<PAGE>
                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, 2003

                                       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 filed (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.

<TABLE>
<CAPTION>
                                                              Shares outstanding
Title of Class                                                at July 31, 2003
--------------                                                ------------------
<S>                                                           <C>
   Common Stock                                                      551,355
   Class A Stock                                                   1,745,104
</TABLE>
<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 Consolidated Financial Statements                      7

   Item 2.    Management's Discussion and Analysis of
              Financial Conditions and Results of Operations                 13

Part II  OTHER INFORMATION

   Item 4.    Submission of Matters to a Vote of Security Holders            18

   Item 5.    Other Matters                                                  18

   Item 6.    Exhibits and Reports on Form 8-K                               18

   Signatures                                                                19


                                       2
<PAGE>
Part I Financial Information
Item I Financial Statements

                       ACMAT CORPORATION AND SUBSIDIARIES
                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                              June 30,       December 31,
Assets                                                                          2003             2002
------                                                                      -------------    ------------
                                                                             (Unaudited)
<S>                                                                         <C>              <C>
Investments:
   Fixed maturities-available for sale at fair value (Amortized Cost of
   $58,231,774 in 2003 and $59,872,707 in 2002)                             $ 59,009,975      60,919,291
   Equity securities, at fair value (Cost of $7,665,262 in 2003 and
   $6,700,559 in 2002                                                          8,085,914       6,697,150
   Short-term investments, at cost which approximates fair value              20,358,346       2,132,966
                                                                            ------------     -----------
      Total investments                                                       87,454,235      69,749,407
Cash and cash equivalents                                                      9,888,071      18,724,560
Accrued interest receivable                                                      367,243         452,724
Receivables, net                                                               2,856,603       2,580,046
Reinsurance recoverable                                                        9,903,050       8,383,894
Prepaid expenses                                                                 229,480         161,712
Income tax receivable                                                            141,563         308,459
Deferred income taxes                                                          2,523,419       2,639,582
Property & equipment, net                                                     11,444,473      11,723,140
Deferred policy acquisition costs                                              1,720,197       1,270,669
Other assets                                                                   3,431,510       4,050,210
Intangibles                                                                    1,920,360       1,920,360
                                                                            ------------     -----------
                                                                             131,880,204     121,964,763
                                                                            ============     ===========
Liabilities & Stockholders' Equity
----------------------------------

Accounts payable                                                               1,056,170       2,260,950
Reserves for losses and loss adjustment expenses                              25,904,916      25,642,865
Unearned premiums                                                              6,563,491       4,660,194
Collateral held                                                               35,250,814      25,991,045
Other accrued liabilities                                                      1,213,528       1,044,080
Long-term debt                                                                20,314,632      21,511,921
                                                                            ------------     -----------
      Total liabilities                                                       90,303,551      81,111,055

Commitments and contingencies

Stockholders' Equity:
   Common Stock (No par value; 551,355 shares authorized;
      and 553,355 shares issued and outstanding)                                 551,355         553,355
   Class A Stock (No par value; 1,745,105 shares authorized;
      and 1,756,405 shares issued and outstanding)                             1,745,105       1,756,405
   Retained earnings                                                          38,753,907      37,972,590
   Accumulated other comprehensive income                                        526,286         571,358
                                                                            ------------     -----------
   Total Stockholders' Equity                                                 41,576,653      40,853,708
                                                                            ------------     -----------
                                                                            $131,880,204     121,964,763
                                                                            ============     ===========
</TABLE>

See Notes to 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
                                             -------------------------      --------------------------
                                                2003           2002            2003            2002
                                             ----------     ----------      ----------     -----------
<S>                                          <C>            <C>             <C>            <C>
Contract revenues                            $  286,820      6,634,068       1,011,113      11,801,599
Earned premiums                               3,118,193      2,058,341       5,377,996       3,597,877
Investment income, net                          620,919        913,114       1,255,238       1,797,627
Net realized capital gains (losses)              22,649           (691)        248,771          16,962
Life insurance proceeds, net                         --             --              --       3,348,903
Other income                                    303,597        265,357         464,253         368,357
                                             ----------     ----------      ----------     -----------
                                              4,352,178      9,870,189       8,357,371      20,931,325
                                             ----------     ----------      ----------     -----------

Cost of contract revenues                       305,244      6,937,171         943,629      12,611,912
Losses and loss adjustment expenses           1,077,195        496,680       1,863,319       3,078,223
Amortization of policy acquisition costs        597,346        416,256       1,024,696         848,819
General and administrative expenses           1,322,413      1,254,136       2,617,290       2,694,679
Interest expense                                267,049        505,868         554,429       1,043,082
                                             ----------     ----------      ----------     -----------
                                              3,569,247      9,610,111       7,003,363      20,276,715
                                             ----------     ----------      ----------     -----------

Earnings before income taxes (benefits)         782,931        260,078       1,354,008         654,610

Income taxes (benefits)                         278,341       (546,085)        471,831        (888,862)
                                             ----------     ----------      ----------     -----------

Net earnings                                 $  504,590        806,163         882,177       1,543,472
                                             ==========     ==========      ==========     ===========

Basic earnings per share                     $      .22            .34             .38             .65

Diluted earnings per share                   $      .22            .33             .38             .63
</TABLE>

See Notes to Consolidated Financial Statements.


                                       4
<PAGE>
                       ACMAT CORPORATION AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
                             June 30, 2003 and 2002

<TABLE>
<CAPTION>
                                                                                      Accumulated
                                              Common        Class A                      Other          Total
                                             Stock Par     Stock Par     Retained    Comprehensive  Stockholders'
                                               Value         Value       Earnings       Income         Equity
                                            ------------  -----------  ------------  -------------  -------------
<S>                                         <C>           <C>          <C>           <C>            <C>
Balance as of December 31, 2001             $   557,589    1,827,019    35,460,226      127,341       37,972,175

Comprehensive income:

    Net unrealized gains on debt
     and equity securities                           --           --            --      313,534          313,534

    Net earnings                                     --           --     1,543,472           --        1,543,472
                                                                                                     -----------

Total comprehensive income                                                                             1,857,006

    Acquisition and retirement of
     4,234 shares of Common Stock                (4,234)          --       (76,255)          --          (80,489)

    Acquisition and retirement of
     9,500 shares of Class A Stock                   --       (9,500)      (83,390)          --          (92,890)

    Exercise of 7,500 shares of Class A
     Stock pursuant to Stock options                 --        7,500        46,875           --           54,375
                                            -----------   ----------   -----------     --------      -----------

Balance as of June 30, 2002                 $   553,355    1,825,019    36,890,928      440,875       39,710,177
                                            ===========   ==========   ===========     ========      ===========

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                           --           --            --       45,059           45,059

    Net unrealized losses on
     derivatives qualifying as 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
                                            ===========   ==========   ===========     ========      ===========
</TABLE>

See Notes to Consolidated Financial Statements.


                                       5
<PAGE>
                       ACMAT CORPORATION AND SUBSIDIARIES
                Consolidated Statements of Cash Flows (Unaudited)
                    Six Months Ended June 30, 2003 and 2002
<TABLE>
<CAPTION>
                                                                                         2003              2002
                                                                                     -------------     ------------
<S>                                                                                  <C>               <C>
Cash flows from operating activities:
     Net earnings                                                                    $    882,177        1,543,472
     Adjustments to reconcile net earnings to net cash used for
       operating activities:
        Depreciation and amortization                                                     766,226          532,199
        Net realized capital (gains) losses                                              (248,771)         (16,962)
        Changes in:
            Accrued interest receivable                                                    85,481          172,242
            Reinsurance recoverable                                                    (1,519,156)      (3,392,266)
            Receivables, net                                                             (276,557)      (3,018,679)
            Deferred policy acquisition costs                                            (449,528)        (110,420)
            Prepaid expenses and other assets                                             550,932        1,884,807
            Accounts payable and other accrued liabilities                             (1,133,449)       2,137,883
            Reserves for losses and loss adjustment expenses                              262,051        4,811,858
            Collateral held                                                             9,259,769          456,608
            Income taxes, net                                                             255,731       (1,417,166)
            Unearned premiums                                                           1,903,297          471,012
                                                                                     ------------      -----------
                 Net cash provided by operating activities                             10,338,203        4,054,588
                                                                                     ------------      -----------

Cash flows from investing activities:
     Proceeds from investments sold or matured:
        Fixed maturities-sold                                                           6,652,707        4,395,321
        Fixed maturities-matured                                                       20,481,634        8,590,000
        Equity securities                                                               2,082,649          636,490
        Short term investments                                                          7,457,791        4,407,970
     Purchases of:
        Fixed maturities                                                              (25,656,946)     (12,232,708)
        Equity securities                                                              (3,100,000)      (2,275,000)
        Short-term investments                                                        (25,683,172)      (5,728,097)
     Capital expenditures                                                                 (97,906)        (153,706)
                                                                                     ------------      -----------
            Net cash used for investing activities                                    (17,863,243)      (2,359,730)
                                                                                     ------------      -----------

Cash flows from financing activities:
     Repayments on long-term debt                                                      (1,197,289)      (1,990,379)
     Issuance of Class A Stock                                                                 --           54,375
     Payments for acquisition & retirement of stock                                      (114,160)        (173,377)
                                                                                     ------------      -----------
            Net cash used for financing activities                                     (1,311,449)      (2,109,381)
                                                                                     ------------      -----------

Net change in cash                                                                     (8,836,489)        (414,523)

Cash at beginning of period                                                            18,724,560       12,784,806
                                                                                     ------------      -----------

Cash at end of period                                                                $  9,888,071       12,370,283
                                                                                     ============      ===========
</TABLE>

See Notes to 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, 2002.

(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,
2003 and 2002:

<TABLE>
<CAPTION>
                                                                    Weighted
                                                                    Average
                                                                    Shares          Per-Share
2003:                                                Earnings       Outstanding     Amount
-----                                                --------       -----------     ------
<S>                                                  <C>            <C>             <C>
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
                                                     ========       =========       ====

2002:
-----
Basic EPS:

            Earnings available to stockholders       $806,163       2,379,032       $.34

Effect of Dilutive Securities:
            Stock options                                  --          68,423
                                                     ---------       --------

Diluted EPS:
            Earnings available to stockholders       $806,163       2,447,455       $.33
                                                     ========       =========       ====
</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, 2003
and 2002:

<TABLE>
<CAPTION>
                                                                        Weighted
                                                                        Average
                                                                        Shares           Per-Share
2003:                                                 Earnings          Outstanding      Amount
-----                                                 --------          -----------      ------
<S>                                                   <C>               <C>              <C>
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
                                                      ==========        =========        ====

2002:
Basic EPS:

            Earnings available to stockholders        $1,543,472        2,380,529        $.65

Effect of Dilutive Securities:
            Stock options                                     --           62,783
                                                      ----------        ---------

Diluted EPS:
            Earnings available to stockholders        $1,543,472        2,443,312        $.63
                                                      ==========        =========        ====
</TABLE>

      The Convertible Notes were anti-dilutive in 2003 and 2002.

(3) Supplemental Cash Flow Information

Income taxes paid during the six months ended June 30, 2003 and 2002 was
$216,100 and $538,302, respectively. Interest paid for the six months ended June
30, 2003 and 2002 was $559,451 and $1,098,178, respectively.

(4) Comprehensive Income

The following table summarizes reclassification adjustments for other
comprehensive income and the related tax effects for the six months ended June
30, 2003 and 2002:

<TABLE>
<CAPTION>
                                                                                       2003         2002
                                                                                     --------     --------
<S>                                                                                  <C>          <C>
Unrealized gains on investments:
Unrealized holding gain arising during period                                        $209,248     $324,729
Less reclassification adjustment for gains included in net income, net of income
  tax expense of $84,582 and $5,767 for 2003 and 2002, respectively                   164,189       11,195
                                                                                     --------     --------
Other comprehensive income                                                           $ 45,059     $313,534
                                                                                     ========     ========
</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, 2003 and 2002 is as follows:

<TABLE>
<CAPTION>
                                                               Three Months Ended           Six Months Ended
                                                              ----------------------     -----------------------
                                                                 2003         2002         2003           2002
                                                              ----------     -------     ---------     ---------
<S>                                                           <C>            <C>         <C>           <C>
Net earnings as reported                                      $ 504,590      806,163      882,177      1,543,472
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       (32,067)          --      (64,134)            --
                                                              ---------      -------     --------      ---------
Net earnings, pro forma                                       $ 472,523      806,163      818,043      1,543,472
                                                              =========      =======     ========      =========
Earnings per share
  Basic and diluted - as reported                             $.22/$.22      .34/.33      .38/.38        .65/.63
  Basic and diluted - pro forma                               $.21/$.20      .34/.33      .35/.35        .65/.63
</TABLE>

The significant assumptions used during the year in estimating the fair value on
the date of the grant for original options and reload options granted in 2002
were as follows:

<TABLE>
<CAPTION>
                                             2002
                                             ----
<S>                                          <C>
Expected life of stock options, in years      9
Expected volatility of ACMAT stock           44%
Risk-free interest rate                      4.0
Expected annual dividend yield               --
Expected annual forfeiture rate              --
</TABLE>

No options were granted in 2003.

(6) New Accounting Standards

In June 2001, the FASB issued Statement of Financial Accounting Standards No.
143, "Accounting for Asset Retirement Obligations" (FAS 143). FAS 143 changes
the measurement of an asset retirement obligation from a cost-accumulation
approach to a fair value approach, where the fair value (discounted value) of an
asset retirement obligation is recognized as a liability in the period in which
it is incurred and accretion expense is recognized using the credit-adjusted
risk-free interest rate in effect when the liability was initially recognized.
The associated asset retirement costs are capitalized as part of the carrying
amount of the long-lived asset and subsequently amortized into expense. The
pre-FAS 143 prescribed practice of reporting a retirement obligation as a
contra-asset will no longer be allowed. The Company is not impacted by this new
standard which took effect on January 1, 2003.

In June 2002, the FASB issued Statement of Financial Accounting Standards No.
146, "Accounting for Costs Associated with Exit or Disposal Activities" (FAS
146). FAS 146 requires that a liability for costs associated with exit or
disposal activities be recognized when the liability is incurred. Existing
generally accepted accounting principles provide for the recognition of such
costs at the date of management's commitment to an exit plan. In addition, FAS
146 requires that the liability be measured at fair value and be adjusted for
changes in estimated cash flows. The provisions of the new standard are
effective for exit or disposal activities initiated after December 31, 2002. The
Company is not impacted by this new standard.


                                       9
<PAGE>
(8) Life Insurance Proceeds, net

On January 13, 2002, the Founder, Chairman, President and Chief Executive
Officer of the Corporation died at the age of 82. At the time of his death, Mr.
Nozko, Sr. owned of record or beneficially shares of the Corporation's Common
Stock and Class A Stock having approximately 53% of the total voting power of
the Corporation's voting capital stock. During the pendency of Mr. Nozko's
estate, such voting power has been vested in the executors of the estate who are
his son, Henry W. Nozko, Jr., the current Chairman, President and Chief
Executive Officer of the Corporation, and his daughter Pamela N. Cosmas.

The Company was the owner and beneficiary of several key-man life insurance
policies totaling approximately $11.9 million. After consideration of the
cash-surrender value of the policies, the Company reported a gross gain of
approximately $8.8 million during the three-month period ended March 31, 2002.
In connection with the passing of Henry W. Nozko, Sr., the Company incurred
certain obligations, previously approved by the Board of Directors, totaling
approximately $5.5 million. These obligations for consulting fees, widow's
compensation and unused vacation pay were due only to the extent that sufficient
proceeds existed from the life insurance policies at the time of Mr. Nozko's
death.

(9) 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.

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.

3. ACCOUNTING STANDARDS NOT YET ADOPTED

CONSOLIDATION OF VARIABLE INTEREST ENTITIES

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" (FIN 46). FIN 46 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. It 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 (the subject of FIN
46). FIN 46 clarifies how to identify a variable interest entity and how to
determine when a business enterprise should include the assets, liabilities,
noncontrolling interests and results of activities of a variable interest entity
in its consolidated financial statements. FIN 46 is effective immediately for
variable interest entities created after January 31, 2003. It also applies to
interim periods beginning after June 15, 2003 for variable interest entities
acquired before February 1, 2003. If it is reasonably possible that an
enterprise will consolidate or disclose information about a variable interest
entity when FIN 46 becomes effective, the enterprise is required to disclose in
all financial statements issued after January 31, 2003, the nature, purpose,
size and activities of the variable interest entity and the enterprise's maximum
exposure to loss as a result of its involvement with the variable interest
entity.

The Company holds mortgage-backed and asset-backed securities which are
considered variable interest entities.  For purposes of applying FIN 46, the
Company is evaluating investments which were acquired or created prior to
February 1, 2003 to determine whether such investments should be consolidated
or disclosed as variable interest entities in the Company's future financial
statements.

The Company continues to assess the impact, if any, that the consolidation and
disclosure provisions of FIN 46 may have on the consolidated financial
statements.


                                       10
<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, 2003
and 2002 is summarized as follows:

<TABLE>
<CAPTION>
                                            Three Months ended                 Six Months ended
                                        ---------------------------      ----------------------------
                                           2003            2002             2003             2002
                                        -----------     -----------      -----------      -----------
<S>                                     <C>             <C>              <C>              <C>
Revenues:
 ACSTAR Bonding                         $ 1,800,826       1,545,516        3,548,677        2,678,383
 United Coastal Liability Insurance       1,754,968       1,338,764        3,154,383        2,576,980
 ACMAT Contracting                        1,497,810       7,615,271        2,909,961       13,486,948
                                        -----------     -----------      -----------      -----------
                                        $ 5,053,604      10,499,551        9,613,021       18,742,311
                                        ===========     ===========      ===========      ===========

Operating Earnings (Loss):
 ACSTAR Bonding                         $   402,102         599,538        1,073,820          361,358
 United Coastal Liability Insurance         457,252         759,350          892,301         (503,803)
 ACMAT Contracting                          190,626        (592,942)         (57,684)      (1,508,766)
                                        -----------     -----------      -----------      -----------
                                        $ 1,049,980         765,946        1,908,437       (1,651,211)
                                        ===========     ===========      ===========      ===========

Depreciation and Amortization:
 ACSTAR Bonding                         $   189,095          99,280          319,120          198,421
 United Coastal Liability Insurance          57,693          50,712          203,304          100,415
 ACMAT Contracting                          122,004          88,623          243,802          233,363
                                        -----------     -----------      -----------      -----------
                                        $   368,792         238,615          766,226          532,199
                                        ===========     ===========      ===========      ===========
</TABLE>

<TABLE>
<CAPTION>
Identifiable Assets:                            June 30, 2003                   December 31, 2002
                                                -------------                   -----------------
<S>                                             <C>                             <C>
 ACSTAR Bonding                                 $ 66,766,823                        56,407,938
 United Coastal Liability Insurance               48,751,036                        46,443,389
 ACMAT Contracting                                16,362,345                        19,113,436
                                                ------------                       -----------
                                                $131,880,204                       121,964,763
                                                ============                       ===========
</TABLE>

The components of revenue for each segment for the three and six-month periods
ended June 30, 2003 and 2002 are as follows:

<TABLE>
<CAPTION>
                                             Three Months ended                Six Months ended
                                        ----------------------------     -----------------------------
                                            2003            2002             2003             2002
                                        ------------     -----------     ------------     ------------
<S>                                     <C>              <C>             <C>              <C>
ACSTAR Bonding:
   Premiums                             $ 1,700,822       1,208,216        2,878,796        2,011,394
   Investment income, net                   248,840         338,004          572,326          668,384
   Capital gains                             22,649              --          202,794             (237)
   Other                                   (171,485)           (704)        (105,239)          (1,158)
                                        -----------      ----------      -----------      -----------
                                        $ 1,800,826       1,545,516        3,548,677        2,678,383
                                        ===========      ==========      ===========      ===========
United Coastal Liability Insurance:
   Premiums                             $ 1,417,371         850,125        2,499,200        1,586,483
   Investment income, net                   326,008         484,704          591,923          966,064
   Capital gains/(losses)                        --            (691)          45,977           17,199
   Other                                     11,589           4,626           17,283            7,234
                                        -----------      ----------      -----------      -----------
                                        $ 1,754,968       1,338,764        3,154,383        2,576,980
                                        ===========      ==========      ===========      ===========
ACMAT Contracting:
   Contract revenues                    $   286,820       6,634,068        1,011,113       11,801,599
   Investment income, net                     1,818          40,892            7,232           83,665
   Intersegment revenue:
      Rental income                         232,040         305,340          410,742          675,319
      Underwriting services, agency
       commissions and funds
       administration services               513,639         372,353          928,665          564,084
    Other                                    463,493         262,618          552,209          362,281
                                         -----------      ----------      -----------      -----------
                                         $ 1,497,810       7,615,271        2,909,961       13,486,948
                                         ===========      ==========      ===========      ===========
</TABLE>


                                       11
<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:                                              2003             2002             2003             2002
                                                  ------------     ------------     ------------     ------------
<S>                                               <C>              <C>              <C>              <C>
      Total revenue for reportable segments       $ 5,053,604       10,499,551        9,613,021       18,742,311
      Life insurance proceeds, net                         --               --               --        3,348,903
      Intersegment eliminations                       701,426         (629,362)       1,255,650       (1,159,889)
                                                  -----------      -----------      -----------      -----------
                                                  $ 4,352,178        9,870,189        8,357,371       20,931,325
                                                  ===========      ===========      ===========      ===========
</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>
<S>                                               <C>              <C>              <C>              <C>
Operating Earnings:
      Total operating earnings for reportable
        segments                                  $ 1,049,980          765,946        1,908,437       (1,651,211)
      Interest expense                               (267,049)        (505,868)        (554,429)      (1,043,082)
      Life insurance proceeds, net                         --               --               --        3,348,903
                                                  -----------      -----------      -----------      -----------
                                                  $   782,931          260,078        1,354,008          654,610
                                                  ===========      ===========      ===========      ===========
</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.


                                       12
<PAGE>
                                ACMAT CORPORATION

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

CONSOLIDATED RESULTS OF OPERATIONS:

Net earnings were $504,590 for the three months ended June 30, 2003 compared to
$806,163 for the same period a year ago. The decrease in net earnings for the
three months ended June 30, 2003 compared to the same period a year ago
reflects the absence of a tax benefit in 2003 offset by an increase in earned
premium in 2003. Net earnings for the six months ended June 30, 2003 were
$882,177 compared to $1,543,472 for the six months ended June 30, 2002. The
decrease in net earnings for the six months ended June 30, 2003 compared to
2002 is largely due to the absence of a one-time benefit from life insurance
proceeds received in 2002 offset in part by an increase in earned premium and
a decrease in loss and loss adjustment expense. The net earnings for the six
months ended June 30, 2002 reflects the net effect of life insurance proceeds,
net of the related obligations, due to the death of the Chairman and President
of the Company and the related tax benefits offset by an increase to loss
reserves due to adverse development in prior years and additional remediation
expenses incurred on a construction project significantly exceeded the original
estimate.

Revenues were $4,352,178 for the three months ended June 30, 2003 compared to
$9,870,189 for the same period in 2002. Revenues were $8,357,371 for the six
months ended June 30, 2003 compared to $20,931,325 for the same period in 2002.
Earned premiums were $3,118,193 for the three months ended June 30, 2003
compared to $2,058,341 for the same period a year ago. Earned premiums were
$5,377,996 for the six months ended June 30, 2003 compared to $3,597,877 for the
same period in 2002. Contract revenues were $286,820 for the three months ended
June 30, 2003 compared to $6,634,068 for the same period a year ago. Contract
revenues were $1,011,113 for the six months ended June 30, 2003 compared to
$11,801,599 for the six months ended June 30, 2002. Contract revenue is
difficult to predict and depends greatly on the successful securement of
contracts bid.

Investment income was $620,919 for the three months ended June 30, 2003 compared
to $913,114 for the same period in 2002. Investment income was $1,255,238 for
the six months ended June 30, 2003 compared to $1,797,627 for the same period in
2002. The decrease in investment income was primarily related to a decrease in
the yield on invested assets offset in part by an increase in invested assets.
Net realized capital gains for the three months ended June 30, 2003 were $22,649
compared to net realized capital losses of $691 for the same period a year ago.
Net realized capital gains were $248,771 for the six months ended June 30, 2003
compared to net realized capital gains of $16,962 for the same period a year
ago.

Life insurance proceeds received in 2002 reflect the net proceeds of several
key-man life insurance policies totaling approximately $8,800,000. In addition,
the Company incurred certain obligations, previously approved by the Board of
Directors, totaling approximately $5,500,000. These obligations for consulting
fees, widow's compensation and unused vacation pay were due only to the extent
that sufficient proceeds existed from the life insurance policies at the time of
Mr. Nozko's death.

Other income was $303,597 for the three months ended June 30, 2003 compared to
$265,357 for the same period in 2002. Other income was $464,253 for the six
months ended June 30, 2003 compared to $368,357 for the six months ended June
30, 2002. Other income consists primarily of rental income.

Losses and loss adjustment expenses were $1,077,195 for the three months ended
June 30, 2003 compared to $496,680 for the same period a year ago. The increase
in loss and loss adjustment expense for the three month period ended June 30,
2003 compared to the same period a year ago reflects an increase in the current
year loss and loss adjustment expense ratio and an increase in earned premiums.
Losses and loss adjustment expenses were $1,863,319 for the six months ended
June 30, 2003 compared to $3,078,223 for the same period a year ago. The losses
and loss adjustment expenses for the six month period ended June 30, 2002 is
attributable to the strengthening of loss reserves due to adverse development in
prior years. During the six-month period ended June 30, 2002, the Company
increased reserves by a net amount of $2,200,000. Amortization of policy
acquisition costs were $597,346 for the three months ended June 30, 2003
compared to $416,256 for the same period in 2002. Amortization of policy
acquisition costs were $1,024,696 for the six months ended June 30, 2003
compared to $848,819 for the six months ended June 30, 2002. The increase in
amortization of policy acquisition costs reflects increase in earned premium
offset in part by a decrease in commissions paid.

Costs of contract revenues were $305,244 for the three months ended June 30,
2003 compared to $6,937,171 for the same period a year ago, representing gross
profit (loss) margin (6.4)% and (4.6)%, respectively. Costs of contract revenues
were $943,629 for the six months ended June 30, 2003 compared to $12,611,912 for
the same period a year ago, representing gross profit (loss) margins of 6.7% and
(6.9)%, respectively. The Company incurred additional remediation expenses on a
construction project that significantly exceeded the original estimate. Gross
margin fluctuates each year based upon the profitability of specific projects.


                                       13
<PAGE>
General and administrative expenses were $1,322,413 for the three months ended
June 30, 2003 compared to $1,254,136 for the same period a year ago. The
increase in general and administrative expense for the three month period ended
June 30, 2003 compared to the same period a year ago reflects an increase in bad
debt expense in 2003. General and administrative expenses were $2,617,290 for
the six months ended June 30, 2003 compared to $2,694,679 for the six months
ended June 30, 2002. The decrease in general and administrative expenses for the
six months ended June 30, 2003 compared to 2002 is due primarily to a one-time
investment write-off in 2002.

Interest expense was $267,049 for the three months ended June 30, 2003 compared
to $505,868 for the same period in 2002. Interest expense was $554,429 for the
six months ended June 30, 2003 compared to $1,043,082 for the same period a year
ago. The decrease in interest expense is due to the decrease in long-term debt
and replacement of high-interest bearing debt with lower interest-bearing debt
during the fourth quarter of 2002.

Income tax expense was $278,341 for the three months ended June 30, 2003
compared to income tax benefit of $546,085 for the same period a year ago
representing effective tax rates of 35.6% and (210)%, respectively. Income tax
expense was $471,831 for the six months ended June 30, 2003 compared to income
tax benefit of $888,862 for the same period a year ago, representing effective
tax rates of 34.8% and (136)%, respectively. The effective tax rate in 2003
reflects the Company's reduction in tax exempt interest. The effective rate in
2002 reflects the recognition of net life insurance proceeds which are exempt
for income tax purposes.

<TABLE>
<CAPTION>
Results of Operations by Segment:
---------------------------------
  ACSTAR BONDING:                  Three Months ended June 30,    Six Months ended June 30,
                                   ---------------------------    -------------------------
                                      2003             2002         2003            2002
                                   ----------        ---------    ---------       ---------
<S>                                <C>               <C>          <C>             <C>
  Revenue                          $1,800,826        1,545,516    3,548,677       2,678,383
  Operating Earnings               $  402,102          599,538    1,073,820         361,358
</TABLE>

Revenues for the ACSTAR Bonding segment were $1,800,826 for the three months
ended June 30, 2003 compared to $1,545,516 for the same period in 2002. Revenues
for the ACSTAR Bonding segment were $3,548,677 for the six months ended June 30,
2003 compared to $2,678,383 for the six months ended June 30, 2002. Net written
premiums were $2,052,091 for the three months ended June 30, 2003 compared to
$1,359,801 for the three months ended June 30, 2002. Net written premiums were
$3,304,780 for the six months ended June 30, 2003 compared to $2,026,933 for the
same period a year ago. Earned premiums were $1,700,822 for the three months
ended June 30, 2003 compared to $1,208,216 for the three months ended June 30,
2002. Earned premiums were $2,878,796 for the six months ended June 30, 2003
compared to $2,011,394 for the six months ended June 30, 2002.

The increase in net written premiums for the three and six months ended June 30,
2003 as compared to the three and six months ended June 30, 2002 reflect the
impact of the favorable insurance market. ACSTAR has experienced a significant
increase in business opportunities over the past twelve months that meet
ACSTAR's underwriting standards.

Investment income was $248,840 for the three months ended June 30, 2003 compared
to $338,004 for the same period a year ago. Investment income was $572,326 for
the six months ended June 30, 2003 compared to $668,384 for the six months ended
June 30, 2002. The 2003 investment income reflects a decrease in the effective
yield on invested assets offset in part by an increase in invested assets.

Operating earnings for the ACSTAR Bonding segment were $402,102 for the three
months ended June 30, 2003 compared to $599,538 for the same period in 2002.
The decrease in operating earnings for the three months ended June 30, 2003
compared to the same period a year ago reflects an increase in losses and loss
adjustment expenses and an increase in Funds Administration fees paid to ACMAT
offset by an increase in earned premiums. Operating earnings for the six months
ended June 30, 2003 were $1,073,820 compared to $361,358 for the six months
ended June 30, 2002. The operating earnings for the six months ended June 30,
2003 reflect the increase in earned premiums and realized capital gains. The
operating earnings for the six months ended June 30, 2002 reflect the addition
of $500,000, net of recoveries, to loss reserves for adverse development in
prior years and the emergence of adverse loss trends in 2002.

Losses and loss adjustment expenses were $510,247 for the three months ended
June 30, 2003 compared to $241,643 for the same period a year ago. The increase
in loss and loss adjustment expense for the three month period ended June 30,
2003 compares to the same period a year ago reflects an increase in the loss and
loss adjustment expense ratio and an increase in earned premiums. Losses and
loss adjustment expenses were $863,639 for the six months ended June 30, 2003
compared to $902,279 for the same period a year ago. The 2002 losses and loss
adjustment expenses for the six months ended June 30, 2002 reflects the
strengthening of loss reserves by a net amount of $500,000. Amortization of
policy acquisition costs were $564,737 for the three months ended June 30, 2003
compared to $461,380 for the same period in 2002. Amortization of policy
acquisition were $996,905 for the six months ended June 30, 2003 compared to
$799,408 for the same period a year ago.

General and administrative expenses were $323,740 for the three months ended
June 30, 2003 compared to $242,955 for the same period a year ago. General and
administrative expenses were $614,313 for the six months ended June 30,


                                       14
<PAGE>
2003 compared to $615,338 for the same period a year ago. The increase in
general and administrative expenses for the three months ended June 30, 2003 is
due primarily to a one-time rent recovery from an affiliate in 2002.

<TABLE>
<CAPTION>
UNITED COASTAL LIABILITY
INSURANCE:                    Three Months ended June 30,    Six Months ended June 30,
                              ---------------------------    -------------------------
                                 2003            2002           2003           2002
                              ----------       ---------     ----------     ----------
<S>                           <C>              <C>           <C>            <C>
Revenue                       $1,754,968       1,338,764     $3,154,383      2,576,980
Operating Earnings (Loss)     $  457,252         759,350     $  892,301       (503,803)
</TABLE>

Revenues for the United Coastal Liability Insurance segment were $1,754,968 for
the three months ended June 30, 2003 compared to $1,338,764 for the same period
in 2002. Revenues were $3,154,383 for the six months ended June 30, 2003
compared to $2,576,980 for the six months ended June 30, 2002. Net written
premiums were $2,009,493 for the three months ended June 30, 2003 compared to
$1,166,080 for the three months ended June 30, 2002. Net written premiums were
$4,045,985 for the six months ended June 30, 2003 compared to $1,970,835 for the
same period a year ago. Earned premiums were $1,417,371 for the three months
ended June 30, 2003 compared to $850,125 for the three months ended June 30,
2002. Earned premiums were $2,499,200 for the six months ended June 30, 2003
compared to $1,586,483 for the six months ended June 30, 2002. The increase in
net written premiums reflects the impact of the favorable insurance market and
an increase in new business.

Investment income was $326,008 for the three months ended June 30, 2003 compared
to $484,704 for the same period a year ago. Investment income was $591,923 for
the six months ended June 30, 2003 compared to $966,064 for the six months ended
June 30, 2002. The decrease in investment income was primarily related to a
decrease in the effective yield on invested assets and a slight decrease in the
amount of invested assets. There were no net realized capital gains for the
three months ended June 30, 2003 compared to net realized capital losses of $691
for the same period a year ago. Net realized capital gains for the six month
period ended June 30, 2003 were $45,977 as compared to $17,199 for the same
period a year ago.

Operating earnings for the United Coastal Liability Insurance segment were
$457,252 for the three months ended June 30, 2003 as compared to $759,350 for
the same period in 2002. Operating earnings for the six months ended June 30,
2003 were $892,301 compared to operating losses of $503,803 for the six months
ended June 30, 2002. The operating loss for the six months ended June 30, 2003
is due primarily to the addition of $1,700,000 to loss reserves for adverse
development in prior years.

Losses and loss adjustment expenses were $566,948 for the three months ended
June 30, 2003 compared to $255,037 for the same period a year ago. The increase
in loss and loss adjustment expense for the three month period ended June 30,
2003 compares to the same period a year ago reflects an increase in the loss and
loss adjustment expense ratio and an increase in earned premiums. Losses and
loss adjustment expenses were $999,680 for the six months ended June 30, 2003
compared to $2,175,944 for the same period a year ago. The 2002 losses and loss
adjustment expenses is attributable to the strengthening of loss reserves due to
adverse development in prior years. During the three-month period ended March
31, 2002, the Company increased United Coastal reserves by a net amount of
$1,700,000. Amortization of policy acquisition costs were $400,020 for the three
months ended June 30, 2003 as compared to $207,094 for the same period in 2002.
Amortization of policy acquisition were $693,733 for the six months ended June
30, 2003 compared to $426,973 for the same period a year ago. The increase
amortization of policy acquisition costs is primarily attributable to the
increase in earned premiums.

General and administrative expenses were $330,748 for the three months ended
June 30, 2003 compared to $117,283 for the same period a year ago. General and
administrative expenses were $568,669 for the six months ended June 30, 2003
compared to $477,866 for the same period a year ago. General and administrative
expenses for 2003 reflects an increase in bad debt expense. General and
administrative expenses for the three months ended June 30, 2002 reflect a
reduction in rent expense from a one-time rent recovery from an affiliate.

<TABLE>
<CAPTION>
ACMAT CONTRACTING:            Three Months ended June 30      Six Months ended June 30,
                              --------------------------     ---------------------------
                                 2003           2002            2003             2002
                              ----------     ----------      ----------      -----------
<S>                           <C>            <C>             <C>             <C>
Revenue                       $1,497,810      7,615,271       2,909,961       13,486,948
Operating Earnings (Loss)     $  190,626       (592,942)        (57,684)      (1,508,766)
</TABLE>

Revenues for the ACMAT Contracting segment were $1,497,810 for the three months
ended June 30, 2003 compared to $7,615,271 for the same period in 2002. Revenues
were $2,909,961 for the six months ended June 30, 2003 compared to $13,486,948
for the same period a year ago. The 2003 decrease in revenue reflects a decrease
in contract revenues compared to 2002 due to the completion of most backlog
during 2002. Contract revenue is difficult to predict and depends greatly on the
successful securement of contracts bid.


                                       15
<PAGE>
Operating earnings for the ACMAT Contracting segment were $190,626 for the three
months ended June 30, 2003 compared to operating losses of $592,942 for the same
period a year ago. Operating losses were $57,684 for the six months ended June
30, 2003 compared to operating losses of $1,508,766 for the six months ended
June 30, 2002. The operations in 2003 reflect a significant decrease in contract
revenue and the decrease in rental income charged to ACSTAR and United Coastal
effective January 1, 2003. The operating loss in 2002 is due primarily to
additional remediation expenses incurred on a construction project that
significantly exceeded the original estimate.

The 2003 decrease in revenue reflects the completion of most of the backlog in
2002. Contract revenue depends greatly on the successful securement of contracts
bid and execution. The Company is substantially complete with its current
projects and its current backlog relates to primarily one profitable project.
The backlog at June 30, 2003 was $4,000,000 compared to $6,000,000 at June 30,
2002. The decrease in backlog reflects the significant number of contractors
competing for a limited number of projects available in our market place.

Cost of contract revenues were $305,244 for the three months ended June 30, 2003
compared to $6,937,171 for the same period in 2002 representing gross profit
(loss) margin of (6.4)% and (4.6)%, respectively. Cost of contract revenues were
$943,629 for the six months ended June 30, 2003 compared to $5,671,614 for the
same period a year ago, representing gross profit (loss) margins of 6.7% and
(6.9)%, respectively. Gross margin fluctuates each year based upon the
profitability of specific projects.

General and administrative expenses were $1,001,940 for the three months ended
June 30, 2003 compared to $1,271,042 for the same period a year ago. General and
administrative expenses were $2,024,016 for the six months ended June 30, 2003
compared to $2,383,802 for the same period a year ago. The decrease in general
and administrative expense is primarily due to a one-time investment write-off
in 2002.

RESERVES FOR LOSSES AND LOSS ADJUSTMENT EXPENSES:

Reserves for losses and loss adjustment expenses are established with respect to
both reported and incurred but not reported claims for insured risks. 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.

Management believes that the reserves for losses and loss adjustment expenses at
June 30, 2003 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 claim reporting patterns, 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.

The Company's insurance subsidiaries loss ratios under generally accepted
accounting principles ("GAAP") were 34.5% and 24.1% for the three-month period
ended June 30, 2003 and 2002 respectively. The increase in losses and loss
adjustment expenses is attributable to the emergence of loss trends in the
current year. The Company's insurance subsidiaries' expense ratios under GAAP
were 51.9% and 50.0% for the three-month period ended June 30, 2003 and 2002,
respectively. The increase in the 2003 expense ratio results primarily from the
increase in expensed offset by an increase in earned premiums. The Company's
insurance subsidiaries' combined ratios under GAAP were 86.5% and 74.1% for the
three-month period ended June 30, 2003 and 2002, respectively.

The Company's insurance subsidiaries' loss ratios under generally accepted
accounting principles ("GAAP") were 34.6% and 85.6% for the six-month periods
ended June 30, 2003 and 2002, respectively. The 2002 losses and loss adjustment
expenses reflect the strengthening of loss reserves due to adverse development
in prior years and emergence of loss trends in the current year. During the
three-month period ended March 31, 2003, the Company increased reserves by a net
amount of $2,200,000. The Company's insurance subsidiaries' expense ratios under
GAAP were 53.4% and 64.5% for the six-month period ended June 30, 2003 and 2002,
respectively. The decrease in the 2003 expense ratio results primarily from the
decrease in commissions paid and an increase in earned premiums. The Company's
insurance subsidiaries' combined ratios under GAAP were 93.4% and 150.0% for the
six-month period ended June 30, 2003 and 2002, respectively.


                                       16
<PAGE>
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.

ACMAT, exclusive of its subsidiaries, has incurred negative cash flows from
operating activities primarily because of interest expense related to notes
payable and 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, intercompany and short-term borrowings, 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 recently relied on dividends from its insurance
subsidiaries to repay debt.

The Company generated cash flow from operations of $10,338,203 and $4,054,588
for the six-month period ended June 30, 2003 and 2002, respectively. The cash
flow from operations is due primarily to the increase in cash collateral. Net
cash flows from operations in 2002 resulted primarily from life insurance
proceeds and cash collateral. The Company's cash flow was used to repay
long-term debt and repurchase stock. 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.

Net cash used for investing activities in the first six-months of 2003 amounted
to $17,863,243 compared to $2,359,730 for the same period in 2002. Purchases of
investments are made based upon excess cash available after the payment of
losses and loss adjustment expenses and other operating and non-operating
expenses.

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 Company was in compliance with the covenants at
June 30, 2003, except for the ratio of Funded Debt to Statutory Earnings. The
Company expects to be in compliance by the end of the year or to receive a
waiver.

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, 2003.

During the six-month period ended June 30, 2003, the Company purchased, in the
open market and privately negotiated transactions, 2,000 shares of its Common
Stock at an average price of $10.33 per share. During the six-month period ended
June 30, 2003, the Company also purchased, in the open market and privately
negotiated transactions, 11,300 shares of its Class A Stock at an average price
of $8.28 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 $4,491,000 in 2003.

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 June 30, 2003 was above the level which might require
regulatory action.

CRITICAL ACCOUNTING POLICIES:

Reserves for losses and loss adjustment expenses are established with respect
to both reported and incurred but not reported claims for insured risks. 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.

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. Selling, general and administrative expenses
are not allocated to contracts. This is a critical accounting policy for the
ACMAT construction segment.

CONTRACTUAL CASH OBLIGATIONS AND COMMITMENTS:

Contractual obligations at June 30, 2003 include the following:

<TABLE>
<CAPTION>
Payment due by Period          Total        2002     2003/2004   2005/2006   After 2006
                               -----        ----     ---------   ---------   ----------
<S>                         <C>          <C>         <C>         <C>         <C>
Long-Term Debt (principal)  $20,314,632  $1,208,099  $5,223,604  $5,217,451  $8,665,478
</TABLE>

The Company also has cash collateral of $35,250,814 at June 30, 2003, which it
would be required to return at the end of expiration of applicable bond period
subject to any claims.

CONTROLS AND PROCEDURES:

The Company maintains disclosure controls and procedures (as that term is
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934 (the "Exchange Act")) that are designed to ensure that information required
to be disclosed in the Company's reports under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms, and that such information
is accumulated and communicated to the Company's management, including its Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosures. Any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives. The Company's management, with the
participation of the Company's Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of the design and operation of the
Company's disclosure controls and procedures as of June 30, 2003. Based upon
that evaluation and subject to the foregoing, the Company's Chief Executive
Officer and Chief Financial Officer concluded that the design and operation of
the Company's disclosure controls and procedures provided reasonable assurance
that the disclosure controls and procedures are effective to accomplish their
objectives.

In addition, there was no change in the Company's "internal control over
financial reporting" (as that term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) that occurred during the quarter ended June 30, 2003
that has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.

                                       17
<PAGE>
Part II - Other Information

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 26, 2003.

      b. Directors elected at the meeting:

<TABLE>
<CAPTION>
                               Votes      Votes     Brokers
                                For      Against   Non-Votes

<S>                          <C>        <C>       <C>
      Henry Nozko III         644,428     2,066       --
      Henry Nozko, Jr         647,528       506       --
      Victoria Nozko          644,310     2,183       --
      John Creasy             690,680       613       --
      Arthur Moore            690,908       386       --
      Andrew Sullivan, Jr.    690,908       350       --
</TABLE>

      c. Other matters voted upon:

<TABLE>
<CAPTION>
                                                                    Brokers
                                     For      Against   Abstain    Non-Votes
<S>                                <C>        <C>       <C>        <C>
      1. Appointment of
         Independent Auditors      690,827     350        316         --
</TABLE>

Item 5 -  Other Information

Item 6 -  Exhibits and Reports on Form 8-K

      a. Exhibits:

         31.1 Certification of Henry W. Nozko, Jr., Chief Executive Officer
         of the Company, as required by Section 302 of the Sarbanes-Oxley Act
         of 2002

         31.2 Certification of Michael P. Cifone, Chief Financial Officer of
         the Company, 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


                                       18
<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 14, 2003                /S/ Henry W. Nozko, Jr.
                                      -----------------------
                                      Henry W. Nozko, Jr., President, Chairman,
                                      Chief Operating Officer, and Treasurer


Date:  August 14, 2003                /S/ Michael P. Cifone
                                      ----------------------
                                      Michael P. Cifone, Senior Vice President,
                                      Chief Financial Officer
                                      (Principal Financial & Accounting Officer)


                                       19