<PAGE>  1

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

                 U.S. SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C. 20549

                                 FORM 10-KSB

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

                 For the fiscal year ended    June 30, 1997
                                             ---------------
                                    OR

[   ]         TRANSITION REPORT UNDER 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
              (Name of small business issuer in its charter)
 
                DELAWARE                                95-4426690
      (State or other jurisdiction of                (I.R.S. Employer
       incorporation or organization)                Identification  No.)

         400 Burrard Street, Suite 1250
       Vancouver, British Columbia, Canada                 V6C 3A6
     (Address of principal executive offices)             (Zip Code)

       Issuer's telephone number, including area code:  (604) 683-5312

     Securities registered under Section 12(b) of the Exchange Act:  None

        Securities registered under Section 12(g) of the Exchange Act:

                          Common Stock $0.01 Par Value
                          15 Year Variable Rate Bonds

      Check whether the issuer:  (1) filed all reports required to be filed 
by Section 13 or 15(d) of the Exchange Act during the past 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
    ---     ---

      Check if there is no disclosure of delinquent filers in response to 
Item 405 of Regulation S-B is not contained in this form, and no disclosure 
will be contained, to the best of Registrant's knowledge, in definitive proxy 
or information statements incorporated by reference in Part III of this Form 
10-KSB or any amendment to this Form 10-KSB.  [X]

      The issuer's revenues for the most recent fiscal year were $4.3 
million.

      The aggregate market value of the voting and non-voting common equity 
of the Registrant held by non-affiliates of the Registrant as of September 
22, 1997 was approximately $2.2 million.

      The number of shares outstanding of the Registrant's Common Stock as of 
September 22, 1997 was 2,718,600.

                      DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the 1997 Proxy Statement to be filed within 120 days of the 
fiscal year ended June 30, 1997 are incorporated by reference into Part III.  
Certain exhibits in Part III are incorporated by reference from prior filings 
made by the Registrant under the Securities Act of 1933, as amended, and the 
Securities Exchange Act of 1934, as amended.

Transitional Small Business Disclosure Format:   Yes           No  X
                                                     ----         ---

<PAGE>  2

FORWARD-LOOKING STATEMENTS

Statements in this report, to the extent 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.

<PAGE>  3

                               TABLE OF CONTENTS
                               -----------------

                                                                         PAGE
                                                                         ----

                                    PART I
          

ITEM 1.   DESCRIPTION OF BUSINESS.........................................  4

ITEM 2.   DESCRIPTION OF PROPERTY.........................................  5

ITEM 3.   LEGAL PROCEEDINGS...............................................  6

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY
          HOLDERS.........................................................  6

                                    PART II

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

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
          FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................  7

ITEM 7.   FINANCIAL STATEMENTS............................................ 12

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE............................. 12

                                    PART III

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
          CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
          OF THE EXCHANGE ACT............................................. 12

ITEM 10.  EXECUTIVE COMPENSATION.......................................... 12

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
          AND MANAGEMENT.................................................. 12

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

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K................................ 13

SIGNATURES................................................................ 34

<PAGE>  4

                                    PART I
                                    ------

ITEM 1.  DESCRIPTION OF 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 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 segment in both the United 
States and Canada, engaging in investment and merchant banking activities and 
asset-based commercial lending.  The Corporation's merchant banking 
activities include seeking controlling interests in businesses or assets 
which the Corporation believes are undervalued, and its asset-based 
commercial lending primarily involves the administration and realization of 
an existing loan portfolio comprised of loans to emerging companies.

The Corporation's operating strategy with respect to its commercial lending 
has been to provide asset-based financing to emerging companies who wish to 
make a public offering of securities in the near future and are seeking 
additional financing prior to the offering with all or a portion of the 
financing to be repaid from the proceeds of the public offering.  These 
companies often have adequate collateral but do not meet the overall credit 
standards typically required by commercial banks.  The Corporation has made 
both revolving credit and term loans which are generally collateralized by 
accounts receivable, inventory, plant and equipment, commercial real estate, 
and other tangible assets.  The Corporation has generally sought collateral 
coverage of 118% for accounts receivable; 200% for inventory; and 154% of 
liquidation value for property and equipment, commercial real estate, and 
other tangible assets.  The Corporation does not generally enter into joint 
relationships with, actively participate in the operations of, or establish 
any long-term equity interests in, its borrowers, unless it is necessary to 
work out certain non-performing loans.

At June 30, 1997, the Corporation's loan portfolio consisted of finance 
receivables of $11.4 million which were subject to an allowance for credit 
losses of $3.3 million, with no unfunded loan commitments. At such date, the 
portfolio was comprised of loans to seven borrowers, with the largest 
principal amount outstanding to any single borrower being $3.0 million and 
the average principal amount outstanding per borrower being $1.6 million.  
The loans are due over periods of one to three years.  As at June 30, 1997, 
the loan portfolio included one borrower in the energy industry (26.3% of the 
portfolio) and two borrowers in the environmental clean-up industry (38.4% of 
the portfolio).  No other industry classification represented more than 20% 
of finance receivables.

<PAGE>  5

For the year ended June 30, 1997, approximately 49% of the Corporation's 
revenues were from interest income, approximately 21% were from loan fees and 
other revenue, and approximately 22% were from gains on investments.

The Corporation has de-emphasized its asset-based commercial lending and is 
focusing on administering and realizing its existing loan portfolio and 
expanding its merchant banking activities. The Corporation intends to seek 
controlling interests in businesses or operating companies as opportunities 
arise.  The Corporation has no such interest to date and has not identified 
any opportunities as at the date hereof.  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.

Although the Corporation has currently de-emphasized making new asset-based 
loans, it continues to receive numerous unsolicited requests for funding from 
potential borrowers.  In addition, the Corporation may make loans in 
conjunction with its merchant banking activities.  The Corporation's credit 
investigation normally involves analysis of the prospective borrower's 
business, financial statements, cash flow, collateral, and certain historical 
data. Audits of information and operational data and independent appraisals 
may also be performed.  As a general policy, the Corporation does not 
consider loan applications from real estate developers, leverage buyout 
companies, companies reorganizing under Chapter 11 of the U.S. Bankruptcy 
Code, or developmental stage companies. During fiscal 1997, the Corporation 
advanced one new loan in the amount of $1.0 million.

Competition
-----------

The Corporation competes against investment bankers, 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.  The Corporation believes that the 
terms it offers its borrowers have in many cases been more favorable to the 
borrower than those offered by venture capital firms.

As at June 30, 1997, the Corporation had two employees.

ITEM 2.  DESCRIPTION OF PROPERTY

The Corporation's administrative office is located in Vancouver, British 
Columbia, Canada, and is leased.

<PAGE>  6

ITEM 3.  LEGAL PROCEEDINGS

The Corporation is involved in claims and matters of litigation arising in 
the ordinary course of its business, including collection and related actions 
concerning delinquent loans made by the Corporation.  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

None.

                                     PART II
                                     -------

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS

(a)  Market Information.  In March 1997, the Corporation's common stock and 
15 Year Variable Rate Bonds (the "Bonds") were listed and posted for trading 
on the Vancouver Stock Exchange under the trading symbol "DFC.U" and 
"DFC.DB.U", respectively.  Since August 1995, the Corporation's common stock 
has been quoted on the OTC Bulletin Board and the Bonds have been listed in 
the National Quotation Bureau Yellow Sheets.

The following table sets forth the quarterly high and low closing prices per 
share of the Corporation's common stock for the fiscal years ended June 30, 
1996 and 1997, respectively, and the period ended September 22, 1997:

           Fiscal Quarter Ended                       High   Low
           --------------------                       ----   ---

           1995
           September 30...............................$1.67  $1.00
           December 31................................$1.52  $1.25

           1996
           March 31...................................$1.56  $1.38
           June 30....................................$1.56  $1.31
           September 30...............................$1.44  $1.13
           December 31................................$2.06  $1.25

           1997
           March 31...................................$1.69  $0.50
           June 30....................................$1.25  $0.50
           Period Ended September 22..................$1.38  $1.00

<PAGE>  7

(b)  Shareholders.  As of September 22, 1997, there were approximately 36 
holders of record of the Corporation's common stock.

(c)  Dividends.  The Corporation has not paid any dividends on its common 
stock and the directors do not contemplate payment of such dividends.  The 
indenture governing the Corporation's Bonds (the "Bond Indenture") prohibits 
the payment of dividends under certain circumstances, including a default in 
the payment of principal or interest when due.

ITEM 6.  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 year ended June 30, 1997 should be 
read in conjunction with the consolidated financial statements and related 
notes included elsewhere herein (the "Financial Statements").

Results of Operations - Year Ended June 30, 1997
------------------------------------------------

Revenues for the year ended June 30, 1997 decreased to $4.3 million from $7.1 
million in the comparative period of 1996.  In the year ended June 30, 1997, 
the Corporation recognized a $0.9 million net gain on investments, compared 
to $4.5 million in the comparative period of 1996. Interest revenue decreased 
to $2.1 million in fiscal 1997 from $2.2 million in the year ended June 30, 
1996, primarily due to a reduction in the dollar amount of outstanding 
performing loans, which was partially offset by increased interest revenue on 
investments.  The Corporation's loans generally earn interest at the prime 
rate charged by a major U.S. bank (the "Bank") plus 2% to 7%.  The Bank's 
prime rate increased to 8.50% from 8.25% during the year ended June 30, 1997, 
compared to a decrease to 8.25% from 9.00% during the year ended June 30, 
1996. Revenue from loan fees and other activities increased to $0.9 million 
for the year ended June 30, 1997, including $0.6 million from a consent 
dismissal of a court action for which the Corporation had made a provision, 
from $0.3 million for the comparative period of 1996.

Costs and expenses for the year ended June 30, 1997 decreased to $4.6 million 
from $5.4 million in the comparative period of 1996.  General and 
administrative expenses decreased to $1.7 million for the year ended June 30, 
1997 from $2.9 million for the comparative period of 1996, primarily as a 
result of reduced legal fees and loan collection costs in fiscal 1997 and the 
provision of $0.6 million for settlement costs relating to a class action 
involving, among others, the Corporation in the year ended June 30, 1996.  In 
the year ended June 30, 1997, the Corporation reported a recovery of credit 
losses of $0.7 million, compared to $1.4 million for the comparative period 
of 1996.

Interest expense decreased to $3.6 million for the year ended June 30, 1997 
from $3.9 million for the comparative period of 1996, primarily as a result 
of a lower interest rate accrued on the Bonds and a reduction in the 
principal amount outstanding.  For the year ended June 30, 1997, interest was 
accrued at the rate of approximately 8.32% per annum, compared to 
approximately 8.75% per annum for the year ended June 30, 1996.

<PAGE>  8

No income tax provision was recognized for the years ended June 30, 1997 and 
1996, respectively, except for the payment of a minimum tax of $1,000.  The 
provision for income taxes for the year ended June 30, 1996 was eliminated by 
the charge-off with respect to finance receivables for the period.  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.

For the year ended June 30, 1997, the Corporation's net income was $2.3 
million, or $0.74 per share, compared to $1.8 million, or $0.66 per share, in 
the comparative period of 1996.  In fiscal 1997, the Corporation had $3.0 
million of extraordinary gains on the early extinguishment of debt, compared 
to $0.1 million in the comparative period of 1996.  The net income in the 
current period was primarily attributable to an extraordinary gain on early 
extinguishment of debt and lower general and administrative expenses, which 
was partially offset by reduced net gains on investments.

Liquidity and Capital Resources
-------------------------------

The Corporation's cash and cash equivalents at June 30, 1997 were $1.6 
million, which represents a decrease of $12.9 million from June 30, 1996.

Cash provided by operations for the year ended June 30, 1997 was $7.5 
million, compared to cash used by operations of $11.3 million for the 
comparative period of 1996.  The Corporation used cash of $5.6 million in 
operating activities before any activities in trading securities in fiscal 
1997, compared to $5.1 million in the comparative period of 1996.  An 
increase in other receivables used cash of $3.1 million in the year ended 
June 30, 1997, compared to $1.3 million in the comparative period of 1996. In 
the current fiscal year, interest payable decreased by $0.8 million, compared 
to $0.2 million in the year ended June 30, 1996.  An increase in accounts 
payable and accrued liabilities provided cash of $1.0 million in the year 
ended June 30, 1997, compared to $0.4 million in the year ended June 30, 
1996.  A loan to an affiliate used cash of $0.5 million during the year ended 
June 30, 1997.

Net sales of trading securities provided cash of $13.0 million in the year 
ended June 30, 1997, compared to net purchases of trading securities using 
cash of $6.2 million in the year ended June 30, 1996.

Cash used by investing activities was $4.9 million during the year ended June 
30, 1997, compared to cash provided by operations of $7.8 million during the 
comparative period of 1996.  During the year ended June 30, 1997, the 
Corporation accepted an assignment of a note receivable in satisfaction of a 
debt owing to the Corporation in the amount of $7.5 million. Collections on 
loan receivables provided cash of $3.7 million in the year ended June 30, 
1997, compared to $14.0 million in the same period of 1996, primarily as a 
result of a smaller loan portfolio.  The Corporation's net finance 
receivables at June 30, 1997 were $8.1 million, compared to $12.1 million at 
June 30, 1996.  During the year ended June 30, 1997, one new loan in the 
amount of $1.0 million was advanced and $0.1 million was advanced to an 
existing borrower.

Financing activities for the year ended June 30, 1997 used cash of $15.5 
million, compared to providing cash of $5.9 million in the year ended June 
30, 1996.  During the year ended June 30, 

<PAGE>  9

1997, the Corporation used cash of $15.3 million to purchase $19.0 million in 
aggregate principal amount of the Bonds.  As at June 30, 1997, the 
Corporation had $45.0 million in principal amount of the Bonds issued and 
outstanding, of which approximately $22.0 million was repurchased and held by 
the Corporation in treasury.  The Corporation used $0.2 million to pay a cash 
dividend to the holder of its preferred shares during fiscal 1997.

In October 1996, the terms of the indenture governing the Bonds were amended 
to, among other things, delete the provisions that required the Corporation 
to maintain a ratio of consolidated liabilities to consolidated tangible net 
worth of not more than 15:1, and redeem all of the Bonds if any person or 
group acquires 35.0% or more of the combined voting power of the then 
outstanding securities of the Corporation.  As a result of the deletion of 
this 35.0% threshold, MFC Bancorp Ltd., who owns approximately 34.6% of the 
Corporation's outstanding common stock and all of the Corporation's 
outstanding variable voting cumulative preferred stock, controls 47.9% of the 
total votes of the Corporation.  At June 30, 1997, the Corporation was in 
compliance with the ratios and other terms of the Bond Indenture.

The Corporation did not make its semi-annual interest payments on the Bonds 
due July 25, 1997 and January 25, 1997 until August 20, 1997 and February 21, 
1997, respectively, which were within the 30 day cure period provided for 
under the terms of the Bond Indenture.  As at the date hereof, no defaults 
exist under the Bond Indenture.  The next regularly scheduled interest 
payment date is January 25, 1998.  In May 1997, the trustee under the Bond 
Indenture was changed to The Bank of Nova Scotia Trust Company of New York.

During the year ended June 30, 1997, the Corporation proceeded to collect 
and/or settle and restructure the non-performing loans in its portfolio.  The 
Corporation anticipates that its cash and investments on hand, and its 
expected loan interest and principal collections, will be sufficient to 
service the Corporation's debt costs and cover the day-to-day general and 
administrative expenses during the short-term.

Finance Receivables
-------------------

The Corporation's loan portfolio at June 30, 1997 aggregated $11.4 million in 
finance receivables (principal plus interest and reimbursable costs less 
unamortized commitment fees) due from seven borrowers, compared to an 
aggregate of $19.3 million in finance receivables due from nine borrowers at 
June 30, 1996.

During the year ended June 30, 1997, loans to four borrowers which were 
previously designated as non-performing at June 30, 1996, with finance 
receivables totaling $18.0 million, were settled, sold or re-designated as 
performing.  The borrowers are:  Conversion Industries Inc., Enviropur Waste 
Refining and Technology, Inc., Beta Well Service Inc. ("Beta") and PDG 
Environmental, Inc. ("PDGE").  In partial settlement of the Corporation's 
loan to PDGE, 1,470,320 shares of PDGE's subsidiary, ICHOR Corporation 
(formerly PDG Remediation, Inc.) ("ICHOR") were transferred to the 
Corporation.  ICHOR is in the environmental services business of recycling 
petroleum waste products and disposing of oily waste waters, and is listed on 
the NASDAQ SmallCap market.  The loans to Beta and PDGE were repaid in full 
subsequent to June 30, 1997.

<PAGE>  10

Non-performing Loans at June 30, 1997
-------------------------------------

At June 30, 1997, the Corporation's loans to Clean-Up Technology, Inc. 
("CUT") and Heartland, Inc. ("Heartland"), who had finance receivables 
totaling $5.1 million, had been classified as non-performing and the 
borrowers had either filed voluntary petitions for bankruptcy protection or 
ceased to operate.  See Note 4 of the Financial Statements for a comparison 
of the non-performing loans as at June 30, 1997 with those as at June 30, 
1996.

During fiscal 1997, the Corporation increased its allowance with respect to 
its loan to Heartland to $2.1 million, the total amount outstanding.  The 
Corporation designates finance receivables as non-performing when interest 
and/or principal payments are contractually delinquent for more than 90 days, 
or earlier, if the Corporation has material evidence of the borrower's 
inability to meet its commitments under the loan agreement (e.g., the 
borrower files for bankruptcy protection).  Non-performing loans have a 
significant negative effect on the Corporation's interest margin, as the 
Corporation does not realize income on these loans, but does incur holding 
costs (primarily interest expense).

Allowance for Credit Losses
---------------------------

The Corporation maintains an allowance for credit losses in an amount 
estimated to cover potential losses on finance receivables which have 
experienced an event of impairment or for which 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 Corporation'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 reflects the Corporation's best estimate 
of the necessary level of the allowance for credit losses.  See Note 4 of the 
Financial Statements with regards to the allowance for credit losses during 
the years ended June 30, 1997 and 1996, respectively.

On July 1, 1995, the Corporation adopted the Financial Accounting Standards 
Board Statement ("FASB") No. 114, "Accounting by Creditors for Impairment of 
a Loan".  Under the provisions of FASB No. 114, when a loan is impaired as 
defined in the statement, a lender shall measure impairment based on 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 Corporation has adopted a measurement method on a 
loan-by-loan basis.  By definition, the Corporation's non-performing loans 
are impaired.  A specific reserve is established for each impaired loan equal 
to the amount by which the Corporation's recorded investment in the loan 
exceeds the net present value of the loan determined in accordance with FASB 
No. 114.

The following tables summarize the Corporation's specific reserves for credit 
losses prepared in accordance with FASB No. 114 as at June 30, 1997 and June 
30, 1996:

<PAGE> 11

<TABLE>
<CAPTION>
                                            JUNE 30, 1997
                                       (dollars in thousands)
                                                                                                
                                            Total future         Total related             Specific
                                            expected cash        costs               Net    reserve
                         # of   Recorded    collections, net     expected to       present under FASB
                         loans  investment  of related costs(1)  be incurred(1)(2)  value   No. 114
                         -----  ----------  -------------------  ----------------- ------- ----------
<S>                      <C>   <C>          <C>                   <C>            <C>      <C>
IMPAIRED LOANS
Future cash flows:
 Bankruptcy or
  ceased to operate       2    $  5,071        $ 2,927               $  263        $1,848   $ 3,223
UNIMPAIRED LOANS          5       6,364                                                          70(4)
                         --    --------                                                     ------- 
Grand total               7    $ 11,435                                                     $ 3,293
                         ==    ========                                                     =======
</TABLE>


<TABLE>
<CAPTION>

                                            JUNE 30, 1996
                                       (dollars in thousands) 
  
                                            Total future         Total related             Specific
                                            expected cash        costs               Net    reserve
                         # of   Recorded    collections, net     expected to       present under FASB
                         loans  investment  of related costs     be incurred(2)     value    No. 114
                         -----  ----------  -------------------  ----------------- ------- ----------
<S>                      <C>   <C>          <C>                   <C>            <C>      <C>
IMPAIRED LOANS
Collateral dependant(3):
 Bankruptcy or
  ceased to operate        1     $  2,405        $   865             $  125        $   737   $ 1,668
 Continuing to operate     2        7,146          6,024                300          4,494     2,652

Future cash flows:
 Bankruptcy or
  ceased to operate        2        5,021          5,213                375          2,639     2,382
                          --     --------        -------             ------        -------   -------
Subtotal                   5       14,572        $12,102             $  800        $ 7,870     6,702
                                                 =======             ======        =======
UNIMPAIRED LOANS           4        4,767                                                        500(4)
                          --     --------                                                    -------
Grand total                9     $ 19,339                                                    $ 7,202
                          ==     ========                                                    =======
</TABLE>

________________________


Notes:

1.  The estimate of expected cash flows represents the Corporation's best 
estimate based on reasonable and supportable assumptions and projections.  
The period over which future expected net cash collections will occur is 3.5 
years for loans which may generate future cash flows and the borrower is 
bankrupt or has ceased to operate.

<PAGE>  12

2.  These amounts represent future costs to be incurred in connection with 
the sale of collateral and/or the collection of the loans, and have been 
subtracted from the net future expected cash collections.

3.  The fair market value of the collateral represents the amount that the 
Corporation reasonably expects to receive in an arm's length sale between a 
willing buyer and a willing seller.  For marketable securities, the current 
quoted price is used.  For receivables, inventory and equipment, relevant 
market sources are used when reliable information is provided.  A normal 
price adjustment is provided if a forced or liquidation sale is probable.  No 
appraisals have been used for the valuation of collateral.

4.  The general reserve is determined in accordance with FASB No. 5 on a pool 
of unimpaired loans.

ITEM 7.  FINANCIAL STATEMENTS

The consolidated financial statements of the Corporation to be provided 
pursuant to this Item 7, and as listed in Item 13 of this report, are 
included in this report commencing on page 15.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

                                PART III
                                --------

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
         PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

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

ITEM 10. EXECUTIVE COMPENSATION

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

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
         AND MANAGEMENT

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

<PAGE>  13

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) (1) Index to Financial Statements
        -----------------------------

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

    (2) Exhibits
        --------

        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  Bylaws.  Incorporated by reference to Form S-1 filed June 7, 
             1993.
        3.5  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.
        4.1  Form of Indenture between CVD Financial Corporation and Harris 
             Trust Company of New York, as Trustee.  Incorporated by 
             reference to Form S-1 filed June 7, 1993.
        4.2  Second Supplemental Indenture between Drummond Financial 
             Corporation and Harris Trust Company of New York, as Trustee, 
             dated for reference October 23, 1996.  Incorporated by reference
             to Form 10-QSB dated November 11, 1996.
        4.3  Third Supplemental Indenture among Drummond Financial 
             Corporation, Harris Trust Company of New York and The Bank of 
             Nova Scotia Trust Company of New York dated for reference May
             13, 1997.
        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.

<PAGE>  14

        10.3 Stock Purchase Agreement between CVD Financial Corporation and 
             Mercer International Inc. dated March 22, 1995.  Incorporated by 
             reference to Form 8-K dated March 22, 1995.
        10.4 Subscription Agreement between CVD Financial Corporation and 
             Logan International Corp. dated for reference June 20, 1996.  
             Incorporated by reference to Form 8-K dated June 27, 1996.
        10.5 Subscription Agreement between CVD Financial Corporation and 
             Arbatax International Inc. dated for reference June 20, 1996.
             Incorporated by reference to Form 8-K dated June 27, 1996.
        21.  List of subsidiaries of Registrant.
        27.  Article 5 - Financial Data Schedule for year ended June 30, 1997 
             - Form 10-KSB.

(b)  Reports on Form 8-K
     -------------------

A report on Form 8-K dated June 30, 1997 was filed reporting under:

Item 4.  Changes in Registrant's Certifying Accountant.
Item 7.  Financial Statements and Exhibits.

A report on Form 8-K/A dated July 7, 1997 was filed reporting under:

Item 4.  Changes in Registrant's Certifying Accountant.
Item 7.  Financial Statements and Exhibits.

<PAGE>  15







                          INDEPENDENT AUDITORS' REPORT





To the Shareholders of
Drummond Financial Corporation
(formerly CVD Financial Corporation)


We have audited the consolidated balance sheet of Drummond Financial 
Corporation (formerly CVD Financial Corporation) as at June 30, 1997 and the 
related consolidated statements of operations, shareholders' equity and cash 
flows for the year then ended.  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 
audit.  The consolidated financial statements of Drummond Financial 
Corporation (formerly CVD Financial Corporation) as at June 30, 1996 and for 
the year then ended were audited by other auditors whose report dated 
September 13, 1996 expressed an unqualified opinion on those statements.

We conducted our audit 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 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 
audit provides 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, 
1997 and the results of their operations and their cash flows for the year 
then ended in accordance with generally accepted accounting principles in the 
United States of America.






                                               /s/ DAVIDSON & COMPANY
Vancouver, Canada                              Chartered Accountants

August 26, 1997




<PAGE>  16



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

                                            Report of Independent Accountants
-----------------------------------------------------------------------------




To The Board of Directors and Shareholders
Drummond Financial Corporation
(formerly CVD Financial Corporation)


We have audited the Consolidated Balance Sheet of Drummond Financial 
Corporation (formerly CVD Financial Corporation) (the "Company") as of June 
30, 1996 and the related Consolidated Statements of Operations, Shareholders' 
Equity and Cash Flows for the year then ended.  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 audit.

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

In our opinion, the consolidated financial statements referred to above 
present fairly, in all material respects, the financial position of the 
Company at June 30, 1996 and the results of
its operations and its cash flows for the year then ended in conformity with 
generally accepted accounting principles in the United States.



                                                        /s/ BDO DUNWOODY
Vancouver, Canada                                       Chartered Accountants
September 13, 1996

<PAGE>  17

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

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

                                                           1997        1996
-----------------------------------------------------------------------------



ASSETS


Cash and cash equivalents                             $   1,625  $   14,478

Finance receivables, net (Note 4)                         8,142      12,137

Other receivables (Note 5)                               10,948         371

Due from affiliates                                         541          - 

Investments (Note 6)                                      8,035      19,283

Investment - at equity (Note 7)                             917          - 

Deferred debt issuance costs, net of accumulated
    amortization of $770 (1996 - $567)                    1,348       2,037

Other assets                                                  4           4
                                                     ----------  ----------

                                                     $   31,560  $   48,310
=============================================================================



















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

<PAGE>  18

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

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

                                                           1997        1996
-----------------------------------------------------------------------------



LIABILITIES AND SHAREHOLDERS' EQUITY


Accounts payable and accrued liabilities              $   1,788   $     835

Interest payable                                            964       1,787

Accrued dividends payable                                   149          -

Bonds payable (Note 8)                                   23,002      42,047
                                                      ---------   ---------
                                                         25,903      44,669
                                                      ---------   ---------

Shareholders' equity (Note 9)
    Capital stock
      Preferred stock, $0.01 par value
        5,000,000 shares authorized
        3,000,000 shares issued and outstanding              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
         4,264,000 shares issued and outstanding             43          43
      Additional paid-in capital                         17,767      17,767
                                                      ---------   ---------

                                                         17,810      17,810
                                                      ---------   ---------

    Deficit                                             (15,097)    (17,113)
                                                      ---------   ---------

                                                          8,713       6,697
    Less: 1,545,400 common shares held as 
            treasury stock                               (3,056)     (3,056)
                                                      ---------   ---------

                                                          5,657       3,641
                                                      ---------   ---------

                                                      $  31,560   $  48,310
=============================================================================

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

<PAGE>  19

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

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

                                                           1997        1996
-----------------------------------------------------------------------------



REVENUE
  Interest                                           $    2,079  $    2,232
  Loan fees and other                                       914         319
  Gain on investments, net                                  938       4,516
  Dividend income                                           322          - 
                                                     ----------  ----------


                                                          4,253       7,067
                                                     ----------  ----------

COSTS AND EXPENSES
  Interest                                                3,571       3,893
  Recovery of credit losses                                (673)     (1,396)
  General and administrative                              1,704       2,891
                                                     ----------  ----------

                                                          4,602       5,388
                                                     ----------  ----------

Equity in loss of investee                                 (289)         -
                                                     ----------  ----------

Income (loss) from  operations                             (638)      1,679

Income tax expense                                            1           1
                                                     ----------  ----------

Income (loss) before extraordinary gain                    (639)      1,678

Extraordinary gain on early extinguishment of debt,
    net of $Nil provision for income taxes for 
    1997 and 1996                                         2,977         113
                                                     ----------  ----------

Net income for the year                              $    2,338  $    1,791
=============================================================================


Earnings (loss) per share
   Earnings (loss) before extraordinary gain         $    (0.35) $     0.62
   Extraordinary gain                                      1.09        0.04
                                                     ----------  ----------

                                                     $     0.74  $     0.66
=============================================================================


Weighted average number of shares outstanding         2,718,600   2,718,600
=============================================================================

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

<PAGE>  20

DRUMMOND FINANCIAL CORPORATION
(formerly CVD Financial Corporation)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars stated in thousands)
YEAR ENDED JUNE 30

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

                                                           1997        1996
-----------------------------------------------------------------------------



CASH FLOWS FROM OPERATING ACTIVITIES:

  Net income                                          $   2,338   $   1,791
  Adjustment to reconcile income to cash from 
    operating activities
      Extraordinary gain on early extinguishments 
        of debt                                          (2,977)       (113)
      Gain on investments, net                             (938)     (4,516)
      Recovery of credit losses                            (673)     (1,396)
      Equity in loss of investee                            289          -  
      Amortization of deferred debt issuance costs          (78)        205
                                                      ---------   ---------
                                                         (2,039)     (4,029)

  Changes in non-cash working capital balances
      Interest receivable                                   127         136
      Commitment fees                                      (106)       (249)
      Other receivables                                  (3,133)     (1,317)
      Due from affiliates                                  (541)         - 
      Interest payable                                     (823)       (168)
      Accounts payable and accrued liabilities              953         430
      Other                                                  -           65
                                                      ---------   ---------

                                                         (5,562)     (5,132)

  Purchase of trading securities                         (3,037)    (15,235)
  Proceeds from sales of trading securities              16,082       9,050
                                                      ---------   ---------

  Net cash provided by (used in) operating 
    activities                                            7,483     (11,317)
                                                      ---------   ---------


CASH FLOWS FROM INVESTING ACTIVITIES:

  Advances on loans                                      (1,100)       (229)
  Payments collected on loans                             3,740      14,000
  Purchase of available-for-sale security                    -       (6,000)
  Increase in note receivable                            (7,502)         - 
                                                      ---------   --------- 

  Net cash provided by (used in) investing activities    (4,862)      7,771
                                                      ---------   --------- 


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

<PAGE>  21

DRUMMOND FINANCIAL CORPORATION
(formerly CVD Financial Corporation)
CONSOLIDATED STATEMENT OF CASH FLOWS (continued)
(Dollars stated in thousands)
YEAR ENDED JUNE 30

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

                                                           1997        1996
-----------------------------------------------------------------------------



CASH FLOWS FROM FINANCING ACTIVITIES:

  Proceeds from issuance of preferred stock           $      -    $   6,000
  Purchase of treasury bond payable                     (15,301)       (121)
  Dividends paid                                           (173)         -  
                                                      ---------   ---------

  Net cash provided by (used in) financing activities   (15,474)      5,879
                                                      ---------   ---------


Increase (decrease) in cash and cash equivalents for 
  the year                                              (12,853)      2,333


Cash and cash equivalents, beginning of year             14,478      12,145
                                                      ---------   ---------

Cash and cash equivalents, end of year                $   1,625   $  14,478
=============================================================================


Cash paid during the year for:

  Interest expense                                    $   3,521   $   3,853
  Income taxes                                                1           1
=============================================================================

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



<PAGE>  22

DRUMMOND FINANCIAL CORPORATION
(formerly CVD Financial Corporation)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Dollars stated in thousands)     



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

                     Preferred Stock                 Common Stock
                ---------------------------  --------------------------                             Total
                                 Additional                  Additional                     Shareholders'
                   Number           Paid-in     Number          Paid-in Accumulated Treasury       Equity
                of Shares  Amount   Capital  of Shares  Amount  Capital     Deficit    Stock    (Deficit)
---------------------------------------------------------------------------------------------------------
<S>             <C>        <C>    <C>        <C>        <C>    <C>      <C>          <C>        <C>

Balance at
 June 30, 1995         -   $   -   $    -    4,264,000  $   43 $ 17,767 $   (18,904) $ (3,056)  $ (4,150)


Issued for cash 3,000,000      30    5,970          -       -        -           -         -       6,000


Net income 
 for the year          -       -        -           -       -        -        1,791        -       1,791
                ---------  ------  -------   ---------  ------ -------- -----------  --------   --------

Balance at 
 June 30, 1996  3,000,000      30    5,970   4,264,000      43   17,767     (17,113)   (3,056)     3,641


Net income for 
 the year              -       -        -           -       -        -        2,338        -       2,338


Dividends paid 
 and payable           -       -        -           -       -        -        (322)        -        (322)
                ---------  ------  -------   ---------  ------ -------- -----------  --------   --------

Balance at 
 June 30, 1997  3,000,000  $   30  $ 5,970   4,264,000  $   43 $ 17,767 $  (15,097)  $ (3,056)  $  5,657
========================================================================================================

</TABLE>



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




<PAGE>  23

DRUMMOND FINANCIAL CORPORATION
(formerly CVD Financial Corporation)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables stated in thousands)
JUNE 30, 1997

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



1.    NATURE OF OPERATIONS

Drummond Financial Corporation (formerly CVD Financial Corporation) 
(the "Company"), a Delaware 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 
asset-based commercial lending primarily involves the administration 
and realization of an existing loan portfolio comprised of loans to 
emerging companies.



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.

While the Company reported net income in 1997 and 1996 principally as a 
result of realizing gains on sales of investments and extinguishment of 
debt, the Company had an accumulated deficit of $15.1 million as at 
June 30, 1997.  The Company now focuses on investment and merchant 
banking activities while de-emphasizing asset-based commercial lending.




3.    SIGNIFICANT ACCOUNTING POLICIES

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.  
Additionally, the Company maintains cash balances at foreign financial 
institutions in excess of insured limits.

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.

<PAGE>  24

DRUMMOND FINANCIAL CORPORATION
(formerly CVD Financial Corporation)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables stated in thousands)
JUNE 30, 1997

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



3.    SIGNIFICANT ACCOUNTING POLICIES (continued)


Finance receivables and allowance for credit losses (continued)
---------------------------------------------------------------

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
----------------------------

Debt issuance costs consist of underwriters' fees and expenses and 
other costs capitalized in connection with the Company's August 1993 
debenture 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.

<PAGE>  25

DRUMMOND FINANCIAL CORPORATION
(formerly CVD Financial Corporation)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables stated in thousands)
JUNE 30, 1997

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



3.    SIGNIFICANT ACCOUNTING POLICIES (continued)


Revenue recognition
-------------------

Revenue consists principally of interest income from finance 
receivables and temporary investments of cash and cash equivalents, 
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 revenues, 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
-------------------------

Earnings (loss) per share is computed using the weighted average number 
of shares outstanding during the year, after considering outstanding 
stock options and warrants.

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.

Comparative figures
-------------------

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


<PAGE>  26

DRUMMOND FINANCIAL CORPORATION
(formerly CVD Financial Corporation)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables stated in thousands)
JUNE 30, 1997

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



4.    FINANCE RECEIVABLES 

The Company engages in the asset-based commercial lending business.  
Generally, loans are due over periods of one to five years and are 
collateralized by security agreements on various types of equipment, 
commercial real estate, borrowers' eligible accounts receivable and 
inventory and other tangible assets.  The loans generally earn interest 
at a major bank's (the "Bank") prime rate (8.5 percent at June 30, 1997 
and 8.25 percent at June 30, 1996) plus two to seven percent.  The 
Bank's weighted daily average prime rate was 8.32 percent and 8.52 
percent during the years ended June 30, 1997 and 1996, respectively.

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

                           June 30, 1997                   June 30, 1996
                  ------------------------------- ------------------------------
                                        Allowance                      Allowance
                    Number    Recorded for Credit   Number Recorded   for Credit
                  of Loans Investments     Losses of Loans Investments    Losses
--------------------------------------------------------------------------------
<S>              <C>      <C>          <C>       <C>      <C>         <C>

Impaired loans           2  $    5,071  $   3,223        5 $    14,572 $   6,702
Unimpaired loans         5       6,364         70        4       4,767       500
                   -------  ----------  ---------  ------- ----------- ---------

                         7  $   11,435  $   3,293        9 $    19,339 $   7,202
================================================================================

Net book value              $    8,142                     $    12,137  
================================================================================
</TABLE>

The net book value of the finance receivables approximate their fair 
market value which is based on the discounted present value of the 
estimated future cash flow.

The Company has established allowances for credit losses at June 30, 
1997 and 1996 as follows:

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

                                               1997
                                   -------------------------------
                                   Specific    General     Total       1996
--------------------------------------------------------------------------------
<S>                                <C>         <C>        <C>        <C>

Balance, beginning of year         $   6,702   $    500   $  7,202   $ 14,716
Provision (recovery) for the year         40       (713)      (673)    (1,396)
Charge-offs for the year              (3,519)       283     (3,236)    (6,118)
                                   ---------   --------   --------   --------

Balance, end of year               $   3,223   $     70   $  3,293   $  7,202 
================================================================================
</TABLE>

Contractual maturities of finance receivables are as follows:

   Years ending June 30,
      1998                                                $  7,664
      1999                                                   3,329
      2000                                                      82
                                                          --------

                                                            11,075
   Interest receivable, currently due                          178
   Reimbursable expenses, currently due                        220
   Deferred commitment fees, net of related costs              (38)
                                                          --------

                                                            11,435
   Less: allowance for credit losses                        (3,293)
                                                          --------

   Finance receivables, net                               $  8,142
                                                          ========

<PAGE>  27

DRUMMOND FINANCIAL CORPORATION
(formerly CVD Financial Corporation)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables stated in thousands)
JUNE 30, 1997

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



4.    FINANCE RECEIVABLES (continued)

The Company does not have sufficient operating history to determine 
whether the loan portfolio will generally be repaid or renewed before 
contractual maturity dates.  The above tabulation, therefore, is not to 
be regarded as a forecast of future cash collections.

At June 30, 1997 and 1996, the Company does not have any unfunded loan 
commitments.



5.    OTHER RECEIVABLES

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

                                                       1997       1996
-------------------------------------------------------------------------

Note receivable                                    $  7,502   $     -  
Accrued dividend receivable                             149         -  
Other receivable                                      3,297        371
                                                   --------   --------

                                                   $ 10,948   $    371
=========================================================================

The note receivable is unsecured, accrues interest at the rate of 8% 
per annum and is due January 1, 1998.

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



6.    INVESTMENTS

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

                                                       1997       1996
-------------------------------------------------------------------------

Trading securities:

  Bonds and debentures                             $     -    $ 10,204
  Equity securities                                   2,035        296
  Investment funds                                       -       2,783
                                                   --------   --------

                                                      2,035     13,283

Available-for-sale security (Note 12)                 6,000      6,000
                                                   --------   --------

                                                   $  8,035   $ 19,283
=========================================================================

<PAGE>  28

DRUMMOND FINANCIAL CORPORATION
(formerly CVD Financial Corporation)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables stated in thousands)
JUNE 30, 1997

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



6.    INVESTMENTS (continued)

For the year ended June 30, 1997, the Company recognized an unrealized 
holding loss of $435,000 (1996 - $57,000) and a realized gain of 
$1,373,000 (1996 - $4,573,000) on sales of trading securities.

Available-for-sale investments consist of preferred shares in an 
affiliate.  The preferred shares are stated at cost of $6,000,000 at 
June 30, 1997 and 1996 because there is no 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.


7.    INVESTMENT - AT EQUITY

The Company's investment is comprised of 1,470,320 shares of Ichor 
Corporation which represents 29.95% of the total outstanding shares.  
The Company has accounted for its investment using the equity method of 
accounting.


8.    BONDS PAYABLE

Under an indenture dated August 26, 1993 (the "Master Indenture") the 
Company is authorized to issue up to $500 million of unsecured, 
subordinated variable rate bonds (the "Bonds").  The Bonds may be 
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 may not issue any subsequent series of Bonds 
unless no event of default under the Master Indenture has occurred or 
has 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 
have 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 have since 
occurred.

Interest on the Bonds is payable semi-annually on January 25 and July 
25 to holders of record on the preceding December 31, and June 30, 
respectively.  The interest paid for each semi-annual period is the 
greater of: (i) the Bank's prime rate as of the first day of the semi-
annual period, (ii) the Bank's weighted daily average prime rate during 
the semi-annual period, (iii) a rate specified by the Company prior to 
the commencement of the semi-annual period, and, (iv) 80 percent of the 
"portfolio yield".  Portfolio yield is defined as: (i) the aggregate of 
interest received from the Company's loan portfolio and gains less 
losses, if any, realized from the disposition of equity securities or 
warrants to acquire equity securities received in connection with the 
making or purchasing of loans; less (ii) the provision for credit 
losses.

The Company did not make its semi-annual interest payments due on 
January 25, 1996, July 25, 1996, January 25, 1997, and July 25, 1997 
until February 20, 1996, August 22, 1996, February 21, 1997, and August 
20, 1997, respectively.  The delinquent payments did not result in an 
event of default as the payment was made within the 30 day cure period 
provided for under the terms of the Master Indenture.

As part of an amendment to the Master Indenture made during 1996, the 
requirement to maintain a ratio of consolidated liabilities to 
consolidated tangible net worth of not more than 15:1 and the 
restriction on the use of proceeds from the issuance of the bonds was 
deleted.

<PAGE>  29

DRUMMOND FINANCIAL CORPORATION
(formerly CVD Financial Corporation)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables stated in thousands)
JUNE 30, 1997

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



8.    BONDS PAYABLE (continued)


The Bonds mature on July 31, 2008 and are subject to mandatory 
redemption by the Company in annual instalments commencing July 31, 
2004 through July 31, 2008.  The annual instalment amount is equal to 
20 percent of the outstanding principal on June 30, 2004.  The Bonds 
are also subject to mandatory redemption generally upon the sale or 
transfer of substantially all of the assets of the Company.

In September 1993, the Board of Directors authorized the repurchase of 
up to $5.0 million principal amount of bonds. The entire $5.0 million 
of bonds were repurchased and cancelled, resulting in an extraordinary 
gain before income taxes of approximately $0.7 million.

In April, 1994, the Company's Board of Directors authorized a 
discretionary buy back program (the "Repurchase Program") of the 
Company's Common Stock and Bonds up to a total cost of $4.5 million.  
During the last quarter of fiscal 1996, the Board of Directors 
authorized the Company at its discretion, to spend up to an additional 
$10 million to repurchase Bonds. During the last quarter of fiscal 
1997, the Board of Directors authorized the Company to spend a further 
$10 million to repurchase Bonds.  During 1997, $19,045,000 (1996 - 
$234,000) in aggregate principal amount of Bonds were repurchased  
resulting in an extraordinary gain of $2,977,000 (1996 - $113,000).  At 
June 30, 1997, the Company had remaining issued and outstanding $45 
million principal amount of bonds of which approximately $22 million 
were repurchased and are held by the Company in treasury.

The Bonds had a carrying amount of $23,002,000 (1996 - $42,047,000) and 
a fair value of $15,181,000 (1996 - $29,433,000) as at June 30, 1997.   
The fair value is based on the quoted market price.

For semi-annual periods ended December 31, 1995, June 30, 1996, 
December 31, 1996 and June 30, 1997, interest has been incurred at per 
annum coupon rates of 9.0 percent, 8.5 percent, 8.25 percent and 8.38 
percent, respectively.



9.    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 which limit the votes thereon so that any 
holder thereof has less than 48% of total votes attached to all the 
outstanding voting shares of the Company, subject to certain 
adjustments.

In connection with its initial public offering, the Company issued 
warrants to its underwriters representing the right to purchase 200,000 
shares of the Company's Common Stock at $4.50 per share.  The number of 
shares and exercise price are subject to adjustment for certain changes 
in the Company's capital structure.  The warrants may be exercised 
until expiry on August 16, 1998.

<PAGE>  30

DRUMMOND FINANCIAL CORPORATION
(formerly CVD Financial Corporation)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables stated in thousands)
JUNE 30, 1997

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



10.   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 
are automatically 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.  Information with respect to options granted under the plan 
is as follows:

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

                                                               Exercise
                                                                  Price
                                                              Per Share
                                                Number          (Not in
                                             of Shares        Thousands)
-------------------------------------------------------------------------

Outstanding, June 30, 1995                    150,000     $1.81 - $3.75

    Expired                                   (75,000)    $1.81 - $3.75
                                            ---------     -------------


Outstanding, June 30, 1996                     75,000     $1.81 - $1.88

    Expired                                   (50,000)            $1.81
                                            ---------     -------------

Outstanding, June 30, 1997                     25,000             $1.88
=========================================================================

At June 30, 1997, options to purchase 350,000 shares (1996 - 300,000) 
of the Company's Common Stock are available for future grant and 
outstanding options with regard to 25,000 (1996 - 75,000) shares are 
exercisable.

The Company applies Accounting Principles Board Opinion No. 25 in 
accounting for its stock option plan.  There was no option granted in 
either 1997 or 1996.

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 
was no option granted after the fiscal year ended June 30, 1995.

<PAGE>  31

DRUMMOND FINANCIAL CORPORATION
(formerly CVD Financial Corporation)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables stated in thousands)
JUNE 30, 1997

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



11.   INCOME TAXES


There was no provision for income taxes for the years ended June 30, 
1997 and 1996 (other than the payment of state minimum income tax of 
$1,000 each in 1997 and 1996) due to tax losses incurred in prior 
years.



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

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

                                                       1997       1996
-------------------------------------------------------------------------

United States federal statutory rate on 
    income from operations                         $    795   $    571
Timing differences on credit losses                  (1,329)    (2,520)
Other timing differences                                305        101
Valuation allowance                                     229      1,848
                                                   --------   --------

                                                   $     -    $     - 
=========================================================================



The net deferred tax assets at June 30, 1997 and 1996 consist of the 
following:

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

                                                       1997       1996
-------------------------------------------------------------------------


Provision for credit losses                        $  1,120   $  2,483
Net operating loss carryforwards                      3,264      3,245
Other timing differences                                571         -  
Valuation allowance                                  (4,955)    (5,728)
                                                   --------   --------

Deferred tax asset, net                            $     -    $     -  
=========================================================================


At June 30, 1997, the Company has $9.6 million in net operating loss 
carryforwards for United States federal income tax purposes and $3.1 
million for California income tax purposes.  The carryforwards expire 
in the fiscal years ending in 2009 to 2012 for United States federal 
income tax purposes and 1999 to 2001 for California income tax 
purposes.  Of  the total net operating loss carryforwards,  utilization 
of approximately $3.0 million is restricted due to various changes in 
the ownership of the Company.

<PAGE>  32

DRUMMOND FINANCIAL CORPORATION
(formerly CVD Financial Corporation)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables stated in thousands)
JUNE 30, 1997

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



12.   RELATED PARTY TRANSACTIONS


During the year ended June 30, 1997, the Company incurred $300,000 
(1996 - $456,000) in fees payable to certain affiliates.  These 
affiliates are related to the Company because they have certain common 
director(s) (one of the affiliates also owns a 34.6% indirect interest 
of common shares and 100% indirect interest of preferred shares of the 
Company representing a total of 47.9% of all the outstanding voting 
shares).  The fees were to pay for the accounting and administration of 
the Company, as well as reimbursement of certain office expenses.  The 
Company also paid $22,000 (1996 - $125,000) in consulting fees and 
expense reimbursement to a company which is owned and controlled by an 
officer of the Company.  The Company has an amount of $541,000 (1996 - 
$Nil) owing to them from a company in which the Company owns 29.95% 
interest.

During fiscal 1996, the Company issued 3,000,000 shares of its 
Preferred Stock, Series 1 for $6,000,000 cash to an affiliate which 
also owns a 34.6% indirect interest in the Company.  Also during fiscal 
1996, the Company acquired $6,000,000 worth of preferred stock in a 
subsidiary of the same affiliate.  This investment is classified as an 
available-for-sale security.


13.   COMMITMENTS AND CONTINGENCIES


The Company is involved in various claims and matters of litigation 
arising in the ordinary course of its business including collection and 
related actions concerning delinquent loans made by the Company.  The 
Company does not believe that the outcome of such litigation will have 
a material adverse effect on its business or financial conditions.


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


Significant non-cash transaction in 1997 include:

a) The Company received a loan re-payment of $1,205,662 in the form of 
shares of a company related to the respective borrower.


Significant non-cash transactions in 1996 include:

a) The Company received payment of $131,000 in loan fees in the form of 
shares of the respective borrower's common stock.

b) The Company collected $73,000 on a loan by receiving shares of a 
borrower's common stock.

c) The Company converted a loan of $1,925,000 into shares of a borrower's 
common stock.  Subsequently, the shares received were sold for a gain.

<PAGE>  33

DRUMMOND FINANCIAL CORPORATION
(formerly CVD Financial Corporation)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables stated in thousands)
JUNE 30, 1997

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



15.   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:

=========================================================================
                                                   June 30,    June 30,
                                                       1997        1996
-------------------------------------------------------------------------

Net income for the year in accordance
  with U.S. GAAP                                  $   2,338  $   1,791

Unrealized gains of prior years on trading
  securities sold during the year                        -         270
                                                  ---------  ---------

Net income for the year in accordance
  with Canadian GAAP                                  2,338      2,061

Accumulated deficit, beginning of year              (17,113)   (19,174)

Dividends paid and payable                             (322)        -  
                                                  ---------  ---------

Accumulated deficit, end of year 
  in accordance with Canadian GAAP                $ (15,097) $ (17,113)
=========================================================================

Basic earnings per share
  in accordance with Canadian GAAP                $    0.74  $    0.76
=========================================================================

Fully diluted earnings per share
  in accordance with Canadian GAAP                $    0.71  $    0.76
=========================================================================

(a)     Investments
        -----------

U.S. GAAP require that trading securities be carried at fair market value 
with holdings gains and losses included in annual earnings.  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.  

(b)     Extinguishment of Debt
        ----------------------

U.S. GAAP require gains and losses on the extinguishment of debt to be 
classified as an extraordinary item.  Under Canadian GAAP, the gain or loss 
would be included in income (loss) from operations.





<PAGE>  34

                                   SIGNATURES


In accordance with Section 13 or 15(d) of the Securities Exchange Act of 
1934, the Registrant has caused this report to be signed on its behalf by the 
undersigned, thereunto duly authorized.

                                  DRUMMOND FINANCIAL CORPORATION

Date: September 24, 1997          By:   /s/ Michael J. Smith
                                        ------------------------------------
                                        Michael J. Smith
                                        President, Chief Executive Officer,
                                        Chief Financial Officer and Director

In accordance with 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:   September 24, 1997
--------------------
Michael J. Smith
President, Chief Executive Officer,
Chief Financial Officer and Director


/s/ Leonard Petersen                  Date:   September 24, 1997
--------------------
Leonard Petersen
Director


/s/ Rene Randall                      Date:   September 24, 1997
--------------------
Rene Randall
Director


/s/ Frederick Yu Wong                 Date:  September 24, 1997
---------------------
Frederick Yu Wong
Director














<PAGE>  35

                                  EXHIBIT INDEX

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  Bylaws.  Incorporated by reference to Form S-1 filed June 7, 1993.
3.5  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.
4.1  Form of Indenture between CVD Financial Corporation and Harris Trust 
     Company of New York, as Trustee.  Incorporated by reference to Form S-1 
     filed June 7, 1993.
4.2  Second Supplemental Indenture between Drummond Financial Corporation and 
     Harris Trust Company of New York, as Trustee, dated for reference 
     October 23, 1996.  Incorporated by reference to Form 10-QSB dated 
     November 11, 1996.
4.3  Third Supplemental Indenture among Drummond Financial Corporation, 
     Harris Trust Company of New York and The Bank of Nova Scotia Trust 
     Company of New York dated for reference May 13, 1997.
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 Stock Purchase Agreement between CVD Financial Corporation and Mercer 
     International Inc. dated March 22, 1995.  Incorporated by reference to 
     Form 8-K dated March 22, 1995.
10.4 Subscription Agreement between CVD Financial Corporation and Logan 
     International Corp. dated for reference June 20, 1996.  Incorporated by 
     reference to Form 8-K dated June 27, 1996.
10.5 Subscription Agreement between CVD Financial Corporation and Arbatax 
     International Inc. dated for reference June 20, 1996.  Incorporated by 
     reference to Form 8-K dated June 27, 1996.
21.  List of subsidiaries of Registrant.
27.  Article 5 - Financial Data Schedule for year ended June 30, 1997 - Form 
     10-KSB.