
default provisions. The payment of future cash dividends and re-acquisition of
shares are restricted. The Company was in compliance with the covenants at June
30, 2004.

The Company maintains a short-term unsecured bank credit line totaling $10
million to fund interim cash requirements. There were no borrowings under this
line of credit as of June 30, 2004.

During the six-month period ended June 30, 2004, the Company purchased, in the
open market and privately negotiated transactions, 4,026 shares of its Common
Stock at an average price of $11.58 per share. During the six-month period ended
June 30, 2004, the Company also purchased, in the open market and privately
negotiated transactions, 53,727 shares of its Class A Stock at an average price
of $13.13 per share.

The Company's principal source of cash for repayment of long-term debt is from
dividends from its two insurance companies. Under applicable insurance
regulations, ACMAT's insurance subsidiaries are restricted as to the amount of
dividends they may pay to their respective holding companies, without the prior
approval of their domestic State insurance department. The amount of dividends
ACMAT's insurance subsidiaries may pay, without prior approval of their domestic
State insurance departments, are limited to approximately $3,920,000 in 2004.

REGULATORY ENVIRONMENT

Risk-based capital requirements are used as early warning tools by the National
Association of Insurance Commissioners and the states to identify companies that
require further regulatory action. The ratio for each of the Company's insurance
subsidiaries as of December 31, 2003 was above the level which might require
regulatory action.

CONTRACTUAL CASH OBLIGATIONS AND COMMITMENTS:

Contractual obligations at June 30, 2004 include the following:

<TABLE>
<CAPTION>
Payment due by Period             Total            2004         2005/2006       2007/2008      After 2008
                               -----------     -----------     -----------     -----------     -----------
<S>                            <C>             <C>             <C>             <C>             <C>
Long-Term Debt (principal)     $17,634,733     $ 1,235,836     $ 5,091,305     $ 5,359,166     $ 5,948,426
</TABLE>

The Company also has cash collateral of $52,257,201 at June 30, 2004, which it
would be required to return at the end of expiration of applicable bond period
subject to any claims.

FORWARD-LOOKING STATEMENT DISCLOSURE AND CERTAIN RISKS

This report contains certain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
are statements other than historical information or statements of current
condition. Words such as "expects", "anticipates", "intends", "plans",
"believes", "seeks", or "estimates", or variations of such words, and similar
expressions are intended to identify forward-looking statements.

In light of the risks and uncertainties inherent in future projections, many of
which are beyond our control, actual results could differ materially from those
in forward-looking statements. These statements should not be regarded as a


                                       24
<PAGE>

representation that anticipated events will occur or that expected objectives
will be achieved. Risks and uncertainties include, but are not limited to, the
following:

o     Changes in the demand for, pricing of, or supply of our products;

o     Performance of the Company's investment portfolios which could be
      adversely impacted by adverse developments in the financial markets,
      interest rates and rates of inflation;

o     Additional statement of earnings charges if our loss reserves are
      insufficient;

o     The possibility that claims cost trends that we anticipate in our
      businesses may not develop as we expect;

o     The possibility of downgrades in our ratings significantly adversely
      affecting us, including, but not limited to, reducing the number of
      insurance policies we write, generally, or causing clients who require an
      insurer with a certain rating level to use higher-rated insurers;

o     The risk that our subsidiaries may be unable to pay dividends to us in
      sufficient amounts to enable us to meet our obligations;

o     The cyclicality of the property-liability insurance industry causing
      fluctuations in our results.

o     The adverse developments in the cost and availability of reinsurance;

o     The adverse developments in the ability to collect from reinsurers.


                                       25
<PAGE>

Part II - Other Information

Item 2 - Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities

e. The following table provides information about purchases by the Company
during the six months ended June 30, 2004 of equity securities that are
registered by the company pursuant to Section 12 of the Exchange Act.

                      ISSUER PURCHASE OF EQUITY SECURITIES

<TABLE>
<CAPTION>
                      (a)                  (b)              (c)                 (d)
                                                                                 Maximum Number
                                                                                (or Approximate
                                                             Total Number of    Dollar Value) of
                                                            Shares (or Units)   Shares (or Units)
                       Total Number of                      Purchased as Part   that May Yet Be
                         Shares (or        Average Price       of Publicly      Purchased Under
Period                      Units)            Paidper        Announced Plans      the Plans or
                        Purchased (1)       Share(or Unit)   or Programs (2)      Programs  (2)
                      Common   Class A    Common   Class A
<C>                    <C>      <C>       <C>        <C>     <C>                <C>
1/01/04 - 1/31/04        526     1,026    $11.75     $12.63  N/A                N/A
2/01/04 - 2/29/04      1,500        --    $11.75         --  N/A                N/A
3/01/04 - 3/31/04         --        --         --        --  N/A                N/A
4/01/04 - 4/30/04      2,000    52,701    $11.40     $13.14  N/A                N/A
5/01/04 - 5/31/04         --        --        --         --  N/A                N/A
6/01/04 - 6/30/04         --        --        --         --  N/A                N/A
                       -----    ------    ------     ------
TOTAL                  4,026    53,727    $11.58     $13.13
</TABLE>

(1)   During the six-months ended June 30, 2004, the Company purchased, in the
      open market and privately negotiated transactions, 4,026 shares of its
      Common Stock at an average price of $11.58 per share. In addition, the
      Company purchased, in the open market and privately negotiated
      transactions, 53,727 shares of its Class A Stock at an average price of
      $13.13 per share during the six-month period ended June 30, 2004.

(2)   The Company does not have any stock repurchase plans or programs. Shares
      were purchased in the open market and privately negotiated transactions
      and as a result disclosure requirements in columns (c) and (d) are not
      applicable (N/A).

Item 4. - Submission of Matters to a Vote of Security Holders

      a.    The Annual Meeting of Stockholders of ACMAT Corporation was held on
            Thursday, June 24, 2004.

      b.    Directors elected at the meeting:

                                Votes        Votes        Brokers
                                 For        Against      Non-Votes

      Henry Nozko III          686,761      11,509          --
      Henry Nozko, Jr          686,781      11,489          --
      Victoria Nozko           686,541      11,729          --
      John Creasy              686,581      11,689          --
      Arthur Moore             697,450         810          --
      Andrew Sullivan, Jr      697,463         807          --

      c. Other matters voted upon:
                                                                        Brokers
                                         For      Against    Abstain   Non-Votes
      1. Appointment of
         Independent Auditors          697,561       610       316        --

      2. Approval of stock options     579,363    82,604       316        --


                                       26
<PAGE>

Item 5 -  Controls and Procedures

The Company maintains a system of internal controls and procedures designed to
provide reasonable assurance as to the reliability of our published financial
statements and other disclosures included in this report. Within the 90-day
period prior to the date of this report, we evaluated the effectiveness of the
design and operation of our disclosure controls and procedures pursuant to Rule
13a-14 of the Securities Exchange Act of 1934. Based upon that evaluation, our
Chief Executive Officer and our Principal Financial Officer concluded that our
disclosure controls and procedures are effective in timely alerting them to
material information relating to ACMAT Corporation (including its consolidated
subsidiaries) required to be included in this quarterly report on Form 10-Q.

There have been no significant changes in our internal controls or in other
factors which could significantly affect internal controls subsequent to the
date that we carried out our evaluation.


Item 6 -  Exhibits and Reports on Form 8-K

      a.    Exhibits:

            31.1 Certification of Chief Executive Officer as required by Section
                 302 of the Sarbanes-Oxley Act of 2002

            31.2 Certification of Chief Financial Officer as required by Section
                 302 of the Sarbanes-Oxley Act of 2002

            32.1 Certification of Chief Executive Officer, as required by
                 Section 906 of the Sarbanes-Oxley Act of 2002

            32.2 Certification of Chief Financial Officer, as required by
                 Section 906 of the Sarbanes-Oxley Act of 2002

      b.    Report on Form 8-K - None


                                       27
<PAGE>

                                   SIGNATURES


Pursuant to the requirements of Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.


                                      ACMAT CORPORATION


Date:  August 13, 2004                /S/ Henry W. Nozko, Jr.
                                      -----------------------------------------
                                      Henry W. Nozko, Jr., President, Chairman,
                                      Chief Operating Officer, and Treasurer


Date:  August 13, 2004                /S/ Michael P. Cifone
                                      -----------------------------------------
                                      Michael P. Cifone, Senior Vice President,
                                      Chief Financial Officer
                                      (Principal Financial & Accounting Officer)


                                       28