<PAGE>

================================================================================


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

                                    FORM 10-K

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

                     For the fiscal year ended June 30, 2002

[   ]       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 001-12212

                         DRUMMOND FINANCIAL CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

              WASHINGTON                                     95-4426690
    (STATE OR OTHER JURISDICTION OF                       (I.R.S. EMPLOYER
    INCORPORATION OR ORGANIZATION)                      IDENTIFICATION  NO.)

      FLOOR 21, MILLENNIUM TOWER, HANDELSKAI 94-96, A-1200 VIENNA, AUSTRIA
                               (ADDRESS OF OFFICE)

      REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (43) 1 24025 102

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                          COMMON STOCK, $0.01 PAR VALUE
                                (TITLE OF CLASS)

Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the SECURITIES EXCHANGE ACT OF
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes  X   No
                                               ---     ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]

The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the Registrant was approximately $1,000,516 as of October 11,
2002, computed on the basis of the closing price on such date.

The number of shares outstanding of the Registrant's Common Stock as of October
23, 2002 was 2,718,600.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the 2002 Proxy Statement to be filed within 120 days of the fiscal
year ended June 30, 2002 are incorporated by reference into Part III.


================================================================================

<PAGE>


FORWARD-LOOKING STATEMENTS

Statements in this report, to the extent that they are not based on historical
events, constitute forward-looking statements. Forward-looking statements
include, without limitation, statements regarding the outlook for future
operations, forecasts of future costs and expenditures, evaluation of market
conditions, the outcome of legal proceedings, the adequacy of reserves, or other
business plans. Investors are cautioned that forward-looking statements are
subject to an inherent risk that actual results may vary materially from those
described herein. Factors that may result in such variance, in addition to those
accompanying the forward-looking statements, include changes in interest rates,
prices, and other economic conditions; actions by competitors; natural
phenomena; actions by government authorities; uncertainties associated with
legal proceedings; technological development; future decisions by management in
response to changing conditions; and misjudgments in the course of preparing
forward-looking statements.


                                       2

<PAGE>


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE

<S>           <C>                                                           <C>
                                     PART I

ITEM 1.       BUSINESS........................................................4

ITEM 2.       PROPERTIES......................................................5

ITEM 3.       LEGAL PROCEEDINGS...............................................5

ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............5

                                     PART II

ITEM 5.       MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
              STOCKHOLDER MATTERS.............................................6

ITEM 6.       SELECTED FINANCIAL DATA.........................................7

ITEM 7.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................8

ITEM 7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
              MARKET RISK....................................................10

ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................11

ITEM 9.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
              ACCOUNTING AND FINANCIAL DISCLOSURE............................11

                                    PART III

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.............12

ITEM 11.      EXECUTIVE COMPENSATION.........................................12

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

ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................12

ITEM 14.      CONTROLS AND PROCEDURES........................................12

                                     PART IV

ITEM 15.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
              REPORTS ON FORM 8-K............................................12

SIGNATURES...................................................................31

CERTIFICATION................................................................32
</TABLE>


                                       3
<PAGE>


                                     PART I

ITEM 1.   BUSINESS

THE CORPORATION

Drummond Financial Corporation was incorporated in June 1993 pursuant to the
laws of the State of Delaware and commenced operations in August 1993. In
October 1996, the Corporation changed its name from "CVD Financial Corporation"
to "Drummond Financial Corporation". In July 2001, the Corporation changed its
domicile from the State of Delaware to the State of Washington.

In this document, unless the context otherwise requires, the "Corporation"
refers to Drummond Financial Corporation and its subsidiaries.

GENERAL

The Corporation operates in the financial services business internationally,
engaging primarily in merchant banking activities. The Corporation's merchant
banking activities include seeking controlling interests in businesses or
assets, which the Corporation believes are undervalued. In prior years, the
Corporation was primarily engaged in asset-based commercial lending, which
primarily involved the administration and realization of an existing loan
portfolio comprised of loans to emerging companies, which portfolio was fully
settled during fiscal 1999.

The Corporation is focusing on expanding its merchant banking activities. The
Corporation is seeking controlling interests in businesses or operating
companies that generate or will potentially generate positive cash flows from
operations as opportunities arise. The Corporation anticipates that substantial
capital may be required to further its merchant banking activities, and
anticipates that such capital will be provided from cash on hand, through the
sale or exchange of assets, or through debt or equity financing. No assurance
can be given that any necessary capital will be available when required.

COMPETITION

The Corporation competes against investment banks, merchant banks and other
investment managers for appropriate investments. This business is highly
competitive and is subject to fluctuations based upon many factors over which
the Corporation has no control, such as the condition of public markets,
interest rates and the state of capital markets. Many of the Corporation's
competitors are national or international companies with far greater resources,
capital and access to information than the Corporation. As a result, the
Corporation may become involved in transactions with more risk than if it had
greater resources.

While the Corporation has nominally competed with commercial banks, leasing
companies and asset-based lenders with respect to its asset-based lending
activities, its primary competitors have been venture capital firms, which also
invest in emerging growth companies.

As at June 30, 2002, the Corporation had one employee.


                                       4
<PAGE>

ITEM 2.   PROPERTIES

The Corporation's administrative office is located in Vienna, Austria and is
leased.

ITEM 3.   LEGAL PROCEEDINGS

In September 1999, Gibralt Holdings Ltd. ("Gibralt") commenced a putative
derivative action in Delaware Chancery Court (the "Court") naming Drummond
Financial Corporation (the "Corporation"), certain of its directors and officers
and others as defendants. The action was filed in the form of a class action on
behalf of shareholders, but did not receive Court certification as such at the
time. The action was subsequently amended to substitute certain individual
plaintiffs (the "Individual Plaintiffs") in place of Gibralt and amend the
action to withdraw certain claims dismissed by the Court and clarify other
claims. The Corporation and other defendants believe the claims to be entirely
without merit and have vigorously defended against the action.

On July 25, 2002, the parties entered into a Stipulation and Agreement of
Compromise, Settlement and Release in connection with the proposed settlement
(the "Settlement") of the action. The Settlement is subject to final Court
approval. If such approval is obtained, the Corporation will make an offer to
purchase all of the outstanding shares of the Corporation's common stock not
owned by the defendants and/or their associates and affiliates at a price of
$1.25 per share. The Settlement will release any or all claims of the plaintiffs
and derivative claims against the defendants, their affiliates, successors,
heirs and assigns and any past or present officers and directors of the
Corporation that were or could have been brought in the action, and to the
maximum extent permitted under law, any claims that could have been brought
under federal or state laws. The Settlement also releases any and all claims by
the defendants against the Individual Plaintiffs that either could have been
brought in the action or that in any way arise out of the action or the
Individual Plaintiffs' conduct of the action. The action will be temporarily
maintained as a class action, for the purposes of the Settlement only, and will
not be an admission or concession on the part of any person of any liability or
wrongdoing by them. The settlement also provides that plaintiff's counsel is
to receive $125,000 for attorney's fees and expenses in connection with the
action. For further information with respect to the Settlement, see the
Corporation's Form 8-K filed July 26, 2002 with the U.S. Securities and
Exchange Commission.

The Corporation is subject to claims and matters of litigation arising in the
ordinary course of its business. The Corporation does not believe that the
outcome of such litigation will have a material adverse effect on its business
or financial condition.

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

Not applicable.


                                       5
<PAGE>


                                     PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
          STOCKHOLDER MATTERS

(a) MARKET INFORMATION. In March 1997, the Corporation's common stock was listed
and posted for trading on the Vancouver Stock Exchange (now known as the TSX
Venture Exchange) under the trading symbol "DFC.U". Since August 1995, the
Corporation's common stock has been quoted on the OTC Bulletin Board under the
trading symbol "DFCUE".

The following table sets forth the high and low sales prices per share of the
Corporation's common stock on the OTC Bulletin Board for the periods indicated.
These prices reflect inter-dealer prices, without retail mark-up, mark-down or
commission, and may not necessarily represent actual transactions.

<TABLE>
<CAPTION>
          FISCAL QUARTER ENDED                           HIGH       LOW
          --------------------                          ------     ------
<S>                                                     <C>        <C>
          2000
          September 30..................................$ 0.37     $ 0.24
          December 31...................................  0.25       0.13

          2001
          March 31......................................  0.14       0.07
          June 30.......................................  0.80       0.06
          September 30..................................  0.17       0.07
          December 31...................................  0.13       0.06

          2002
          March 31......................................  0.51       0.11
          June 30.......................................  0.54       0.25
          September 30..................................  1.01       0.15
          Period ended October 22, 2002.................  0.97       0.77
</TABLE>

(b) SHAREHOLDERS. As of October 22, 2002, there were approximately 40 holders of
record of the Corporation's common stock.

(c) DIVIDENDS. The Corporation has not paid any dividends on its common stock
and does not contemplate the payment of such dividends.


                                       6
<PAGE>


ITEM 6.   SELECTED FINANCIAL DATA

The following table reflects selected consolidated financial data for the
Corporation for the last five fiscal years ended June 30, 2002. The information
in the table was extracted from the more detailed consolidated financial
statements and related notes included in this annual report and should be read
in conjunction with such financial statements and related notes.

<TABLE>
<CAPTION>
                                                       YEAR ENDED JUNE 30,
                                    ----------------------------------------------------------
                                      2002        2001         2000         1999        1998
                                    --------    --------     --------     --------    --------
                                          (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                 <C>         <C>          <C>          <C>         <C>
OPERATING DATA
Revenues .......................    $  2,046    $    872     $  2,650     $  2,297    $  1,354
Expenses .......................       1,640       2,140        2,541        1,960       3,540
Income (loss) from continuing
   operations ..................         406      (1,269)         108          336      (2,607)
Extraordinary item .............       2,361          --           --           --          --
Net income (loss) ..............       2,767      (1,269)         108          336      (2,122)

COMMON SHARE DATA(1)
Income (loss) from continuing
   operations per common share..        0.04       (0.58)       (0.07)        0.01       (1.07)
Income from extraordinary
   item per common share .......        0.87          --           --           --          --
Net income (loss) per common
   share .......................        0.91       (0.58)       (0.07)        0.01       (0.89)
Weighted average common shares
   outstanding (in thousands)...       2,719       2,719        2,719        2,719       2,719

BALANCE SHEET DATA
Total assets ...................      16,535      23,536       26,000       25,999      29,535
Long-term obligations ..........      11,949      21,515       21,515       21,515      21,515
Total stockholders' equity(2)...       3,713       1,119        3,079        3,271       3,235
</TABLE>

---------------
(1)  Basic and diluted common share data is the same.
(2)  Including preferred stock of face value $6,000,000.


                                       7
<PAGE>


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

The following discussion and analysis of the financial condition and results of
operations of the Corporation for the fiscal years ended June 30, 2002, 2001 and
2000 should be read in conjunction with the consolidated financial statements
and related notes included elsewhere in this annual report.

RESULTS OF OPERATIONS

YEAR ENDED JUNE 30, 2002 COMPARED TO THE YEAR ENDED JUNE 30, 2001

Revenues for the year ended June 30, 2002 increased to $2.0 million from $0.9
million for the year ended June 30, 2001, primarily as a result of a net gain on
investments. Interest income decreased to $0.6 million for the year ended June
30, 2002 from $0.9 million for the year ended June 30, 2001. Revenues from
dividends decreased to $0.3 million for the year ended June 30, 2002 from $0.4
million for the year ended June 30, 2001.

Costs and expenses for the year ended June 30, 2002 decreased to $1.6 million
from $2.1 million for the year ended June 30, 2001, primarily as a result of
lower interest and general and administrative expenses. General and
administrative expenses decreased to $0.6 million for the year ended June 30,
2002 from $0.9 million for the year ended June 30, 2001.

Interest expense decreased to $1.0 million for the year ended June 30, 2002 from
$1.2 million for the year ended June 30, 2001 as a result of a reduction in debt
during the current period.

No income tax provision was recognized for the years ended June 30, 2002 and
2001, respectively, except for the payment of a minimum tax of $1,000 in the
year ended June 30, 2001. The Corporation has deferred tax benefits with respect
to net operating loss carry-forwards which have not been recognized as there is
no assurance that they will be realized.

In the year ended June 30, 2002, the Corporation recognized a gain, net of tax,
of $2.4 million (or $0.87 per share) as a result of the settlement of a portion
of its outstanding debt during the current period.

The Corporation had net income of $2.8 million, or $0.91 per common share, for
the year ended June 30, 2002, compared to a net loss of $1.3 million, or $0.58
per common share, for the year ended June 30, 2001.

YEAR ENDED JUNE 30, 2001 COMPARED TO THE YEAR ENDED JUNE 30, 2000

Revenues for the year ended June 30, 2001 decreased to $0.9 million from $2.7
million for the year ended June 30, 2000, primarily as a result of a net loss on
investments. Interest income decreased to $0.9 million for the year ended June
30, 2001 from $1.1 million for the year ended June 30, 2000. Revenues from
dividends and other activities increased to $0.4 million for the year ended June
30, 2001 from $0.3 million for the year ended June 30, 2000.


                                       8
<PAGE>


Costs and expenses for the year ended June 30, 2001 decreased to $2.1 million
from $2.5 million for the year ended June 30, 2000, primarily as a result of
lower interest and general and administrative expenses. General and
administrative expenses decreased to $0.9 million for the year ended June 30,
2001 from $1.2 million for the year ended June 30, 2000.

Interest expense decreased to $1.2 million for the year ended June 30, 2001 from
$1.3 million for the year ended June 30, 2000.

No income tax provision was recognized for the years ended June 30, 2001 and
2000, respectively, except for the payment of a minimum tax of $1,000. The
Corporation has deferred tax benefits with respect to net operating loss
carry-forwards, which have not been recognized as there is no assurance that
they will be realized.

Net loss for the year ended June 30, 2001 was $1.3 million, or $0.58 per common
share, compared to a net income of $0.1 million, or $0.07 loss per common share,
for the year ended June 30, 2000.

LIQUIDITY AND CAPITAL RESOURCES

The Corporation's cash and cash equivalents at June 30, 2002 were $0.7 million,
a decrease of $5.1 million from June 30, 2001.

Cash provided by operating activities for the year ended June 30, 2002 was $1.7
million, compared to cash used by operating activities of $0.9 million for the
year ended June 30, 2001. Cash used by operating activities before activities in
trading securities was $30,000 in the year ended June 30, 2002, compared to
$0.2 million in the year ended June 30, 2001. A decrease in accounts payable and
accrued liabilities used cash of $0.2 million in the year ended June 30, 2002,
compared to an increase in same providing cash of $0.2 million in the year ended
June 30, 2001. A decrease in receivables provided cash of $0.7 million in the
year ended June 30, 2002, compared to $0.9 million in the comparable period of
2001. Net sales of trading securities provided cash of $1.8 million in the year
ended June 30, 2002, compared to net purchases of trading securities using cash
of $0.6 million in the year ended June 30, 2001.

Investing activities for the year ended June 30, 2002 provided cash of $0.4
million, compared to $0.6 million for the year ended June 30, 2001. In the year
ended June 30, 2002, a net increase in notes receivable used cash of $0.7
million, compared to a net decrease in same providing cash of $6.5 million in
the year ended June 30, 2001. Net sales of long-term investments provided cash
of $1.1 million for the year ended June 30, 2002.

Financing activities for the year ended June 30, 2002 used cash of $7.2 million,
primarily as a result of the repayment of debt during the current period. The
payment of dividends on preferred shares used cash of $0.3 million in each of
the years ended June 30, 2002 and 2001.

The Corporation anticipates that its cash, investments on hand and interest
income will be sufficient to service the Corporation's debt costs and cover the
day-to-day general and administrative expenses of the Corporation during the
short-term.


                                       9
<PAGE>


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Corporation is exposed to market risks from changes in interest rates and
equity prices which may affect its results of operations and financial
condition. The Corporation manages these risks through internal risk management
policies. The Corporation does not enter into derivative contracts for its own
account to hedge against these risks.

INTEREST RATE RISK

Fluctuations in interest rates may affect the fair value of financial
instruments sensitive to interest rates. An increase in interest rates may
decrease the fair value and a decrease in interest rates may increase the fair
value of such financial instruments. The Corporation's financial instruments
which may be sensitive to interest rate fluctuations are investments, notes
receivable and debt obligations. The following table provides information about
the Corporation's exposure to interest rate fluctuations for the carrying amount
of financial instruments that may be sensitive to such fluctuations as at June
30, 2002 and 2001 and expected cash flows from these instruments:

AS AT JUNE 30, 2002

<TABLE>
<CAPTION>
                                                   EXPECTED FUTURE CASH FLOW(3)
                          ----------------------------------------------------------------------------
                          CARRYING    FAIR
                            VALUE     VALUE     2003     2004     2005     2006     2007    THEREAFTER
                          --------   -------   ------   ------   ------   ------   ------   ----------
                                                         (IN THOUSANDS)
<S>                       <C>        <C>       <C>      <C>      <C>      <C>      <C>      <C>
Investments(1).......     $  6,952   $ 6,952   $  334   $  853   $  300   $  300   $  300   $    6,425
Notes receivable.....        6,837     6,837    7,432       --       --       --       --           --
Debt obligations(2)..       11,949    11,949      597      597      597      597      597       12,596
</TABLE>

----------
(1)  Investments consist of debt securities and fixed yield securities.
(2)  Debt obligations consist of a promissory note bearing interest at 5.00% per
     annum and maturing on July 31, 2008.
(3)  Including interest and dividends. Current investments are assumed to be
     sold in year 1 and long-term investment in perpetual preferred shares in
     year 6.

AS AT JUNE 30, 2001

<TABLE>
<CAPTION>
                                                   EXPECTED FUTURE CASH FLOW(3)
                           ----------------------------------------------------------------------------
                           CARRYING    FAIR
                            VALUE      VALUE     2002     2003     2004     2005     2006    THEREAFTER
                           --------   -------   ------   ------   ------   ------   ------   ----------
                                                         (IN THOUSANDS)
<S>                        <C>        <C>       <C>      <C>      <C>      <C>      <C>      <C>
Investments(1).......      $  6,456   $ 6,456   $  756   $  300   $  300   $  300   $  300   $    6,000
Notes receivable.....         6,042     6,042    6,372       --       --       --       --           --
Debt obligations(2)..        21,515    21,515    1,076    1,076    1,076    1,076    1,076       23,756
</TABLE>

----------
(1)  Investments consist of debt securities and fixed yield securities.
(2)  Debt obligations consist of a promissory note bearing interest at 5.00% per
     annum and maturing on July 31, 2008.
(3)  Including interest and dividends. Current investments are assumed to be
     sold in year 1 and long-term investment in perpetual preferred shares in
     year 6.


                                       10
<PAGE>


EQUITY PRICE RISK

Changes in trading prices of equity securities may affect the fair value of
equity securities. An increase in trading prices will increase the fair value
and a decrease in trading prices will decrease the fair value of equity
securities. The Corporation's financial instruments which may be sensitive to
fluctuations in equity prices are investments. The following table provides
information about the Corporation's exposure to fluctuations in equity prices
for the carrying amount of financial instruments sensitive to such fluctuations
and expected cash flows from these instruments:

AS AT JUNE 30, 2002

<TABLE>
<CAPTION>
                                                    EXPECTED FUTURE CASH FLOW
                         ----------------------------------------------------------------------------
                         CARRYING    FAIR
                           VALUE     VALUE     2003     2004     2005     2006     2007    THEREAFTER
                         --------   -------   ------   ------   ------   ------   ------   ----------
                                                         (IN THOUSANDS)
<S>                      <C>        <C>       <C>      <C>      <C>      <C>      <C>      <C>
Investments(1)......     $    614   $   614   $  426   $   --   $   --   $   --   $   --   $      188
</TABLE>

----------
(1)  Investments consist of equity securities.


AS AT JUNE 30, 2001

<TABLE>
<CAPTION>
                                                    EXPECTED FUTURE CASH FLOW
                         ----------------------------------------------------------------------------
                         CARRYING    FAIR
                           VALUE     VALUE     2002     2003     2004     2005     2006    THEREAFTER
                         --------   -------   ------   ------   ------   ------   ------   ----------
                                                         (IN THOUSANDS)
<S>                      <C>        <C>       <C>      <C>      <C>      <C>      <C>      <C>
Investments(1)......     $  2,734   $ 2,734   $2,645   $   --   $   --   $   --   $   --   $       89
</TABLE>

----------
(1)  Investments consist of equity securities.


ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements and supplementary data required pursuant
to this Item 8, and as listed in Item 14 of this annual report, are included in
this annual report commencing on page 14.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.


                                       11
<PAGE>

                                  PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Incorporated by reference from the Registrant's definitive proxy statement to
be filed within 120 days of the end of the Registrant's fiscal year.

ITEM 11.  EXECUTIVE COMPENSATION

Incorporated by reference from the Registrant's definitive proxy statement to
be filed within 120 days of the end of the Registrant's fiscal year.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Incorporated by reference from the Registrant's definitive proxy statement to
be filed within 120 days of the end of the Registrant's fiscal year.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Incorporated by reference from the Registrant's definitive proxy statement to
be filed within 120 days of the end of the Registrant's fiscal year.

ITEM 14.  CONTROLS AND PROCEDURES

Not applicable.

                                   PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)  (1)  Index to Financial Statements

          Independent Auditors' Report
          Consolidated Balance Sheets
          Consolidated Statements of Operations
          Consolidated Statements of Cash Flows
          Consolidated Statement of Shareholders' Equity
          Notes to the Consolidated Financial Statements


                                      12
<PAGE>

     (2)  Financial Statement Schedules

          None.

     (3)  Exhibits

          2.1   Arrangement Agreement among Drummond Financial (B.C.) Ltd.,
                MFC Bancorp Ltd. and Drummond Financial Corporation dated
                February 23, 1998. Incorporated by reference to Form T-3 of
                MFC Bancorp Ltd. dated March 2, 1998.

          2.2   Amendment Agreement among Drummond Financial (B.C.) Ltd., MFC
                Bancorp Ltd. and Drummond Financial Corporation dated March
                23, 1998. Incorporated by reference to Form 10-KSB dated
                September 28, 1998.

          2.3   Plan and Agreement of Merger between Drummond Financial
                Corporation and Drummond Merger Corporation dated June 18,
                2001. Incorporated by reference to Information Statement on
                Form DEF14C of Drummond Financial Corporation filed July 11,
                2001.

          3.1   Certificate of Incorporation dated June 1, 1993. Incorporated
                by reference to Form S-1 filed June 7, 1993.

          3.2   Certificate of Designations dated July 19, 1996. Incorporated
                by reference to Form 10-KSB dated September 20, 1996.

          3.3   Certificate of Amendment to the Certificate of Incorporation
                of Drummond Financial Corporation dated October 14, 1996.
                Incorporated by reference to Form 10-QSB dated November 11,
                1996.

          3.4   Articles of Incorporation dated June 13, 2001. Incorporated
                by reference to Form 10-K dated May 14, 2002.

          3.5   Bylaws. Incorporated by reference to Form S-1 filed June 7,
                1993.

          3.6   Amendment to the Bylaws adopted as of July 20, 1993.
                Incorporated by reference to Amendment No. 1 to Form S-1
                filed July 26, 1993.

          3.7   Bylaws dated June 18, 2001. Incorporated by reference to Form
                10-Q dated May 14, 2002.

          10.1  1993 Stock Option Plan. Incorporated by reference to Form S-1
                filed June 7, 1993.

          10.2  Profit Sharing Plan. Incorporated by reference to Amendment
                No. 1 to Form S-1 filed July 26, 1993.

          10.3  Debt Restructuring Agreement between MFC Bancorp Ltd. and
                Drummond Financial Corporation dated August 30, 1999.
                Incorporated by reference to Form 10-K dated September 24,
                1999.

          10.4  Stipulation and Agreement of Compromise, Settlement and Release
                dated July 25, 2002.

          21    List of subsidiaries of the Registrant.

          99    Certification of Periodic Report.

(b)  Reports on Form 8-K

       Form 8-K filed July 26, 2002.
         Item 5 - Other Events


                                      13
<PAGE>









                         DRUMMOND FINANCIAL CORPORATION

                        CONSOLIDATED FINANCIAL STATEMENTS

                                  JUNE 30, 2002


                                       14
<PAGE>


INDEPENDENT AUDITORS' REPORT




To the Shareholders of
Drummond Financial Corporation


We have audited the consolidated balance sheets of Drummond Financial
Corporation as at June 30, 2002 and 2001 and the related consolidated statements
of operations, cash flows and shareholders' equity for the years ended June 30,
2002, 2001 and 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at June 30, 2002 and
2001 and the results of its operations and cash flows for the years ended June
30, 2002, 2001 and 2000 in conformity with generally accepted accounting
principles in the United States of America.

                                        /s/ Davidson & Company

Vancouver, Canada                       Chartered Accountants

October 11, 2002


                                       15
<PAGE>


DRUMMOND FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars stated in thousands)
AS AT JUNE 30

<TABLE>
<CAPTION>
============================================================================================    ==============    =============

                                                                                                          2002             2001
--------------------------------------------------------------------------------------------    --------------    -------------
<S>                                                                                             <C>               <C>


ASSETS

CASH AND CASH EQUIVALENTS                                                                       $          663    $       5,714
RECEIVABLES (Note 4)                                                                                     7,966            7,883
INVESTMENTS (Note 5)                                                                                     7,566            9,190
DEFERRED DEBT ISSUANCE COSTS, net of accumulated amortization of $556 (2001 - $864)                        340              749
                                                                                                --------------    -------------

                                                                                                $       16,535    $      23,536
============================================================================================    ==============    =============


LIABILITIES AND SHAREHOLDERS' EQUITY

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES                                                        $          374    $         216
INTEREST PAYABLE                                                                                           350              537
ACCRUED DIVIDENDS PAYABLE                                                                                  149              149
DEBT (Note 7)                                                                                           11,949           21,515
                                                                                                --------------    -------------

                                                                                                        12,822           22,417
                                                                                                --------------    -------------

SHAREHOLDERS' EQUITY (Note 8)
    Capital stock
       Preferred stock, $0.01 par value
             5,000,000  shares authorized
             3,000,000  shares issued and outstanding at June 30, 2002 and 2001                             30               30
       Additional paid-in capital                                                                        5,970            5,970
                                                                                                --------------    -------------

                                                                                                         6,000            6,000
                                                                                                --------------    -------------
       Common stock, $0.01 par value
            10,000,000  shares authorized
             2,718,600  shares issued and outstanding at June 30, 2002 and 2001                             27               27
       Additional paid-in capital                                                                       14,727           14,727
                                                                                                --------------    -------------

                                                                                                        14,754           14,754

    Accumulated other comprehensive loss                                                                  (264)            (391)
    Deficit                                                                                            (16,777)         (19,244)
                                                                                                --------------    -------------

                                                                                                        (2,287)          (4,881)
                                                                                                --------------    -------------

                                                                                                         3,713            1,119
                                                                                                --------------    -------------

                                                                                                $       16,535    $      23,536
============================================================================================    ==============    =============
</TABLE>

       The accompanying notes are an integral part of these consolidated
                             financial statements.


                                       16
<PAGE>


DRUMMOND FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars stated in thousands; except per share amounts)
YEAR ENDED JUNE 30

<TABLE>
<CAPTION>
==========================================================================  ===============  ==============  ===============

                                                                                       2002            2001             2000
--------------------------------------------------------------------------  ---------------  --------------  ---------------
<S>                                                                         <C>              <C>             <C>


REVENUE
    Interest                                                                $           612  $          918  $         1,075
    Gain (loss) on investments, net                                                   1,110            (415)           1,272
    Dividend income                                                                     324             352              300
    Other                                                                                 -              17                3
                                                                            ---------------  --------------  ---------------

                                                                                      2,046             872            2,650
                                                                            ---------------  --------------  ---------------

EXPENSES
    Interest                                                                          1,011           1,211            1,349
    General and administrative                                                          629             929            1,192
                                                                            ---------------  --------------  ---------------

                                                                                      1,640           2,140            2,541
                                                                            ---------------  --------------  ---------------

INCOME (LOSS) FROM OPERATIONS                                                           406          (1,268)             109

INCOME TAX EXPENSE                                                                        -              (1)              (1)
                                                                            ---------------  --------------  ---------------

INCOME (LOSS) BEFORE EXTRAORDINARY ITEM                                                 406          (1,269)             108

EXTRAORDINARY ITEM: GAIN ON DEBTS, NET OF INCOME TAX (Note 7)                         2,361               -                -
                                                                            ---------------  --------------  ---------------

NET INCOME (LOSS)                                                           $         2,767  $       (1,269) $           108
==========================================================================  ===============  ==============  ===============

BASIC AND DILUTED EARNINGS (LOSS) PER SHARE (Note 8)

  Before extraordinary item                                                 $          0.04  $        (0.58) $         (0.07)

  Extraordinary item                                                                   0.87               -                -
                                                                            ---------------  --------------  ---------------

                                                                            $          0.91  $        (0.58) $         (0.07)
==========================================================================  ===============  ==============  ===============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING                              2,718,600       2,718,600        2,718,600
==========================================================================  ===============  ==============  ===============
</TABLE>


        The accompanying notes are an integral part of these consolidated
                             financial statements.


                                       17
<PAGE>


DRUMMOND FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars stated in thousands)
YEAR ENDED JUNE 30

<TABLE>
<CAPTION>
============================================================================== ===============  ==============  ===============

                                                                                          2002            2001             2000
------------------------------------------------------------------------------ ---------------  --------------  ---------------
<S>                                                                            <C>              <C>             <C>


CASH FLOWS FROM OPERATING ACTIVITIES
    Income (loss) before extraordinary item for the year                       $          406   $      (1,269)  $           108
    Adjustments to reconcile income (loss) to cash:
       Loss (gain) on investments, net                                                 (1,110)            415            (1,272)
       Amortization of deferred debt issuance costs                                       100             134               134

    Changes in non-cash working capital balances:
       Interest receivable                                                                831            (402)             (576)
       Other receivable                                                                  (120)          1,341              (168)
       Due to/from affiliate                                                              328              40               860
       Interest payable                                                                  (170)           (670)              274
       Accounts payable and accrued liabilities                                          (188)            166               (81)
       Other                                                                             (107)             (2)                6
    Purchase of trading securities                                                     (1,122)         (2,825)             (328)
    Proceeds from sales of trading securities                                           2,876           2,201             5,373
                                                                               ---------------  --------------  ---------------

    Net cash provided by (used in) operating activities                                 1,724            (871)            4,330
                                                                               ---------------  --------------  ---------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Advances on loans receivable                                                            -         (11,752)                -
    Payments collected on loans receivable                                                  -           5,852                 -
    Decrease (increase) in notes receivable, net                                         (686)          6,547            (2,072)
    Purchases of long-term investments                                                   (425)              -                 -
    Proceeds from sales of long-term investments                                        1,532               -                 -
                                                                               ---------------  --------------  ---------------

    Net cash provided by (used in) investing activities                                   421             647            (2,072)
                                                                               ---------------  --------------  ---------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Repayment of debt                                                                  (6,896)             -                  -
    Dividends paid on preferred shares                                                   (300)           (300)             (300)
                                                                               ---------------  --------------  ---------------

    Net cash used in financing activities                                              (7,196)           (300)             (300)
                                                                               ---------------  --------------  ---------------
</TABLE>


                                  - CONTINUED -

        The accompanying notes are an integral part of these consolidated
                             financial statements.


                                       18
<PAGE>


DRUMMOND FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars stated in thousands)
YEAR ENDED JUNE 30

<TABLE>
<CAPTION>
============================================================================== ==============   =============   ==============

                                                                                         2002            2001             2000
------------------------------------------------------------------------------ --------------   -------------   --------------
<S>                                                                            <C>              <C>             <C>

CONTINUED...


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS FOR THE YEAR                          (5,051)           (524)           1,958

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                            5,714           6,238            4,280
                                                                               --------------   -------------   --------------

CASH AND CASH EQUIVALENTS, END OF YEAR                                         $          663   $       5,714   $        6,238
============================================================================== ==============   =============   ==============

CASH PAID DURING THE YEAR FOR:
    Interest expense                                                           $        1,100   $       1,747   $          941
    Income taxes                                                                            -               1                1
============================================================================== ==============   =============   ==============
</TABLE>


SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS (Note 15)

        The accompanying notes are an integral part of these consolidated
                             financial statements.


                                       19
<PAGE>


DRUMMOND FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Dollars stated in thousands)

<TABLE>
<CAPTION>
===================================================================================================================================
                                   Preferred Stock                      Common Stock
                           -------------------------------  ----------------------------------
                                                                                                   Accum-
                                                                                                   ulated
                                                                                                    Other                     Total
                                                  Additional                          Additional   Compre-                   Share-
                               Number                Paid-in       Number                Paid-in   hensive                 holders'
                            of Shares    Amount      Capital    of Shares    Amount      Capital      Loss      Deficit      Equity
--------------------------  ---------  ---------  ----------   ----------   --------  ----------  --------   ----------  ----------
<S>                         <C>        <C>        <C>          <C>          <C>       <C>         <C>        <C>         <C>

BALANCE AT  JUNE 30, 1999   3,000,000  $      30  $   5,970     2,718,600   $     27  $   14,727  $      -   $  (17,483) $    3,271

Net income for the year             -          -           -            -          -           -         -          108         108

Dividends paid and payable          -          -           -            -          -           -         -         (300)       (300)
                            ---------  ---------  ----------   ----------   --------  ----------  --------   ----------  ----------

BALANCE AT JUNE 30, 2000    3,000,000         30       5,970    2,718,600         27      14,727         -      (17,675)      3,079

Net loss for the year               -          -           -            -          -           -         -       (1,269)     (1,269)

Dividends paid and payable          -          -           -            -          -           -         -         (300)       (300)

Unrealized holding loss on
  available for-sale
  securities                        -          -           -            -          -           -      (391)           -        (391)
                            ---------  ---------  ----------   ----------   --------  ----------  --------   ----------  ----------

BALANCE AT JUNE 30, 2001    3,000,000         30       5,970    2,718,600         27      14,727      (391)     (19,244)      1,119

Net income for the year             -          -           -            -          -           -         -        2,767       2,767

Dividends paid and payable          -          -           -            -          -           -         -         (300)       (300)

Unrealized holding gain on
  available-for-sale
  securities                        -          -           -            -          -           -       127           -          127
                            ---------  ---------  ----------   ----------   --------  ----------  --------   ----------  ----------

BALANCE AT JUNE 30, 2002    3,000,000  $      30   $   5,970    2,718,600   $     27  $   14,727  $   (264) $  (16,777)  $    3,713
==========================  =========  =========   =========   ==========   ========  ==========  ========  ==========   ==========
</TABLE>


        The accompanying notes are an integral part of these consolidated
                             financial statements.


                                       20
<PAGE>


DRUMMOND FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables stated in thousands)
JUNE 30, 2002
===============================================================================

1.       NATURE OF OPERATIONS

         Drummond Financial Corporation (the "Company"), a Washington
         corporation, was formed in June 1993. In August 1993, the Company
         completed an initial public offering of common stock concurrent with a
         debenture offering.

         The Company presently operates in the financial services industry,
         which is comprised of investment and merchant banking activities and
         asset-based commercial lending. The merchant banking activities are
         expected to include the acquisition of controlling interests in
         businesses or assets which the Company believes are under-valued. The
         Company now focuses on investment and merchant banking activities
         while de-emphasizing asset-based commercial lending.

2.       BASIS OF PRESENTATION

         These consolidated financial statements have been prepared by
         management in conformity with generally accepted accounting principles
         applicable in the United States of America, and are stated in United
         States dollars.

3.       SIGNIFICANT ACCOUNTING POLICIES

         USE OF ESTIMATES

         In preparing these financial statements, management is required to make
         estimates and assumptions that affect the reported amounts of assets
         and liabilities as of the date of the balance sheet and revenues and
         expenses for the year. Actual results in future periods could be
         different from these estimates made in the current year. The following
         is a summary of the significant accounting policies of the Company:

         BASIS OF CONSOLIDATION

         These consolidated financial statements included the accounts of the
         Company and its subsidiaries. Significant inter-company accounts and
         transactions have been eliminated.

         CASH AND CASH EQUIVALENTS

         Cash equivalents consist of highly liquid investments with an original
         maturity of three months or less. These are recorded at cost which
         approximates fair value based on the reported market value.
         Occasionally, the Company maintains cash balances at foreign financial
         institutions in excess of insured limits.


                                       21
<PAGE>


DRUMMOND FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables stated in thousands)
JUNE 30, 2002
===============================================================================

3.       SIGNIFICANT ACCOUNTING POLICIES (cont'd...)

         FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES

         Finance receivables, also known as recorded investments in loans,
         include the outstanding loan balance (net of any charge-offs), accrued
         interest, reimbursable expenses and are net of deferred loan fees.

         The Company maintains an allowance for credit losses at an amount
         estimated to cover potential losses on finance receivables which have
         experienced an event of impairment or for which future collection of
         outstanding principal, interest and reimbursable expenses has become
         doubtful. Amounts deemed to be uncollectible are charged off against
         the allowance and subsequent recoveries, if any, are credited to the
         allowance. The amount of the allowance is based on the Company's
         evaluation of numerous factors, including the adequacy of the
         collateral securing the loans, the operating environments of the
         various borrowers and the historical experience of the various
         borrowers' management, and reflect the Company's best estimate of the
         necessary level of the allowance for credit losses.

         Under the provisions of Financial Accounting Standards Board ("FASB")
         Statement No. 114, "Accounting by Creditors for Impairment of a Loan",
         when a loan is impaired as defined in the statement, a lender shall
         measure impairment at the present value of expected future cash flows
         discounted at the loan's effective interest rate, or as a practical
         expedient, based on a loan's observable market price or the fair value
         of the collateral if the loan is collateral dependent. The Company has
         adopted a measurement method on a loan-by-loan basis. By definition,
         the Company's non-performing loans are impaired. A specific reserve is
         established for each impaired loan equal to the amount by which the
         Company's recorded investment in the loan exceeds the net present value
         of the loan determined in accordance with FASB Statement No. 114.

         The Company continues to apply FASB Statement No. 5 "Accounting for
         Contingencies" to provide an allowance on a pool of unimpaired loans.

         INVESTMENTS

         The Company's available-for-sale and trading securities are stated at
         their fair values. Any unrealized holding gains or losses of
         available-for-sale securities are excluded from earnings and reported
         as a separate component of shareholders' equity until realized. If a
         loss in value in available-for-sale securities is considered to be
         other than temporary, it is recognized in the determination of net
         income. Gains and losses on trading securities are included in
         earnings. Cost is based on the specific identification method to
         determine realized gains or losses.

         Warrants to acquire common stock of the various borrowers held by the
         Company for which a readily determinable fair market value is available
         and the Company has an unrestricted right to sell the warrant and/or
         underlying securities within one year are included in trading
         securities.

         Investments in other companies where control is temporary or ownership
         is less than 20% are carried using the cost method of accounting. The
         Company accounts for its investments in companies where the ownership
         is 20% or more under the equity method.

         DEFERRED DEBT ISSUANCE COSTS

         Deferred debt issuance costs consist of underwriters' fees and expenses
         and other costs capitalized in connection with the Company's August
         1993 debt offering. These costs are being amortized on a straight-line
         basis which approximates the interest method over the term of the
         related debt. The amortization is included in interest expense.


                                       22
<PAGE>


DRUMMOND FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables stated in thousands)
JUNE 30, 2002
===============================================================================

3.       SIGNIFICANT ACCOUNTING POLICIES (cont'd...)

         REVENUE RECOGNITION

         Revenue consists principally of interest income from finance
         receivables, other receivables, temporary investments of cash and cash
         equivalents, and amortization of loan commitment fees, net of related
         costs, received in connection with the making of loans, as well as
         sales of trading securities. Interest income is recognized when earned
         using the interest method. The Company, as a general policy, suspends
         the recognition of income on loans which are more than 90 days
         contractually delinquent or earlier if the Company has material
         evidence of the borrower's inability to meet its commitments under the
         loan agreement (e.g. the borrower files for bankruptcy protection). The
         recognition of income is generally resumed, and suspended income is
         recognized as interest revenue, when the loan becomes contractually
         current or collection of suspended amounts is assured. Loan commitment
         fees, net of related costs, are deferred and recognized over the term
         of the loan using the interest method. For delinquent loans,
         amortization of the corresponding net loan commitment fees is suspended
         and subsequently resumed concurrently with the related recognition of
         interest income.

         INCOME TAXES

         Certain revenue and expense items, primarily related to the allowance
         for credit losses, are accounted for in different time periods for
         financial reporting purposes as compared to income tax reporting
         purposes. Deferred taxes are recognized using the liability method, and
         tax rates are applied to cumulative temporary differences based on when
         and how they are expected to be included for income tax reporting
         purposes. Valuation allowances are established, when necessary, to
         reduce deferred tax assets to the amount which management believes is
         more likely than not to be realized.

         EARNINGS (LOSS) PER SHARE

         In February 1997, the Financial Accounting Standards Board ("FASB")
         issued SFAS No. 128, "Earnings Per Share". Under SFAS 128, basic and
         diluted earnings per share are to be presented. Basic earnings per
         share is computed by dividing income available to common shareholders
         by the weighted average number of common shares outstanding in the
         period. Diluted earnings per share takes into consideration common
         shares outstanding (computed under basic earnings per share) and
         potentially dilutive common shares.

         FOREIGN CURRENCY

         The monetary assets and liabilities of the Company that are denominated
         in foreign currencies are translated at the rate of exchange at the
         balance sheet date and non-monetary items are translated at historical
         rates. Revenues and expenses are translated at the average exchange
         rate for the year. Exchange gains and losses arising on translation are
         included in the statement of operations.

         STOCK-BASED COMPENSATION

         FASB Statement No. 123, "Accounting for Stock-Based Compensation",
         encourages, but does not require, companies to record compensation cost
         for stock-based employee compensation plans at fair value. The Company
         has chosen to account for stock-based compensation using Accounting
         Principles Board Opinion No. 25, "Accounting for Stock Issued to
         Employees". Accordingly, compensation cost for stock options is
         measured as the excess, if any, of the quoted market price of the
         Company's stock at the date of the grant over the amount an employee is
         required to pay for the stock.


                                       23
<PAGE>


DRUMMOND FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables stated in thousands)
JUNE 30, 2002
===============================================================================

3.       SIGNIFICANT ACCOUNTING POLICIES (cont'd...)

         COMPREHENSIVE INCOME

         In June 1997, the FASB issued Statement No. 130 "Reporting
         Comprehensive Income", which establishes standards for the reporting
         and display of comprehensive income and its components (revenues,
         expenses, gains and losses). The purpose of reporting comprehensive
         income is to present a measure of all changes in shareholders' equity
         other than transactions with owners in their capacity as owners. The
         Company has other comprehensive income of $127,000, $391,000 loss and
         $Nil during the years ended June 30, 2002, 2001 and 2000, respectively,
         representing the unrealized holding gain or loss on available-for-sale
         securities.

         RECENT ACCOUNTING PRONOUNCEMENTS

         In July 2001, the FASB issued SFAS No. 141, "Business Combinations",
         and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141
         requires that the purchase method of accounting be used for all future
         business combinations and specifies criteria that intangible assets
         acquired in a business combination must meet to be recognized and
         reported apart from goodwill. SFAS No. 142 requires that goodwill and
         intangible assets with indefinite useful lives no longer be amortized,
         but instead tested for impairment at least annually in accordance with
         the provisions of SFAS No. 142. SFAS No. 142 will also require that
         intangible assets with estimable useful lives be amortized over their
         respective estimated useful lives, and reviewed for impairment in
         accordance with SFAS No. 121. The Company has adopted the provisions of
         SFAS 141 and SFAS 142 as of July 1, 2001.

         In July 2001, the FASB issued Statements of Financial Accounting
         Standards No. 143 ("SFAS 143") "Accounting for Asset Retirement
         Obligations" that records the fair value of the liability for closure
         and removal costs associated with the legal obligations upon retirement
         or removal of any tangible long-lived assets. The initial recognition
         of the liability will be capitalized as part of the asset cost and
         depreciated over its estimated useful life. SFAS 143 is required to be
         adopted effective January 1, 2003.

         In August 2001, the FASB issued Statements of Financial Accounting
         Standards No. 144 ("SFAS 144") "Accounting for the Impairment or
         Disposal of Long-Lived Assets" that supersedes Statement of Financial
         Accounting Standards No. 121 "Accounting for the Impairment or Disposal
         of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS
         144 is required to be adopted for fiscal years beginning after December
         15, 2001.

         In April 2002, FASB issued Statements of Financial Accounting No. 145,
         "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB
         Statement No. 13, and Technical Corrections" ("SFAS 145"). SFAS 145
         eliminates the requirement that gains and losses from the
         extinguishment of debt be aggregated and, if material, classified as an
         extraordinary item, net of the related income tax effect and eliminates
         an inconsistency between the accounting for sale-leaseback transactions
         and certain lease modifications that have economic effects that are
         similar to sale-leaseback transactions. Generally SFAS 145 is effective
         for transactions occurring after May 15, 2002.

         In June 2002, the FASB issued Statements of Financial Accounting
         Standards No. 146 ("SFAS 146") "Accounting for Costs Associated with
         Exit or Disposal Activities" that nullifies Emerging Issues Task Force
         Issue No. 94-3 ("EITF Issue 94-3") "Liability Recognition for Certain
         Employee Termination Benefits and Other Costs to Exit an Activity
         (Including Certain Costs Incurred in a Restructuring)". SFAS 146
         requires that a liability for a cost associated with an exit or
         disposal activity be recognized when the liability is incurred, whereby
         EITF Issue 94-3 had recognized the liability at the commitment date to
         an exit plan. The provisions of this statement are effective for exit
         or disposal activities that are initiated after December 31, 2002 with
         earlier application encouraged.


                                       24
<PAGE>


DRUMMOND FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables stated in thousands)
JUNE 30, 2002
===============================================================================

3.       SIGNIFICANT ACCOUNTING POLICIES (cont'd...)

         RECENT ACCOUNTING PRONOUNCEMENTS (cont'd...)

         The adoption of these new pronouncements is not expected to have a
         material effect on the Company's financial position or results of
         operations.

         COMPARATIVE FIGURES

         Certain comparative figures have been reclassified to conform with the
         current year's presentation.

4.       RECEIVABLES

<TABLE>
<CAPTION>
         ============================================================ =============  =============

                                                                               2002           2001
         ------------------------------------------------------------ -------------  -------------
<S>                                                                   <C>            <C>

         Notes and loans receivable                                   $       6,837  $       6,042
         Accrued dividend receivable                                            149            149
         Other receivables                                                      980          1,692
                                                                      -------------  -------------

                                                                      $       7,966  $       7,883
         ============================================================ =============  =============
</TABLE>

         The carrying amount of the receivables approximates their fair value
         which is based on the discounted present value of their estimated
         future cash flows.

5.       INVESTMENTS

<TABLE>
<CAPTION>
         ============================================================ =============  =============

                                                                               2002           2001
         ------------------------------------------------------------ -------------  -------------
<S>                                                                   <C>            <C>

         Trading securities:
             Bonds and debentures                                     $           -  $         456
             Equity securities                                                  426          2,645
                                                                      -------------  -------------

                                                                                426          3,101
                                                                      -------------  -------------
         Available-for-sale securities:
             Bonds and debentures                                               527              -
             Equity securities                                                  188             89
                                                                      -------------  -------------

                                                                                715             89
                                                                      -------------  -------------

         Other investments                                                    6,425          6,000
                                                                      -------------  -------------

                                                                      $       7,566  $       9,190
         ============================================================ =============  =============
</TABLE>



                                       25
<PAGE>


DRUMMOND FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables stated in thousands)
JUNE 30, 2002
===============================================================================

5.       INVESTMENTS (cont'd...)

         For the year ended June 30, 2002, the Company recognized an unrealized
         holding gain (loss) of $267,000 (2001 - ($75,000); 2000 - ($40,000))
         and a realized gain (loss) of $159,000 (2001 - ($340,000); 2000 -
         $846,000) on trading securities.

         For the year ended June 30, 2002 the Company recorded an unrealized
         gain (loss) of $127,000 (2001 - ($391,000); 2000 - $Nil) on the
         available-for-sale securities which is recorded as other comprehensive
         loss under the shareholders' equity section.

         Other investments consist of preferred shares in a company under common
         control and in an unrelated company. The preferred shares in the
         Company under common control are stated at cost of $6,000,000 at June
         30, 2002 and 2001 because there is no ready market for the shares. The
         carrying amount approximates their fair value which is based on their
         retractibility feature and dividend rate compared to market rate.

6.       INVESTMENT - AT EQUITY

         As at June 30, 1998, the Company's investment was comprised of
         1,070,320 common shares of Mymetics Corporation (formerly Ichor
         Corporation) which represented 21.81% of the total outstanding shares.
         The Company has accounted for its investment using the equity method of
         accounting. During 1999, the Company sold the investment to an
         affiliate for consideration of 94% of the proceeds from the future
         sales by the affiliate of all or part of the investment on or before
         December 31, 2003. During 2000, 779,435 shares of Mymetics Corporation
         were sold for an accounting gain of $2,158,000. During 2002, the
         remaining shares were sold for an accounting gain of $684,000.

7.       DEBT

         Under an indenture dated August 26, 1993 (the "Master Indenture"), the
         Company was authorized to issue up to $500 million of unsecured,
         subordinated variable rate bonds (the "Bonds"). The Bonds could have
         been issued in series, each substantially identical in form pari passu
         in right and having substantially identical terms except for the date
         of issuance. The Company could not issue any subsequent series of Bonds
         unless no event of default under the Master Indenture had occurred or
         had been continuing with respect to any Bond previously issued within
         the 12 month period immediately preceding the date of issuance of such
         subsequent series, and not less than 75 percent of the net proceeds
         received from the issuance of the immediately preceding series of Bonds
         had been utilized or formally committed.

         In August 1993, the Company made an initial issuance of Bonds at par in
         the aggregate principal amount of $50 million in a public offering
         concurrent with the Company's initial public offering of Common Stock.
         The sale of the Bonds generated net proceeds of $46.9 million after
         related debt issuance costs. No other issuances of Bonds had since
         occurred.

         In February 1998, MFC Bancorp Ltd. ("MFC") owned all of the Bonds,
         which had a face value of $21,515,000, as approved by a court order.


                                       26
<PAGE>


DRUMMOND FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables stated in thousands)
JUNE 30, 2002
===============================================================================

7.       DEBT (cont'd...)

         On January 25, 1999, MFC delivered all of the outstanding Bonds to
         the Company in exchange for a promissory note. The promissory note
         was to pay interest at 8.75% per annum payable semi-annually on
         January 25 and July 25 of each year and matures on July 31, 2008. In
         August 1999, The Company entered into a debt restructuring agreement
         with MFC, pursuant to which the rate of interest was reduced to 5%
         per annum and the debt was secured by fixed liens upon the assets of
         the Company.

         Interest paid or accrued on the promissory note and/or Bonds was
         $868,000 during the year 2002 (2001 - $1,076,000; 2000 - $1,207,000),
         and accrued interest payable was $349,000 as at June 30, 2002 (2001 -
         $537,000).

         During the year 2002, the Company settled approximately $9,179,000
         debt with MFC, resulting in a gain, net of tax, of approximately
         $2,274,000. Also, the Company settled approximately $387,000 Bonds
         with a dissenting holder, resulting in a gain, net of tax, of
         approximately $87,000. The gains that arose from these debt
         settlements have been classified as extraordinary item on the
         consolidated income statement.

         The promissory note had a fair value of approximately $11,949,000 and
         $21,515,000 as of June 30, 2002 and 2001, respectively, which is based
         on the present value taking into consideration the security and
         interest rate.

8.       SHAREHOLDERS' EQUITY

         In June 1996, the Company issued 3,000,000 shares of its Preferred
         Stock, Series 1 for $6,000,000 cash. The Preferred Stock, Series 1 pays
         a cumulative dividend at 5% per annum on paid-up amount; accrued
         interest at 8% per annum on accrued and unpaid dividends; is redeemable
         by the Company at any time at the paid-up amount plus 10% premium; and
         has variable voting rights.

         MFC owns directly and indirectly 50.1% (2001 - 49.4%) of the Company's
         Common Stock and 100% (2001 - 100%) of the Company's Preferred Stock.

         Income (loss) before extraordinary item has been reduced by
         preferred dividends of $300,000 for each of the years presented in
         the calculation of basic and diluted earnings (loss) per share
         before extraordinary item.

9.       STOCK OPTION PLAN

         In June 1993, the Board of Directors approved the adoption of the Stock
         Option Plan. Under the plan, substantially all employees, consultants
         and non-employee directors are eligible to receive options to purchase
         up to an aggregate of 400,000 shares of the Company's common stock at
         exercise prices which cannot be less than the fair market value of the
         shares on the date the options are granted. The term of each option can
         be no more than 10 years. Non-employee directors of the Company can be
         granted options to purchase 25,000 shares of common stock on the date
         they become a director and additional options to purchase 3,500 shares
         of common stock are granted upon the completion of each full year of
         service and at the Annual Meeting of Shareholders thereafter.

         At June 30, 2002, 2001 and 2000 options to purchase 375,000 shares of
         the Company's Common Stock are available for future grant. There were
         no options granted in either 2002, 2001 or 2000. There were no stock
         options outstanding as at June 30, 2002 and 2001.

         The disclosure requirements of FASB Statement No. 123 are effective for
         the Company's financial statements starting from the fiscal year ended
         June 30, 1997. No pro forma disclosures are presented because there
         have been no options granted after the fiscal year ended June 30, 1995.


                                       27
<PAGE>


DRUMMOND FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables stated in thousands)
JUNE 30, 2002
===============================================================================

10.      INCOME TAXES

         There was no provision for income taxes for the years ended June 30,
         2002, 2001 and 2000 (other than the payment of state minimum income tax
         of $1,000 each in 2001 and 2000).

         Differences between the United States federal statutory and the
         Company's effective tax rates are as follows:

<TABLE>
<CAPTION>
         ===================================================================== ==============  ==============  ==============

                                                                                         2002            2001            2000
         --------------------------------------------------------------------- --------------  --------------  --------------
<S>                                                                            <C>             <C>             <C>

         United States federal statutory rates on income (loss) from
             operations                                                        $          941  $         (431) $           37
         Timing differences on debt settlement                                           (911)              -               -
         Other                                                                           (364)             (5)           (223)
         Tax loss benefit not recorded for book purposes                                  334             436             186
                                                                               --------------  --------------  --------------

                                                                               $            -  $            -  $            -
         ===================================================================== ==============  ==============  ==============
</TABLE>


         The net deferred tax assets at June 30, 2002 and 2001 consist of the
         following:

<TABLE>
<CAPTION>
         ===================================================================================== ==============  =============

                                                                                                         2002           2001
         ------------------------------------------------------------------------------------- --------------  -------------
<S>                                                                                            <C>             <C>

         Net operating loss carryforwards                                                      $        4,093  $       3,777
         Investment differences                                                                           197            344
         Other timing differences                                                                         111            227
         Valuation allowance                                                                           (4,401)        (4,348)
                                                                                               --------------  -------------

         Deferred tax asset, net                                                               $            -  $           -
         ===================================================================================== ==============  =============
</TABLE>

         At June 30, 2002, the Company had $12,000,000 in net operating loss
         carryforwards for United States federal income tax purposes. The
         carryforwards expire in the fiscal years ending in 2009 to 2022.

11.      SEGMENTED INFORMATION

         The Company conducted substantially all of its business of investment
         and merchant banking activities and asset-based commercial lending in
         North America as one business segment.

12.      RELATED PARTY TRANSACTIONS

         During the year ended June 30, 2002, the Company:

         a)  Paid or accrued $300,000 (2001 - $300,000; 2000 - $300,000) in
             administrative fees to MFC., and $Nil (2001 - $Nil; 2000 -
             $300,000) to Logan International Corp. whose former director is a
             director and officer of the Company. These fees were paid for the
             accounting and administration of the Company and reimbursement of
             office expenses.



                                      28
<PAGE>


DRUMMOND FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables stated in thousands)
JUNE 30, 2002
===============================================================================

12.      RELATED PARTY TRANSACTIONS (cont'd...)

         b)  Paid $300,000 (2001 - $300,000; 2000 - $300,000) of dividends on
             its preferred shares held by a subsidiary of MFC and accrued
             $149,000 (2001 - $149,000; 2000 - $149,000) for dividends to the
             subsidiary of MFC.

         c)  Received $300,000 (2001 - $300,000; 2000 - $300,000) of dividends
             on its investments in preferred shares issued by another subsidiary
             of MFC and accrued $149,000 (2001 - $149,000; 2000 - $149,000) for
             dividends from the subsidiary of MFC.

         d)  Received $Nil (2001 - $972,000; 2000 - $Nil) on redemption of
             preferred shares and $Nil (2001 - $52,000; 2000 - $Nil) for
             dividends from Mymetics Corporation.

         e)  Sold trading securities of $3,216,000 (2001 and 2000 - $Nil)
             to MFC.

         f)  Owed MFC and its subsidiary $328,000 (2001 - $Nil).

         g)  Advanced to a director of the Company of $141,000 (2001 - $Nil)
             for travel and related expenses.

         h)  Advanced to a company with a director in common $128,000
             (2001 - $Nil).

13.      FINANCIAL INSTRUMENTS

         The Company's financial instruments consist of cash and cash
         equivalents, receivables, investments, accounts payable and accrued
         liabilities, interest payable, accrued dividends payable and debt.
         Unless otherwise noted, it is management's opinion that the Company is
         not exposed to significant interest, currency or credit risks arising
         from these financial instruments. The fair value of these financial
         instruments approximate their carrying value, unless otherwise noted.

         a)  Credit risk:

             The Company is exposed to credit risk only with respect to
             uncertainties as the timing and amount of collectibility of
             accounts receivable. The Company mitigates credit risk through
             standard credit and reference checks.

         b)  Currency risk:

             The Company is exposed to financial risk arising from fluctuation
             in foreign exchange rates and the degree of volatility of these
             rates. The Company does not use derivative instruments to reduce
             its exposure to foreign currency risk.


                                       29
<PAGE>


DRUMMOND FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables stated in thousands)
JUNE 30, 2002
===============================================================================

14.      COMMITMENTS AND CONTINGENCIES

         In September 1999, Gibralt Holdings Ltd. ("Gibralt") commenced a
         putative derivative action in Delaware Chancery Court naming the
         Company, certain of its directors and officers and others as
         defendants. The claim has been filed in the form of a class action on
         behalf of shareholders, but has not received Court certification as
         such. Gibralt alleges that the defendants have breached certain
         fiduciary duties, engaged in self-dealing and failed in their
         disclosure obligations. The remedies sought by Gibralt include, among
         other things, recovery of funds, judgement for damages and certain
         other remedies that may be sought in the hearing of the claim. The
         action was subsequently amended to substitute certain individual
         plaintiffs (the "Individual Plaintiffs") in place of Gibralt and amend
         the action to withdraw certain claims dismissed by the Court and
         clarify other claims. The Corporation and other defendants believe the
         claims to be entirely without merit and have vigorously defended
         against the action.

         In order to avoid, among other things, the inherent cost, time
         consuming nature and uncertainty of litigation, on July 25, 2002, the
         parties entered into a Stipulation and Agreement of Compromise,
         Settlement and Release (the "Settlement Agreement") in connection with
         the proposed settlement (the "Settlement") of the action. The
         Settlement Agreement provides, among other things, that the Corporation
         will make an offer to purchase all of the outstanding shares of the
         corporation's common stock not owned by the defendants and/or their
         associates and affiliates at a price of $1.25 per share and will
         provide $125,000 to the plaintiff's counsel. The settlement is subject
         to court approval which has not yet been obtained.

15.      SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CONSOLIDATED
         STATEMENT OF CASH FLOWS

         Significant non-cash transactions in 2002 and 2001: Nil

         The significant non-cash transaction in 2000 was the Company receiving
         securities with fair value of $972,000 as settlement of an amount due
         from Mymetics Corporation plus related accrued interest.

16.      DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY
         ACCEPTED ACCOUNTING PRINCIPLES

         The Company's consolidated financial statements have been prepared in
         accordance with United States Generally Accepted Accounting Principles
         ("U.S. GAAP") which conform in all material respects with Canadian
         Generally Accepted Accounting Principles ("Canadian GAAP") except as
         set forth below:

         INVESTMENTS

         U.S. GAAP requires that trading securities be carried at fair market
         value with holding gains and losses included in the net income or loss.
         Warrants to acquire common stock for which a readily determinable fair
         market value is available and the Company has an unrestricted right to
         sell the warrant and/or underlying securities within one year are
         included in trading securities. Canadian GAAP would require that such
         securities be carried at the lower of cost or market with gains
         recorded only as realized. There were no differences between U.S. and
         Canadian GAAP in the determination of net income (loss) for the years
         ended June 30, 2002, 2001 and 2000.

         U.S. GAAP requires that the available for-sale securities be carried at
         fair market value with holding gains and losses included in the
         determination of comprehensive income and reported as a separate
         component of shareholders' equity. Canadian GAAP would require that
         such securities be carried at cost and written down only when a decline
         in value of the investment is other than temporary. Under Canadian
         GAAP, shareholders' equity and investment would both increase by
         $264,000 as at June 30, 2002 (2001 - $391,000).


                                       30
<PAGE>

                                 SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the SECURITIES
EXCHANGE ACT OF 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                      DRUMMOND FINANCIAL CORPORATION

Date: October 24, 2002                By: /s/ Michael J. Smith
                                      ----------------------------------------
                                          Michael J. Smith
                                          President, Chief Executive Officer,
                                          Chief Financial Officer and Director

Pursuant to the requirements of the SECURITIES EXCHANGE ACT OF 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

/s/ Michael J. Smith                      Date: October 24, 2002
------------------------------------
Michael J. Smith
President, Chief Executive Officer,
Chief Financial Officer and Director

/s/ Young-Soo Ko                          Date: October 24, 2002
------------------------------------
Young-Soo Ko
Director

/s/ Oq-Hyun Chin                          Date: October 24, 2002
------------------------------------
Oq-Hyun Chin
Director


                                       31
<PAGE>

                        CERTIFICATION OF PERIODIC REPORT

I, Michael J. Smith, certify that:

1.  I have reviewed this annual report on Form 10-K of Drummond Financial
    Corporation (the "Registrant");

2.  Based on my knowledge, this annual report does not contain any untrue
    statement of a material fact or omit to state a material fact necessary to
    make the statements made, in light of the circumstances under which such
    statements were made, not misleading with respect to the period covered by
    this annual report; and

3.  Based on my knowledge, the financial statements, and other financial
    information included in this annual report, fairly present in all material
    respects the financial condition, results of operations and cash flows of
    the Registrant as of, and for, the periods presented in this annual report.

Date: October 24, 2002

                                            /s/ Michael J. Smith
                                            ---------------------------
                                            Michael J. Smith
                                            Chief Executive Officer and
                                            Chief Financial Officer


                                       32
<PAGE>

                                 EXHIBIT INDEX

<Table>
<Caption>
EXHIBIT NO.                            DOCUMENT
<S>          <C>
   2.1       Arrangement Agreement among Drummond Financial (B.C.) Ltd., MFC
             Bancorp Ltd. and Drummond Financial Corporation dated February
             23, 1998. Incorporated by reference to Form T-3 of MFC Bancorp
             Ltd. dated March 2, 1998.

   2.2       Amendment Agreement among Drummond Financial (B.C.) Ltd., MFC
             Bancorp Ltd. and Drummond Financial Corporation dated March 23,
             1998. Incorporated by reference to Form 10-KSB dated September
             28, 1998.

   2.3       Plan and Agreement of Merger between Drummond Financial
             Corporation and Drummond Merger Corporation dated June 18, 2001.
             Incorporated by reference to Information Statement on Form
             DEF14C of Drummond Financial Corporation filed July 11, 2001.

   3.1       Certificate of Incorporation dated June 1, 1993. Incorporated by
             reference to Form S-1 filed June 7, 1993.

   3.2       Certificate of Designations dated July 19, 1996. Incorporated by
             reference to Form 10-KSB dated September 20, 1996.

   3.3       Certificate of Amendment to the Certificate of Incorporation of
             Drummond Financial Corporation dated October 14, 1996.
             Incorporated by reference to Form 10-QSB dated November 11, 1996.

   3.4       Articles of Incorporation dated June 13, 2001. Incorporated by
             reference to Form 10-K dated May 14, 2002.

   3.5       Bylaws. Incorporated by reference to Form S-1 filed June 7, 1993.

   3.6       Amendment to the Bylaws adopted as of July 20, 1993.
             Incorporated by reference to Amendment No. 1 to Form S-1 filed
             July 26, 1993.

   3.7       Bylaws dated June 18, 2001. Incorporated by reference to Form
             10-Q dated May 14, 2002.

   10.1      1993 Stock Option Plan. Incorporated by reference to Form S-1
             filed June 7, 1993.

   10.2      Profit Sharing Plan. Incorporated by reference to Amendment
             No. 1 to Form S-1 filed July 26, 1993.

   10.3      Debt Restructuring Agreement between MFC Bancorp Ltd. and
             Drummond Financial Corporation dated August 30, 1999.
             Incorporated by reference to Form 10-K dated September 24, 1999.

   10.4      Stipulation and Agreement of Compromise, Settlement and Release
             dated July 25, 2002.

   21        List of subsidiaries of the Registrant.

   99        Certification of Periodic Report.
</Table>