UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549
                             ----------------------
                                    FORM 10-K

[Mark One]

[x]  Annual Report  Pursuant to Section 13 or 15(d) of the  Securities  Exchange
     Act of 1934

                  For the fiscal year ended December 31, 2002

                                       or

[]   Transition  Report  Pursuant  to  Section  13 or  15(d)  of the  Securities
     Exchange Act of 1934

         For the transition period from _____________ to _____________.

                           Commission File No. 0-19727

                          CUMBERLAND TECHNOLOGIES, INC.
             (Exact name of registrant as specified in its charter)

     Florida                                              59-3094503
     ---------------------------_----------------------   ----------------------
         (State or other jurisdiction of incorporation)   (I.R.S. Employer
                                                          Identification No.)

     4311 West Waters Avenue, Suite 501
     Tampa, Florida                                       33614
     --------------------------------------------------   ----------------------
     (Address of principal executive offices)             (Zip Code)

                                 (813) 885-2112
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

           Securities registered pursuant to Section 12(b) of the Act:

     Title of each Class               Name of each exchange on which registered
     -------------------               -----------------------------------------
     Common Stock                      The Over The Counter Bulletin Board

           Securities registered pursuant to Section12(g) of the Act:

                                  Common Stock
                                ----------------
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.
                                                         Yes [x] No [ ]

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

                                    $216,120
                                 ---------------
Aggregate  market value of voting stock (Common Stock) held by  nonaffiliates of
the Registrant as of March 6, 2003

                5,597,244 shares of Common Stock $.001 par value
        ----------------------------------------------------------------
        Number of shares of Common Stock outstanding as of March 6, 2003

                    Documents incorporated by reference: NONE


<PAGE>




                                     PART I
                                     ------

     Item 1.    Business
     ------     --------

     General
     -------

     Cumberland Technologies,  Inc. ("CTI" or "the Company"),  (f/k/a Cumberland
Holdings, Inc.) a Florida corporation,  was formed on November 18, 1991, to be a
holding company and a wholly-owned subsidiary of Kimmins Corp. ("KC"). Effective
October 1, 1992, KC contributed  all of the  outstanding  common stock of two of
its wholly-owned subsidiaries,  Cumberland Casualty & Surety Company ("CCS") and
Surety Specialists, Inc. ("SSI") to CTI. KC then distributed to its stockholders
CTI's  common  stock on the basis of one  share of common  stock of CTI for each
five  shares  of  KC  common   stock  and  Class  B  common   stock  owned  (the
"Distribution").  Cumberland  Technologies,  Inc.,  ("the Company") is a holding
company engaged through its subsidiaries,  Cumberland  Casualty & Surety Company
("CCS"),  Surety  Specialists,  Inc.  ("SSI"),  The Surety Group,  Inc.  ("SG"),
Associates   Acquisition   Corp.  d/b/a  Surety  Associates  ("SA")  and  Qualex
Consulting  Group,  Inc.  ("Qualex")  in the  delivery of  specialty  surety and
insurance  services.  Surety  services  include  underwriting  surety bonds on a
direct and  assumed  basis,  surety  consulting  and the  development  of surety
software.  Insurance  services  include the  underwriting of specialty and other
liability  insurance  products.  In addition,  the Company conducts its business
through a number of  independent  agencies which focus on selling and delivering
surety   insurance   products  to   consumers.   Because  the  need  to  advance
technologically in the delivery of insurance  products,  the Company developed a
software  product  called  Bond-Pro(R).  This patented  surety  issuance  system
increases  the speed that surety agents  deliver their  products to the customer
and  financially  report  those  transactions  to the  carrier,  while  reducing
operating costs. The Company's business strategy is to continue the underwriting
focus of each of its operating  subsidiaries  and to achieve  growth through the
expanded licensing of Bond-Pro(R).

     CCS is a property and casualty  insurance  company that was incorporated in
Texas on May 4, 1988 and redomesticated in Florida, on September 2, 1994. CCS is
licensed in twenty-seven states, the District of Columbia,  and Guam. It holds a
certificate  of authority  from the United  States  Department  of the Treasury,
which qualifies CCS as an acceptable  surety on Federal bonds. CCS is rated "B+"
(Very Good) by A.M. Best.

     CCS currently has  applications  for admission  pending in various  states.
Most of these states have a lengthy  applications process in which the admission
filing must be updated with certain financial and nonfinancial information until
the  insurance  department  decides  to approve an  application.  The  insurance
department is not  restricted as to the amount of time it may take to approve an
application.  All applications are updated as new information  becomes available
and CCS is waiting  for  inquiries  or actions by these  pending  states.  Those
states  in  which  CCS has not  yet  applied  for  licensing  generally  require
additional years of operating  history or additional  capital and surplus.  Once
CCS has met these  requirements,  it is anticipated  that the  applications  for
admission will be submitted  accordingly.  CCS is currently attempting to obtain
additional state licenses in order to spread its risk of loss geographically and
to  increase  its sales of direct  surety  and  insurance  products.  Management
believes that CCS can function profitability selling direct surety and insurance
products in the states in which it is currently licensed.


<PAGE>


     SSI,  a  Florida  corporation,   formed  in  August  1988,  SG,  a  Georgia
corporation,  and SA, a South Carolina  corporation  purchased by the Company in
February and July 1995,  respectively,  are  specialized  surety  agencies which
operate as independent  agencies.  Each secures surety risks for small to medium
size  contractors  as an agent and for other  agents as a broker.  SG and SA are
also general lines insurance  agencies.  When acting as an agent, SSI, SG and SA
receive a commission from the various insurance companies it represents,  one of
which is CCS. Agency commissions are based upon a percentage of premiums paid by
the consumer.  The commissions paid by CCS to SSI, SG and SA range from 35 to 40
percent.

     In addition,  SSI generates  additional  revenues  through joint partnering
agreements  to pursue  small to  medium  size  contract  and  commercial  surety
business on a countrywide  basis.  The  agreements  allow SSI to solicit  surety
business in states in which CCS is not licensed thereby significantly increasing
the Company's  ability to  geographically  spread risk. CCS participates in both
agreements underwriting risk through a retrocession treaty.

     Qualex, a Florida corporation,  formed in November 1994, provides claim and
contracting consulting services to the surety and construction  industries.  CCS
purchases claim consulting services from Qualex on a contract basis.

     The  percentages of gross revenue  generated by the Company's  subsidiaries
for the year ended December 31, 2002 are as follows:

         Subsidiary                              Revenue Percentage
         ----------                              ------------------

         CCS............................              87%
         Qualex.........................              10%
         SA.............................               1%
         SG.............................               2%
                                              -----------
                                                     100%

     The term "the Company"  unless the context  otherwise  requires,  refers to
Cumberland  Technologies,  Inc. and its  subsidiaries.  The principal  executive
offices of the Company are located at 4311 West Waters Avenue, Suite 401, Tampa,
Florida 33614. The Company's  telephone number is (813) 885-2112,  its facsimile
number is (813) 885-6734 and its web site is www.cumberlandtech.com.

     Surety Products
     ---------------

     CCS  underwrites  a wide  variety of surety  bonds for small to medium size
surety accounts.  CCS also assumes underwriting risk from other surety companies
under various reinsurance  arrangements.  Contract surety bonds center primarily
on performance and payment bonds issued for the construction industry. The bonds
guarantee  that a contractor  will fulfill  their  obligations,  with respect to
performing  the scope of work  defined  in the  contract  and  fulfilling  their
financial  obligations.  CCS's typical bond is less than $200,000 with aggregate
ongoing work of $500,000. These bonds are marketed through independent insurance
agencies   specializing  in  this  type  of  coverage  to  general  contractors,
sub-contractors and specialty contractors.


<PAGE>


     Commercial  surety bonds,  which  includes all  non-contract  surety bonds,
numerous  types of license and permit,  miscellaneous  and judicial  bonds.  The
scope of each bond  varies  according  to the law,  locality,  the nature of the
guarantee,  and the  parties  who have a right of action  under  the  bond.  The
typical bond penalty  ranges from $5,000 to $50,000 and is usually  written on a
volume basis.

     Insurance Products
     ------------------

     The  Company's  other  liability   insurance  products  include  Registered
Investment  Advisors  professional  liability insurance and Notary Public Errors
and Omission  liability  insurance.  Both  coverages  are  occurrence  liability
coverages,  that insure against specific  liability risks.  Under the Registered
Investment Advisors  professional  liability coverage,  each endorsed account is
limited to a maximum  liability  coverage of $500,000.  Due to the volatility in
the  marketplace,  the Company  suspended  marketing of this  product  effective
September  2001.  The Notary Public Errors and Omissions  liability  coverage is
written with liability limits of $7,500 to $30,000 per policy.

     On surety or  insurance  products  sold  directly by CCS,  exposure to loss
would be the  penal  amount  of the  bond,  less any  portion  for which CCS has
obtained reinsurance. On reinsurance, CCS's exposure to loss would be limited by
the amount of reinsurance  provided.  Reinsurance does not relieve an insurer of
its liability to the  policyholder  for the full amount of the policy,  however,
the  reinsurer  is  obligated  to the  insurer  for the  portion  assumed by the
reinsurer.

     Technology Product
     ------------------

     On October 1, 1996, CTI launched the  development of a surety bond issuance
system  "Bond-Pro(R)."  The Company received its federal copyright  registration
#TX4-542-729  effective March 29, 1997. The Company sees the  implementation  of
the system as an integral part of its unique service affording it the ability to
capture a larger share of the marketplace. This program encompasses the required
functions an agency needs to run a full scale bond desk when implemented  inside
the agency  structure.  The software is designed to reduce the labor required to
provide improved service. CCS offers its Bond-Pro(R) program to small and medium
size agencies in order to produce premiums. The efficiencies gained in using the
Bond-Pro(R)  system  enhances CCS's ability to increase  premiums and to develop
relationships  which may not otherwise be possible due to  competition  for this
class of business.  While a small  percentage  of the industry  offers issue and
reporting  systems  for  bonds,  no other  provider  offers a fully  integrated,
multi-carrier production and processing system including management reporting.

     Underwriting
     ------------

     For the contract and  commercial  surety lines of business,  the  Company's
underwriting  philosophy  provides  for  an  individual  analysis  of  the  risk
associated   with  each   application,   except  for  specific   categories   of
miscellaneous bonds. In underwriting contract bonds, its approach focuses on the
financial  strength,  experience and operating  capacity of the  contractor.  In
underwriting  commercial surety, this approach focuses on the credit history and
financial resources of the applicant.


<PAGE>


     The  Company  maintains  control  of the  contract  and  commercial  surety
underwriting  process through the use of authority  limits for each  underwriter
and committee  underwriting of larger risks. The Company may require  collateral
on  contract  bonds and  occasionally,  on other  types of bonds  based  upon an
assessment of the risk characteristics.  The risk assessment includes evaluation
of  the  financial  strength  of  the  contractor,  the  credit  history  of the
contractor,  work in progress and  successful  work  experience.  Collateral can
consist of irrevocable letters of credit, certificates of deposit, cash, savings
accounts  and  publicly   traded   securities.   Both   corporate  and  personal
indemnification may be required in order to mitigate liability risk. The Company
also  targets  various  products  in the  commercial  surety  market  which  are
characterized  by  relatively  low risk  exposure  in small penal  amounts.  The
underwriting  criteria,  including  the extent of bonding  authority  granted to
independent agents, will vary depending on the class of business and the type of
bond.  For example,  relatively  little  underwriting  information  is typically
required of certain low exposure risk such as notary bonds.

     Other liability insurance  applications are individually  evaluated and the
decision  to  write a  particular  risk is  made by the  Company's  underwriting
department. The underwriting department determines whether to write a particular
risk  after  evaluating  a number  of  factors  based  upon  detailed  objective
underwriting standards relating to each class of business.

     Reinsurance
     -----------

     CCS assumes reinsurance  premiums through a program whereby its subsidiary,
SSI has contracted  through two joint  partnering  agreements (St. Paul Fire and
Marine  Group,  f/k/a United States  Fidelity and Guaranty  Company and Peerless
Insurance Company) to pursue small to medium size contract and commercial surety
business in states in which CCS is not licensed.  Effective July 1, 2002,  these
programs were discontinued.  CCS participates in the underwriting risk through a
retrocession treaty with Transatlantic Reinsurance Company.

     Effective  October 1, 1996,  CCS entered into a quota share  agreement with
First Indemnity of America Insurance Company ("FIA") whereby all of the premiums
written  through a shared  underwriting  office are subject to this treaty.  The
Company assumes 50% of the premiums written by FIA and cedes 50% of the premiums
written by CCS.

     The Company's  insurance  subsidiary,  in the ordinary  course of business,
cedes  insurance to other  insurance  companies,  to limit its exposure to loss,
provide  greater  diversification  of risk,  and minimize  aggregate  exposures.
Because the ceding of insurance does not discharge the primary  liability of the
original  insurer,   CCS  places   reinsurance  with  qualified  carriers  after
conducting  a  detailed  review of the nature of the  obligation  and a thorough
assessment  of  the  reinsurers  credit  qualifications  and  claims  settlement
performance and capabilities. The reinsurance coverage terms are tailored to the
specific risk characteristics of the underlining products of the company.

     For contract and commercial surety business,  CCS entered into an excess of
loss reinsurance agreement with Transatlantic Reinsurance Company (Transatlantic
Treaty),  which is rated A+ (Superior) by A.M. Best.  Excess of loss reinsurance
is a form of reinsurance,  which  indemnifies the ceding insurer up to an agreed
amount  against  all or a portion of the amount of loss in excess of a specified
retention.  The Company cedes risk insured to Transatlantic  Reinsurance Company
on an excess of loss treaty 95% of the risk insured  with a maximum  exposure to
the  Company of  $235,000  per  principal  prior to June 30,  2001 and a maximum
exposure of $300,000 per principal effective July 1, 2001 through June 30, 2002.
Effective  July 1,  2002,  net  exposure,  is limited to  $250,000  through  its
reinsurance program after a $1.4 million annual aggregate deductible, limited to
$350,000 per  principal,  is  satisfied.  Under the  Transatlantic  Treaty,  the
reinsurer  automatically assumes the risk of losses on all contract surety bonds
written and  classified as surety in CCS's  statutory  annual  statement and all
miscellaneous  surety bonds with penal sums over $100,000 written and classified
as surety in CCS's statutory annual statement.


<PAGE>

         Effective July 1, 2002, CCS entered into a quota share agreement with
Transatlantic Reinsurance Company whereby CCS cedes 35% of the premiums, net of
commissions, on its commercial surety bonds with penal sums less than $100,000.
The quota share treaty is renegotiated annually.

     For its liability  line of registered  investment  advisor  insurance,  the
Company  has reduced its  exposure  on any one risk,  through the  purchase of a
quota share agreement with Dorinco Reinsurance (Dorinco Treaty) which is rated A
(Excellent)  by A.M.  Best.  Under  the  Dorinco  Treaty,  CCS  cedes 50% of its
liability on all Registered Investment Advisor policies.

     Reserves
     --------

     Reserves for losses and loss adjustment expenses are established based upon
reported  claims  and  historical  industry  loss  development.  The  amount  of
liability for case loss reserves for reported  claims is based on a case by case
evaluation of the claim.  Historical industry data is reviewed and consideration
is  given  to  the   anticipated   impact  of  various  factors  such  as  legal
developments,  economic  conditions  and the effects of  inflation.  Amounts are
adjusted periodically to reflect these factors.

     Reserve for losses and loss adjustment  expenses are actuarial estimates of
losses,  including the related  settlement costs.  Management  believes that the
reserves  for losses and loss  adjustment  expenses  are  adequate  to cover the
losses and loss  adjustment  expenses,  including  the cost of incurred  but not
reported  losses.  During  2002,  there were no  material  changes in the mix of
business or types of risk assumed.

     Current  fluctuations  in inflation  have not had a material  effect on the
consolidated  financial  statements and there are no explicit  provisions in the
consolidated  financial  statements  for the effects of inflation that may cause
future changes in claim severity.

     Other  than  certain  classification  differences,  there  are no  material
differences   between  statutory  reserves  and  Generally  Accepted  Accounting
Principle  ("GAAP")  reserves.  CCS does not  discount  its  loss  reserves  for
financial reporting purposes.

     Derivative Instruments
     ----------------------

     The Company adopted SFAS No. 133 "Accounting for Derivative Instruments and
Hedging  Activities"  effective  January  1,  2001.  As a  result,  the  Company
identified one product that meets the  definition of a derivative  instrument as
defined in SFAS No. 133. The policy is issued to registered  investment advisors
("Advisors"),  and insures losses suffered by the Advisors as a result of market
declines  on covered  investment  principal,  provided  that the  Advisors  have
followed  the  investment  guidelines  required  by the policy.  The  identified
derivative was formerly accounted for as an insurance contract within the policy
liabilities for loss and loss adjustment  expenses  account in the  consolidated
balance sheet for periods prior to January 1, 2001. Due to the volatility in the
marketplace, the Company suspended marketing of this product effective September
2001.


<PAGE>

     Environmental Claims
     --------------------

     The Company  bonds  several  accounts  that have  incidental  environmental
exposure,  with respect to which the Company  provides  limited contract bonding
programs.  In the  commercial  surety  market,  the  Company  provides  bonds to
corporations that are in the business of mining various  minerals,  establishing
mitigation banks, or operating environmental facilities,  and that are obligated
to post  financial  assurance  bonds that guarantee that property can be managed
according to regulatory  guidelines.  While no environmental  responsibility  is
overtly  provided by commercial or contract  bonds,  some risk of  environmental
exposure may exist if the surety were to assume  certain  rights of ownership of
the  property  in the  completion  of a  defaulted  project or  through  salvage
recovery. To date, the Company has not received any environmental claim notices,
nor is management aware of any potential environmental claims.

     Investments
     -----------

     Insurance company investment  practices must comply with insurance laws and
regulations.  Generally, insurance laws and regulations prescribe the nature and
quality of, and set limits on, various types of  investments,  which may be made
by CCS.

     CCS's  investment  portfolios  generally  are managed to  maximize  any tax
advantages to the extent available while minimizing credit risk with investments
concentrated  in high quality,  fixed income  securities.  CCS's  portfolios are
managed to provide  diversification  by limiting  exposures  to any one issue or
issuer and to provide liquidity by investing in the public  securities  markets.
Portfolios are structured to support CCS's  operations and in  consideration  of
the expected duration of liabilities and short-term cash needs.

     An Investment Committee of CCS's Board of Directors establishes  investment
policy and oversees the management of the portfolios.

     Marketing
     ---------

     CCS principally  markets its products in twenty-seven  states, the District
of  Columbia  and  Guam in which  it is  licensed.  Its  products  are  marketed
primarily  through SSI, SG, SA and independent  agents and producers,  including
multi-line  agents and brokers that  specialize as surety  specialists,  many of
whom are members of the National Association of Surety Bond Producers.  CCS uses
specialized general agencies to market its other liability insurance products.

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

     The insurance industry is a highly competitive industry. There are numerous
firms, particularly in the specialty surety markets, which compete for a limited
volume of business.  Competition is based upon price, service, products offered,
and financial strength of the insurance company. There are a number of companies
in the industry, which offer products similar to the Company's products.

     The Company  competes in the small to medium size  contract and  commercial
surety bond markets.  Primary competitors include large multi-line companies, as
well as small regional  companies that specialize in the surety market.  After a
decade of stable pricing and consistent  profitability,  the surety industry has
been  hit with a spike in  losses.  As a  result,  more  restrictive  practices,
increased  rates and  tightening  credit  conditions  has created a new level of
competition.  Management  believes it can  effectively  compete in the medium to
small bond market.

<PAGE>


     The Company, while competitive in pricing and commission, believes that the
availability of its proprietary  Bond-Pro(R)  surety issuance system,  specialty
underwriting,  managerial  experience  and service  are its primary  competitive
factors in the industry.  To this end, the Company  believes that its technology
and  specialization  in  underwriting  niche  surety  markets  will enable it to
continue to compete  effectively,  even when  challenged by the larger  standard
market companies.

     Regulation
     ----------

     The Company's subsidiaries are subject to varying degrees of regulation and
supervision in the jurisdictions in which they transact business under statutes,
which  delegate  regulatory,  supervisory,  and  administrative  powers to State
insurance  regulators.  In general, an insurer's state of domicile has principal
responsibility  for such regulation.  It is designed generally to protect policy
holders  rather than  investors  and relates to matters such as the standards of
solvency which must be  maintained;  the licensing of insurers and their agents;
examination of the affairs of insurance companies,  including periodic financial
and  market  conduct  examinations;  the  filing  of annual  and other  reports,
prepared on a statutory  basis,  on the  financial  condition of insurers or for
other purposes;  establishment and maintenance of reserves for unearned premiums
and losses;  and  requirements  regarding  numerous other  matters.  Licensed or
admitted  insurers  generally  must file with the  insurance  regulators of such
states, or have filed on its behalf, the premium rates and bond and policy forms
used within each state. In some states, approval of such rates and forms must be
received from the insurance regulators in advance of their use.

     CCS is  domiciled  in Florida and  licensed in 27 states,  the  District of
Columbia  and Guam.  SSI, SG and SA are  licensed in Florida,  Georgia and South
Carolina respectfully.  CCS is also regulated by the United States Department of
the Treasury as an acceptable surety for Federal bonds.

     Holding  company  laws impose  standards  on certain  transactions  between
registered  insurers and their  affiliates,  which include,  among other things,
that the terms of the  transactions  be fair and  reasonable and that the books,
accounts and records of each party be maintained so as to clearly and accurately
disclose the precise  nature and details of the  transactions.  Holding  company
laws also generally  require that any person or entity  desiring to acquire more
than a specified percentage  (commonly 10%) of the Company's  outstanding voting
securities,  is  required  first to obtain  approval of the  applicable  state's
insurance regulators.

     The National Association of Insurance  Commissioners ("NAIC") has adopted a
risk-based  capital ("RBC") model law for property and casualty  companies.  The
RBC model law is  intended  to  provide  standards  for  calculating  a variable
regulatory capital requirement related to a company's current operations and its
risk exposures (asset risk, underwriting risk, credit risk and off balance sheet
risk).  These standards are intended to serve as a diagnostic  solvency tool for
regulators that establishes uniform capital levels and specific authority levels
for regulatory interventions when an insurer falls below minimum capital levels.
The model laws  specifies  four distinct  action levels at which a regulator can
intervene with  increasing  degrees of authority over a domestic  insurer as its
financial conditions deteriorates.  These RBC levels are based on the percentage
of an insurers  surplus to its calculated  RBC. The company's RBC is required to
be disclosed in its statutory  annual  statement.  The RBC is not intended to be
used as a rating or  ranking  tool nor is to be used in premium  rate  making or
approval.  The Company  calculated its RBC  requirements as of December 31, 2002
and met the minimum standards under the NAIC guidelines.

<PAGE>


     Controlling Shareholders
     ------------------------

     Francis Williams, and KC (collectively  "Majority  Shareholder") owns 79.9%
of the outstanding  ordinary shares of the Company and collectively  control the
policies  and  affairs  of the  Company.  Circumstances  may  arise in which the
interest of the Majority  Shareholder  of the Company  could be in conflict with
the interest of the other holders of the common stock. In addition, the Majority
Shareholder may have an interest in pursuing acquisitions, divestitures or other
transaction that in their judgment, could enhance their equity investment,  even
though such  transactions  might involve risk to the other holders of the common
stock.

     Employees
     ---------

     On December 31, 2002,  the Company had 34 employees.  All are employed on a
full-time basis. None of the Company's employees are union members or subject to
collective bargaining agreements.

     Forward-looking Statements
     --------------------------

     All  statements,  other than  statements of historical  facts,  included or
incorporated by reference in this Form 10-K which address activities,  events or
developments  which the Company expects or anticipates  will or may occur in the
future,  including  statements  regarding  the Company's  competitive  position,
changes  in  business   strategy  or  plans,   the  availability  and  price  of
reinsurance,  the Company's ability to pass on price increases, plans to install
the  Bond-Pro(R)  program  in  independent  insurance  agencies,  the  impact of
insurance laws and regulation,  the  availability of financing,  reliance on key
management  personnel,  ability to manage  growth,  the  Company's  expectations
regarding the adequacy of current  financing  arrangements,  product  demand and
market  growth,  and other  statements  regarding  future plans and  strategies,
anticipated events,  trends or similar  expressions  concerning matters that are
not historical facts are forward looking statements.  These statements are based
on  certain  assumptions  and  analyses  made by the  Company  in  light  of its
experience  and its  perception of historical  trends,  current  conditions  and
expected  future  developments as well as factors it believes are appropriate in
the circumstances. However, whether actual results and developments will conform
with the Company's  expectations and predictions is subject to a number of risks
and uncertainties  which could cause actual results to differ  significantly and
materially from past results and from the Company's expectations,  including the
risk factors discussed in this Form 10-K, Item 1 and 7A, and other factors, many
of which  are  beyond  the  control  of the  Company,  consequently,  all of the
forward-looking  statements  made in this  Form  10-K  are  qualified  by  these
cautionary  statements  and there can be no assurance that the actual results or
developments   anticipated   by  the  Company  will  be  realized  or,  even  if
substantially  realized  that  they will have the  expected  consequences  to or
effects on the Company or its business or operations.

     Item 2.    Properties
     ------     ----------

     The  Company's  operating  subsidiaries  rent or lease  office space in the
cities in which they are  located.  CCS and Qualex  lease office space in Tampa,
Florida from a company owned by Francis  Williams,  the Chairman of the Board of
the Company, at a monthly rate of $10,885, pursuant to a lease that was executed
June 1, 1999 and is effective through May 31, 2009.

     Management  considers  the  rented  and  leased  office  facilities  of its
subsidiaries   adequate  for  the  current  and  anticipated   future  level  of
operations.


<PAGE>

     Item 3.    Legal Proceedings
     ------     -----------------

     CCS was named as a defendant in a class action lawsuit in the United States
District  Court for the District of Colorado.  The  plaintiffs  are clients of a
registered investment advisor (the "Advisor") and have alleged that the Advisor,
a registered  broker-dealer,  and certain other defendants  (excluding CCS) were
negligent  or  otherwise  responsible  for  losses  suffered  by the  plaintiffs
resulting from embezzlement of the plaintiffs'  investments by a third party. As
a separate  count in the  lawsuit,  the  plaintiffs  have also  asserted  claims
against CCS based on a policy of  insurance  issued by CCS to the  Advisor.  The
policy does not provide  coverage  for  embezzlement,  rather it insures  losses
caused  by  market  declines,  providing  that  the  Advisor  has  followed  the
investment  guidelines  required by the policy.  On July 31, 2002,  the District
Court granted CCS motion for summary  judgment and dismissed the claims  against
CCS.

     The Company and its  subsidiaries  are involved in various lawsuits arising
in the ordinary course of its business operations as an insurer. Management does
not  believe  that any of these  lawsuits  will  have a  material  effect on the
consolidated financial position, future operations or cash flows of the Company.

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

     None.

     Executive Officers of the Registrant
     ------------------------------------

     All of the following persons are regarded as executive  officers because of
their   responsibilities  and  duties  as  elected  officers  of  the  Company's
subsidiaries.  Other than Francis M.  Williams and Joseph M.  Williams (See Item
10),  there are no  family  relationships  between  any of  Company's  executive
officers and directors,  and there are no arrangements or understandings between
any of these  officers  and any other  person  pursuant to which the officer was
selected as an officer.


                                 Position
Name                          Presently Held        Entity     Period of Service
----                          --------------        ------     -----------------

Joseph M. Williams..........  President             CTI        06/1992 to date
                              President             CCS        11/2002 to date

Carol S. Black..............  Secretary             CTI        06/1995 to date
                              Secretary/Treasurer   CCS        06/1995 to date
                              Secretary             SSI        08/1995 to date
                              Secretary/Treasurer   Qualex     08/1995 to date
                              Secretary             SG         08/1995 to date
                              Secretary             SA         08/1995 to date

Edward A. Mackowiak.........  President             Qualex     11/1994 to date

Sam H. Newberry.............  Vice President        SG         01/1998 to date



<PAGE>


                                     PART II
                                     -------

     Item 5.    Market for the  Company's  Common  Equity and Related
     ------       Stockholders Matters
                  --------------------

     The  Company's  common  stock  (symbol  "CUMB")  has  been  traded  in  the
over-the-counter  market since October 1, 1992. Effective December 16, 1996, the
Company was approved and included in the trading on the Nasdaq SmallCap  Market.
Effective  September 12, 2002, the Company's  common stock was delisted from the
Nasdaq SmallCap Market and on October 3, 2002, the Company announced its listing
on the Nasdaq Over-the-Counter  Bulletin Board. High and Low bid prices were set
forth in  Quotation  Market  Sheets  published  by Nasdaq.  The high and low bid
prices for 2002 and 2001 were as follows:

                                                  Bid Information
                                                  ---------------
                                            2002                      2001
                                  ----------------------------------------------
                                     High         Low        High         Low
                                  ----------------------------------------------
First Quarter ...............     $   1.00     $   .75     $   1.91     $   1.38
Second Quarter ..............          .59         .35         1.10         1.10
Third Quarter ...............          .06         .05          .98          .90
Fourth Quarter ..............          .15         .06          .95          .95

     As of March 6, 2003,  there were 799  stockholders  of record of the common
stock.  A number of such  holders  are brokers  and other  institutions  holding
shares in "street name" for more than one beneficial owner.

     Dividends
     ---------

     The  payment by the Company of  dividends,  if any, in the future is within
the  discretion  of its Board of  Directors  and will depend upon the  Company's
earnings,  capital  requirements  (including  working capital needs),  and other
financial  needs.  The Company did not declare or pay dividends in 2002 and does
not  anticipate  paying any dividends on the Company's  Common Stock in the near
future.

     The future payment of dividends, if any, by CCS is within the discretion of
its  Board  of  Directors  and  will  depend  upon  CCS's  earnings,   statutory
limitations,   capital  requirements   (including  working  capital  needs)  and
financial  condition,  as well as other relevant factors.  Applicable state laws
and  regulations  restrict  the  payment  of  dividends  by CCS to the extent of
current  year profits less any  dividends  that have been paid in the  preceding
twelve months or net investment  income for the year,  whichever is less, unless
CCS  obtains  prior  approval  from  the  insurance  commissioner.  CCS does not
anticipate paying any dividends on CCS common stock in the near future.

     Item 6.    Selected Financial Data
     ------     -----------------------

     The  following  selected  financial  data  are  taken  from  the  Company's
consolidated  financial statements.  The data should be read in conjunction with
the  accompanying  consolidated  financial  statements  and the  related  notes,
Management's Discussion and Analysis and other financial information included in
this Form 10-K.



<PAGE>

<TABLE>
<CAPTION>

                                                                                         Year Ended December 31,
                                                                   ------------ ------------ ------------- ------------ ------------
                                                                           2002         2001         2000        1999         1998
                                                                   ------------ ------------ ------------- ------------ ------------
                                                                                 (In Thousands - except per share data)
<S>                                                                   <C>          <C>          <C>          <C>           <C>

Statement of Operations Data:
----------------------------
    Net premium income ..................................              $ 13,432     $ 13,641     $ 12,128     $  9,618     $  7,534
    Net investment income ...............................                   486          605          576          333          377
    Net realized capital gains (losses) .................                    66          306           38          129         (437)
    Income from investment in subsidiary ................                    59           61           20         (203)        (136)
    Commission and other income .........................                 2,198        1,909        1,683        1,375        1,537
                                                                       --------     --------     --------     --------     ---------
       Total revenue ....................................                16,241       16,522       14,445       11,252        8,875

    Benefits and expenses ...............................                18,660       16,095       12,436        9,853        9,078
    Impairment of long-lived assets .....................                  --            437         --           --           --
    Interest expense ....................................                    62          166          203          214          118
                                                                       --------     --------     --------     --------     ---------
    Income (loss) before income tax (benefit)
      expense and extraordinary gain ....................                (2,481)        (176)       1,806        1,185         (321)
    Income tax (benefit) expense ........................                  (912)         (76)         764           37         --
                                                                       --------     --------     --------     --------     ---------
    (Loss) income before extraordinary gain .............                (1,569)        (100)       1,042        1,148         (321)
    Extraordinary gain on restructuring of
      note, net of income tax ...........................                  --            158         --           --           --
    Net income (loss) ...................................              $ (1,569)    $     58     $  1,042     $  1,148     $   (321)
                                                                       ========     ========     ========     ========     =========
Income (loss) per common share -
    basic and diluted ...................................              $  (0.28)    $   0.01*    $   0.19     $   0.21     $  (0.06)

*Includes extraordinary gain of $.03 per common share

</TABLE>


<TABLE>
<CAPTION>


                                                                                        Year Ended December 31,
                                                                 ------------ ------------  ------------- ------------ ------------
                                                                    2002         2001            2000          1999         1998
                                                                 ------------ ------------  ------------- ------------ ------------
                                                                                             (In thousands)
<S>                                                              <C>           <C>            <C>            <C>            <C>

Assets Balance Sheet Data:
-------------------------
    Investments .........................................        $ 9,269        $10,815        $ 9,955        $ 8,394        $ 3,987
    Cash and cash equivalents ...........................            593          2,654            694          2,000          4,202
    Accrued investment income ...........................            124            154            185             66             55
    Accounts receivable .................................          2,518          4,687          4,258          3,301          3,105
    Reinsurance recoverable .............................         12,089          6,634          5,970          4,730          2,306
    Deferred policy acquisition costs ...................          1,666          1,904          1,955          1,601          1,247
    Intangibles .........................................            441            534          1,115          1,267          1,456
    Other investment ....................................            700            641            583            559            553
    Deferred tax asset ..................................            402            499            175            305           --
    Income tax recoverable ..............................          1,073           --              168           --             --
    Other assets ........................................            303            372            311            315            354
                                                                 -------        -------        -------        -------        -------
    Total assets ........................................        $29,178        $28,894        $25,369        $22,538        $17,265
                                                                 =======        =======        =======        =======        =======

Liabilities and Shareholders Equity Data:
----------------------------------------
    Unearned premiums ...................................        $ 4,587        $ 5,583        $ 5,775        $ 4,844        $ 3,750
    Loss and loss adjustment expense reserve ............          8,896          5,285          6,246          6,409          3,220
    Derivative instruments ..............................          4,346          3,598           --             --             --
    Ceded reinsurance and accounts payable ..............          3,803          5,143          3,359          2,277          2,615
    Income tax payable ..................................           --              113           --               35           --
    Term note to affiliate ..............................            604            603          1,000          1,000          1,000
    Non affiliate debt ..................................            455            652          1,103          1,281          1,331
                                                                 -------        -------        -------        -------        -------
    Total liabilities ...................................         22,691         20,977         17,483         15,846         11,916
    Total stockholders' equity ..........................        $ 6,487        $ 7,917        $ 7,886        $ 6,692        $ 5,349
                                                                 -------        -------        -------        -------        -------
    Total liabilities and stockholders' equity ..........        $29,178        $28,894        $25,369        $22,538        $17,265
                                                                 =======        =======        =======        =======        =======

</TABLE>

<PAGE>

     Item 7.  Management's  Discussion  and Analysis of Financial  Condition
     ------     and Results of Operations
                -------------------------

Critical Accounting Policies
----------------------------

     The  preparation of  consolidated  financial  statements in conformity with
accounting  principles  generally  accepted in the United  States  requires  the
Company to make estimates and  assumptions  that affect the reported  amounts of
assets and liabilities  and the disclosure of contingent  assets and liabilities
at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period.  These estimates and assumptions are based
on  historical  experience  and various  other  factors  that are believed to be
reasonable  under the  circumstances.  Actual  results  could  differ from these
estimates under different assumptions or conditions.

     The  Company  believes  the  following  accounting  policies  are the  most
critical since these policies  require  significant  judgment or involve complex
estimations  that are  important  to the  portrayal of the  Company's  financial
position and operating results:

     The Company records valuation  allowances to reduce the deferred tax assets
to the amount  that is more likely  than not to be  realized.  While the Company
considers taxable income in assessing the need for a valuation allowance, in the
event the Company determines it would be able to realize its deferred income tax
assets in the future in excess of the net recorded  amount,  an adjustment would
be made and income increased in the period of such determination.  Likewise,  in
the event the Company  determines it would not be able to realize all or part of
its deferred  income tax assets in the future,  an adjustment  would be made and
charged against income in the period of such determination.

     The Company  reviews  long-lived  assets for impairment  whenever events or
changes in circumstances indicate that the carrying value of an asset may not be
recoverable.  In accordance  with the  Statement of Financial  Standards No. 142
Goodwill and Other Liability Assets,  the Company assesses goodwill annually for
impairment. Upon determination that the carrying value of the asset is impaired,
the Company would record an impairment charge or loss. Future adverse changes in
market conditions or poor operating  results of the underlying  investment could
result in losses or an inability to recover the carrying value of the investment
that may not be reflected therein;  and therefore,  might require the Company to
record an impairment charge in the future.

     Statement  of  Financial   Accounting  Standard  No.  133,  Accounting  for
Derivative  Instruments and Hedging  Activities ("SFAS No.133") is effective for
all fiscal  years  beginning  after June 15,  2000.  SFAS No.  133,  as amended,
establishes  accounting  and  reporting  standards for  derivative  instruments,
including certain derivative  instruments  embedded in other contracts,  and for
hedging activities. Under SFAS No. 133, certain contracts that were not formerly
considered derivatives may now meet the definition of a derivative.  The Company
adopted  SFAS No. 133  effective  January 1, 2001.  The Company  identified  one
product that meets the definition of a derivative  instrument as defined in SFAS
No. 133. The identified  derivative  was formerly  accounted for as an insurance
contract within the policy  liabilities  for loss and loss  adjustment  expenses
account in the  consolidated  balance sheet. At December 31, 2002 the fair value
of the derivative instrument has been determined by using a financial model that
incorporates  market data and other  assumptions.  Due to the  volatility in the
marketplace,  the Company has  suspended  marketing  of this  product  effective
September 2001.


<PAGE>


     The liability for loss and loss adjustment  expenses including incurred but
not  reported  losses is based on the  estimated  ultimate  cost of settling the
claim using  traditional  paid and  incurred  loss  development  methods.  These
estimates are subject to the effects of trends in loss  severity and  frequency.
Although  considerable  variability  is inherent in such  estimates,  management
believes  that  the  liabilities  for  loss and  loss  adjustment  expenses  are
adequate.  The estimates are  continually  reviewed and adjusted as necessary as
experience  develops or new  information  becomes known.  Such  adjustments  are
included  in  current  operations.  A  liability  for all costs  expected  to be
incurred in connection  with the  settlement of unpaid loss and loss  adjustment
expenses is accrued  when the related  liability  for unpaid  losses is accrued.
Loss adjustment  expenses include costs associated directly with specific claims
paid or in the process of settlement,  such as legal and adjusters'  fees.  Loss
adjustment  expenses  also include  other costs that cannot be  associated  with
specific  claims but are related to losses paid or in the process of settlement,
such as internal costs of the claims function. The Company does not discount its
reserves for losses and loss adjustment  expenses.  The Company writes primarily
surety  contracts  which are of short  duration.  The Company  does not consider
investment  income in  determining  if a premium  deficiency  relating  to short
duration contracts exists.

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

     The  following  table sets forth,  for the periods  indicated,  (i) summary
financial  data (in  thousands),  and (ii) the  percentage  change in the dollar
amount for such items from period to period.


<TABLE>
<CAPTION>
                                                                                                               Percentage Increase
                                                                                                                   (Decrease)
                                                                      Year Ended December 31,               Year Ended December 31,
                                                              ----------------------------------------------------------------------
                                                                2002            2001            2000          2002           2001
                                                              ----------------------------------------------------------------------
                                                                                         (Dollars In thousands)

<S>                                                          <C>             <C>             <C>              <C>            <C>

Net premium income ....................................       $ 13,432        $ 13,641        $ 12,128          (1.5)%         12.5%
Net investment income .................................            486             605             576         (19.7)%          5.0%
Net realized investment gains .........................             66             306              38         (78.4)%        702.6%
Commission and other income ...........................          2,257           1,970           1,703           14.6%         15.7%
Losses and loss adjustment
    expenses ..........................................          8,552           4,512           3,360           89.5%         34.3%
Derivative expense ....................................            506           1,061            --           (52.3)%        100.0%
Amortization of deferred
    acquisition costs .................................          3,594           4,363           3,768         (17.6)%         15.8%
Operating expenses and interest .......................          6,070           6,325           5,511          (4.0)%         14.8%
Impairment of long-lived assets .......................           --               437            --          (100.0)%      (100.0)%
(Loss) income before income tax
   (benefit) expense and extraordinary gain ...........         (2,481)           (176)          1,806      (1,309.7)%      (109.9)%
(Loss) income tax (benefit)
    expense ...........................................           (912)            (76)            764      (1,100.0)%      (109.9)%
(Loss) income before
    extraordinary gain ................................         (1,569)           (100)          1,042      (1,469.0)%      (109.8)%
Extraordinary gain ....................................           --               158            --          (100.0)%      (100.0)%
Net (loss)  income ....................................       $ (1,569)       $     58        $  1,042      (2,805.2)%       (94.3)%

</TABLE>

<PAGE>

      Year Ended December 31, 2002 Compared to Year Ended December 31, 2001
      ---------------------------------------------------------------------

     Premiums
     --------
     During  the years  ended  December  31,  2002 and 2001,  earned  direct and
assumed earned premiums were $17,478,356 and $18,253,687,  respectively. Overall
earned premiums, net of ceded premiums decreased 2% or $(209,566).  The decrease
in earned  premiums  is a result of CCS's  focus on a smaller  market base in an
effort to better control underwriting guidelines. The following table represents
the written  and earned  premium  for CCS and the  percentage  of change for the
years ended December 31, 2002 and 2001, respectively.

                          Written Premiums (000's)       Earned Premiums (000's)
                 ---------------------------------------------------------------
                     2002       2001   % Change     2002        2001    % Change
                 ---------------------------------------------------------------
Direct .......   $ 13.849   $ 13,867      (.1)% $ 13,981    $ 14,465      (3.4)%
Assumed ......      2,634      4,194    (37.2)%    3,498       3,788      (7.7)%
Ceded ........     (4,139)    (4,654)   (11.1)%   (4,047)     (4,612)    (12.3)%
                 --------   --------            --------    --------
    Total ....   $ 12,344   $ 13,407     (7.9)% $ 13,432    $ 13,641      (1.5)%
                 ========   ========            ========    ========

     Investments
     -----------
     During the years ended December 31, 2002 and 2001,  net  investment  income
earned was  $486,138 and  $604,463,  respectively.  The  decrease in  investment
income is  primarily  attributed  to  redemption  of bonds to meet the demand of
claim  payments.  Net realized  gains for the years ended  December 31, 2002 and
2001 were $66,239 and $305,461, respectively. Net realized gains during 2002 and
2001 are a result of gains on bond disposals of $66,239 and $329,360.  The gains
for 2001 are offset by losses of $23,899 on stock disposals.

     Commission Income
     -----------------
     Commission  income  represents  earnings from subsidiary  agencies on bonds
sold through  insurance  carriers  that have the capacity for writing  bonds not
offered  by  Cumberland  Casualty  &  Surety  Company.   Inter-company   related
commission   earnings  and  expenses  have  been  eliminated  in  preparing  the
consolidated  financial  statements.  Commission  income  for the  period  ended
December 31, 2002  increased by $93,690 or 23% when  compared to the same period
in the prior year.

     Income from Investment in Affiliate
     -----------------------------------
     The earnings of $59,252 and $61,457 for the years ending  December 31, 2002
and 2001  represent  a 30% equity  position  the Company  holds on a  California
agency.

     Other Income
     ------------
     Other income is earned  through an  affiliate  offering  claims  consulting
services to insurance  carriers.  Primarily,  their services include management,
administration and completion of jobs defaulted under surety bonds. Other income
increased by $194,082 or 13% when compared to the same period in the prior year.

     Loss and Loss Adjustment Expenses
     ---------------------------------
     Loss  and  loss  adjustment  reserves  have  been  prepared  by  consulting
actuaries in accordance with accepted actuarial  standards for the periods ended
December 31, 2002 and 2001. Loss and loss adjustment expenses incurred represent
the impact of the large influx of claims CCS  experienced  during  2002.  Losses
incurred for the year ended  December 31, 2002 was  $6,055,043 and represents an
increase of $2,811,944 or 86.7% over 2001 losses  incurred.  The following table
reflects the variance in losses incurred:


<PAGE>

                                   ---------------------------------------------
                                                                          % of
                                     12/31/02     12/31/01    Increase  Increase
                                   ---------------------------------------------

Losses incurred - direct, net ..   $3,857,512   $2,313,544   $1,543,968    66.7%
Losses incurred - assumed, net .    2,197,521      929,545    1,267,976   136.4%
                                   ----------   ----------   ----------
     Total .....................   $6,055,033   $3,243,089   $2,811,944    86.7%
                                   ==========   ==========   ==========

     The  increase  in direct  losses  when  compared  to prior  year  losses is
comprised  of  primarily   contract  claims  on  contractors   defaulting  under
performance and payment bond requirements.  CCS encountered unexpected losses on
an assumed block of business during 2002 creating  incurred losses on that block
of business of approximately $1,169,325.

     Loss adjustment  expenses totaled  $2,044,046 on direct losses and $453,236
on assumed  losses  representing  an  increase  over prior year loss  adjustment
expenses of $1,228,461 or 96.8%. Loss adjustment  expenses represent the cost of
the internal  claims  department,  outside claims  consultants  and attorneys in
connection with the settlement of claims.

     In  analyzing  the  development  of  large  claims,  CCS's  management  has
redirected its  underwriters to concentrate  and focus on new business  writings
with small contractors and commercial surety business.  Effective July 2002, CCS
elected to not renew its assumption reinsurance treaties.

     Derivative Instruments
     ----------------------
     Upon adoption of SFAS No. 133  Accounting for  Derivative  Instruments  and
Hedging Activities effective January 1, 2001, it was determined that CCS has one
policy,  referred to as the Registered Investment Advisors (RIA) program, deemed
a derivative  instrument.  The RIA program provides specific  liability coverage
for  professional  services  rendered by  registered  investment  advisors.  The
insured  liability  risk arises from written  warranties  which address  minimum
performance  standards  associated with the delivery of risk management  program
services.  The structure of the RIA is based on market value fluctuations and is
sold as an insurance policy, with a five-year maturity schedule,  guaranteeing a
return of the principal amount invested, subject to meeting policy criteria. The
Company  distributes  the policy to "market timer's and has no contract with the
individual client. Prior to January 1, 2001, the RIA program was included in the
category of loss and loss adjustment expenses on the Consolidated  Balance Sheet
and  Consolidated  Statement  of  Operations.  Due  to  the  volatility  in  the
marketplace, the Company suspended marketing of this product effective September
10, 2001.

     In prior years,  the Company reserved for the derivative at a percentage of
the earned premium.  In valuing the reserves on the derivative,  the Company had
no history  other than  relying on market  fluctuation  projections  which had a
history of  supporting  the  actuarial  formulas  developed  when the policy was
initially approved by Consulting  Actuaries and Florida regulators.  At December
31,  2002 and 2001,  respectively,  the  derivative  was  valued  using a growth
factor, lapse factor and loss projections before applying a present value factor
to ultimately  determine the liability to the Company.  At December 31, 2002 and
2001, the derivative  instrument liability for this policy was set at $4,346,285
and  $3,597,782,  respectively.  The  policies  began  maturing in June of 2002.
Claims paid in 2002, net of reinsurance was $184,075. Derivative expense for the
periods  ended  December  31,  2002  and  2001  was  $505,816  and   $1,060,799,
respectively.

     Amortization
     ------------
     During the year ended  December 31, 2002 the net  amortization  of deferred
policy  acquisition  costs were to $3,593,701 as compared to $4,362,721  for the
year ended December 31, 2001. The acquisition costs represent 20.6% and 23.9% of
the direct and assumed earned premiums for the years ended December 31, 2002 and
2001, respectively.


<PAGE>

     Operating Expenses
     ------------------
     During the year ended  December  31,  2002,  operating  expenses and taxes,
licenses and fees (excluding income taxes) decreased slightly to $6,008,072 from
$6,159,044  for the same period in 2001.  Operating  expenses  represent  37% of
total revenue for the years ended December 31, 2002 and 2001.

     Interest Expense
     ----------------
     Interest  expense on  non-affiliated  debt is  interest  paid to the former
owners of The Surety  Group and Surety  Associates  on notes due to agencies the
Company purchased in 1995.  Interest on affiliated debt represents interest on a
note payable to TransCor, a division of KC.

     Income Taxes
     ------------
     The  Company  incurred  income  tax  (benefits)  during  2002  and  2001 of
$(912,031) and  $(75,932),  respectively.  The company's  effective tax rate for
2002 is 36.7% and 26.7% for 2001.

      Year Ended December 31, 2001 Compared to Year Ended December 31, 2000
      ---------------------------------------------------------------------

     Premiums
     --------
     During the year ended December 31, 2001 and 2000, earned direct and assumed
premium was $18,253,687 and $15,236,814,  respectively. Overall earned premiums,
net of ceded  premiums  increased  12.5% or  $1,513,363.  The increase in earned
premiums is a result of CCS's  continued  growth in the surety bond market.  The
following  table  represents  the  written  and earned  premium  for CCS and the
percentage  of  change  for  the  years  ended   December  31,  2001  and  2000,
respectively.

                       Written Premiums (000's)       Earned Premiums (000's)
                   -------------------------------------------------------------
                       2001       2000  % Change     2001        2000  % Change
                   -------------------------------------------------------------
Direct .........   $ 13,867   $ 13,775      .7%  $ 14,465    $ 12,756      13.4%
Assumed ........      4,194      2,393    75.3%     3,788       2,481      52.7%
Ceded ..........     (4,654)    (3,510)   32.6%    (4,612)     (3,109)     48.3%
                   --------   --------    -----  --------    --------
    Total ......   $ 13,407   $ 12,658     5.9%  $ 13,641    $ 12,128      12.5%
                   ========   ========    =====  ========    ========

     During the years ended December 31, 2001 and 2000,  net  investment  income
earned was $604,463 and $576,406,  respectively.  The return on average invested
assets was 6.01% for the year 2001 as compared  to 6.28% for the year 2000.  The
slight decrease in the return is attributed to the decrease in overall  interest
rates.  Net realized  gains for the years ended  December 31, 2001 and 2000 were
$305,461 and $38,381,  respectively. Net realized gains during 2001 are a result
of gains on bond  disposals of $329,360  which is offset by losses of $23,899 on
stock disposals. Realized gains in year 2000 are attributed to stock disposals.

     Commission Income
     -----------------
     Commission  income  represents  earnings from subsidiary  agencies on bonds
sold through  insurance  carriers  that have the capacity for writing  bonds not
offered by CCS. Inter-company related commission earnings and expenses have been
eliminated in preparing the consolidated financial statements. Commission income
for the year ended December 31, 2001 increased by $27,060 or 7% when compared to
the same period in the prior year.

<PAGE>



     Other Income
     ------------
     Other income is earned  through an  affiliate  offering  claims  consulting
services to insurance  carriers.  Primarily,  their services include management,
administration and completion of jobs defaulted under surety bonds. Other income
for 2001  increased  by $200,223 or 15% when  compared to the same period in the
prior year.

     Loss and Loss Adjustment
     ------------------------
     Loss  and  loss  adjustment  reserves  have  been  prepared  by  consulting
actuaries in accordance with accepted  actuarial  standards.  The Company writes
two lines of business  classified  as other  liability  and surety and  fidelity
bonds.  The category of other  liability  GAAP  reporting  requirements  changed
effective  January  1,  2001  under  SFAS  No.  133  Accounting  for  Derivative
Instruments and Hedging  Activities and are discussed as a separate item for the
reporting year ended December 31, 2001. The following table is a presentation of
how the reserves are presented on the Consolidated  Balance Sheet for year ended
December 31, 2001.

                                                        Year Ended December 31,
                                                     ---------------------------
                                                           2001             2000
                                                     ---------------------------
Loss and loss adjustment reserves ............       $5,284,804       $6,245,818
Derivative instruments .......................        3,597,782             --
                                                     ----------       ----------
    Totals ...................................       $8,882,586       $6,245,818
                                                     ==========       ==========
Less:
Derivative instruments (SFAS No. 133
     as of January 1, 2001 formerly
     included in loss and loss
     adjustment reserves .....................        3,237,782             --
Additional amount required under
     SFAS 133 ................................          360,000             --
                                                     ----------       ----------
Loss and loss adjustment expense
     reserves ................................       $5,284,804       $6,245,818
                                                     ==========       ==========

     The amount that would be attributed to derivative  instruments for the year
ended  December 31, 2000 is $310,005  and is included in liability  for loss and
loss adjustment expense reserves.

     Loss and loss adjustment expenses totaled $4,511,910 and $3,360,358 for the
years ended December 31, 2001 and 2000,  respectively,  representing an increase
of $1,151,522 for year 2001. In analyzing  losses on direct and assumed business
segregated from loss adjustment  expenses,  losses  increased  $430,741  (direct
business) and  $1,053,943  (assumed  business)  over the prior year. The Company
processed 193 claims for payment during 2001 with an average settlement,  net of
reinsurance  amounting  to $10,130 on its direct line of business as compared to
processing 122 claims for payment during 2000 with an average settlement, net of
reinsurance totaling $14,360.

     Loss adjustment  expenses (LAE's) represent the cost of the internal claims
department,  outside  claims  consultants  and attorneys in connection  with the
settlement of claims.  LAE's decreased $333,132 when compared to the same period
in the prior year. The decrease is a result of CCS processing claims through the
home office.

     The loss and loss adjustment expense reserve liability at December 31, 2001
includes  direct case losses and loss  adjustment  reserves on 30 claims with an
average  reserve  of  approximately  $58,295.  The  balance of the loss and loss
adjustment  expense  reserve  liability  is held  under IBNR  (incurred  but not
reported) on direct and assumed surety claims totaling $3,535,967.

<PAGE>


     Derivative Instruments
     ----------------------
     Prior to 2001,  the Company  reserved for the RIA policy at a percentage of
the earned premium. The change in valuation became significant when SFAS No. 133
Accounting for Derivative  Instruments and Hedging  Activities  became effective
January 1, 2001.

     In valuing the reserves on the RIA,  the Company had no history  other than
relying on market fluctuation  projections which had a history of supporting the
actuarial   formulas  developed  when  the  policy  was  initially  approved  by
Consulting Actuaries and Florida regulators. With the implementation of SFAS No.
133 Accounting for Derivative Instruments and Hedging Activities,  the impact on
how  reserves  were valued was  immediate.  At December  31,  2001,  the RIA was
established  using a growth  factor,  lapse factor and loss  projections  before
applying a present  value factor to  ultimately  determine  the liability to the
Company. At December 31, 2001 the derivative instrument liability (formerly Loss
and loss adjustment expense reserves) for this policy was set at $3,597,782. The
charge to  earnings  for the year  ended  December  31,  2001 was an  additional
$360,000. The policies will begin maturing in June of 2002.

     Amortization
     ------------
     During the year ended  December 31, 2001 the net  amortization  of deferred
policy  acquisition  costs were to $4,362,721 as compared to $3,767,107  for the
year ended December 31, 2000. The acquisition costs represent 23.9% and 24.7% of
the direct and assumed earned premiums for the years ended December 31, 2001 and
2000, respectively.

     Operating Expenses
     ------------------
     During the year ended  December  31,  2001,  operating  expenses and taxes,
licenses  and  fees  (excluding  income  taxes)  increased  to  $6,159,044  from
$5,308,516  for the same  period in 2000.  The  increase of $850,600 or 16% is a
result of  increased  salary and related  expenses  ($307,000);  accounting  and
actuarial fees  ($107,000);  legal fees  ($66,400);  credit  reports  ($48,000);
office supplies and related  expenses  ($178,100) and travel expenses  ($93,100)
and taxes,  license and fees  ($51,000).  The Company's  increase in expenses is
related to the Company's direct marketing efforts and continued  expansion.  The
Company  reclassified  $466,332  and $146,633  attributed  to in-house in claims
expenses to loss  adjustment  expenses for the year ended  December 31, 2001 and
2000, respectively.

     Interest Expense
     ----------------
     Interest  expense on  non-affiliated  debt is  interest  paid to the former
owners of The Surety  Group and Surety  Associates  on notes due to agencies the
Company purchased in 1995.  Interest on affiliated debt represents interest on a
note payable to TransCor, a division of KC.

     Income Taxes
     ------------
     The Company  incurred income tax (benefit)  expense during 2001 and 2000 of
$(75,932) and $764,390,  respectively.  The Company's effective tax rate for the
2001 is 26.7% and 42% for 2000.

     Asset Impairment
     ----------------
     In accordance  with Statement of Financial  Accounting  Standard 121 ("SFAS
121"), goodwill and other long-lived assets that were capitalized in conjunction
with the purchase of Associates Acquisition Corp., d/b/a Surety Associates, were
deemed  impaired as of December  31,  2001,  and an asset  impairment  charge of
$437,418 was recorded.

<PAGE>


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

     The capacity of a surety company to underwrite insurance and reinsurance is
based on maintaining  liquidity and capital  resources  sufficient to pay claims
and expenses as they become due. Based on standards  established by the National
Association  of Insurance  Commissioners  (NAIC) and  promulgated by the Florida
Department of Financial Services, the Company is permitted to write net premiums
up to an amount equal to three times its  statutory  surplus,  or  approximately
$14,204,000  at December 31, 2002.  Statutory  guidelines  impose an  additional
limitation  on  increasing  net  written  premiums  to no more than 33% of prior
year's net written premiums. Under these guidelines,  the Company could increase
net written premiums by approximately $1,800,000.

     At December  31,  2002,  the  Company's  $29,178,488  of total  assets were
distributed   primarily  as  follows:  34.2  percent  in  cash  and  investments
(including  accrued  investment   income),   50.1  percent  in  receivables  and
reinsurance  recoverables,  7.2  percent  in  intangibles  and  deferred  policy
acquisition  costs,  5.1 percent in deferred income tax asset and 3.4 percent in
other assets.

     The Company follows  investment  guidelines that are intended to provide an
acceptable return on investment while maintaining  sufficient  liquidity to meet
its obligations.

     Net cash (used in)  provided  by  operating  activities  was  $(3,723,761),
$2,753,355  and $191,380 for the years ended  December 31, 2002,  2001 and 2000,
respectively.  In 2002,  cash (used in)  provided  by  operating  activities  is
primarily  attributed to payment of claims  resulting in policy  liabilities and
reinsurance ceded payable decreasing and reinsurance recoverables increasing. In
2001,  cash  provided by operating  activities  was  primarily  attributed to an
increase in policy liabilities and accruals. In 2000, cash provided by operating
activities was attributed to policy  liabilities which was offset by reinsurance
recoverable and policy acquisition costs and amortization.

     Net cash  provided  by  (used  in)  investing  activities  was  $1,787,211,
$(572,432)  and  $(1,293,487)  for the years ended  December 31, 2002,  2001 and
2000, respectively.  Investing activities consist primarily of purchases,  sales
and maturities of investments.

     Net cash  used in  financing  activities  was  $(124,322),  $(220,570)  and
$(204,262) for the years ended December 31, 2002,  2001 and 2000,  respectively.
Financing  activities consist primarily of repayments on borrowings and advances
to (from) affiliates during 2002, 2001 and 2000.

     The following  summarizes  the Company's  contractual  cash  obligations at
December  31, 2002 and the effect such  obligations  are expected to have on its
liquidity and cash flow in future periods.

                                           Payments Due by Period (in thousands)
                                      ------------------------------------------
                                              Less than    1-3     4-5   After 5
                                       Total   1 Year     Years   Years   Years
                                      ------------------------------------------
Contractual cash obligations:
Operating leases ..................   $1,345   $  262   $  654   $  365   $   64
Debt instruments ..................    1,059      676      144      144       95
                                      ------   ------   ------   ------   ------
Total contractual cash obligations    $2,404   $  938   $  798   $  509   $  159
                                      ======   ======   ======   ======   ======

<PAGE>

     At  December  31,  2002 and  2001,  the  Company  did not  have  any  other
commercial commitments, such as guarantees or standby repurchase obligations, or
any relationships with unconsolidated entities or financial  partnerships,  such
as entities often referred to as structured finance or special purpose entities,
which would have been  established for the purpose of  facilitating  off-balance
sheet arrangements or other contractually narrow or limited purposes.

Losses and Loss Adjustment Expenses
-----------------------------------

     The consolidated  financial  statements include the estimated liability for
unpaid losses and loss  adjustment  expenses (LAE) of CCS. The  liabilities  for
losses and LAE's are determined  using  case-basis  evaluations  and statistical
projections  and  represent  estimates  of the  ultimate  net cost of all unpaid
losses and LAE's  incurred  through the end of the period.  These  estimates are
subject to the effect of trends in future claim  severity and  frequency.  These
estimates  are  continually   reviewed  and,  as  experience  develops  and  new
information  becomes  known,  the  liability  is  adjusted  as  necessary;  such
adjustments, if any, are included in current operations.

Reconciliation of Liability for Losses and Loss Adjustment Expenses
-------------------------------------------------------------------

     The following table provides a  reconciliation  of the beginning and ending
liability balances, net of reinsurance  recoverable,  for 2002, 2001 and 2000 to
the gross amounts reported in the Company's balance sheets:

<TABLE>
<CAPTION>


                                                                                                     December 31,
                                                                               -----------------------------------------------------
                                                                                      2002                2001                 2000
                                                                               -----------------------------------------------------
<S>                                                                            <C>                 <C>                 <C>

Gross liability for losses and LAE at beginning
   of year ...........................................................         $ 5,284,804         $ 6,245,819          $ 6,408,490
Recoverables on losses and LAE .......................................           1,812,616           2,911,070            3,599,763
                                                                               -----------         -----------          -----------
Liability for losses and LAE on unpaid losses before
   adjustment for incurred and paid losses ...........................           3,472,188           3,334,749            2,808,727
Incurred losses and LAE's claims, net of
   reinsurance, occurring during:
   Current year ......................................................           8,203,575           5,448,480            4,363,435
   Prior year ........................................................             348,740            (936,570)          (1,003,077)
                                                                               -----------         -----------          -----------
Total incurred losses, net of reinsurance ............................           8,552,315           4,511,910            3,360,358
Losses and LAE payments for claims, net of
   reinsurance, occurring during:
   Current year ......................................................           5,469,929           1,798,145            2,450,587
   Prior years .......................................................           3,936,415           2,576,326              383,749
                                                                               -----------         -----------          -----------
Total payments .......................................................           9,433,344           4,374,471            2,834,336
                                                                               -----------         -----------          -----------
Liability for losses and LAE, net ....................................           2,591,159           3,472,188            3,334,749

Add:  recoverables on losses and LAE's ...............................           6,304,311           1,812,616            2,911,070
                                                                               -----------         -----------          -----------
Liability for losses and LAE, at end of year .........................         $ 8,895,470         $ 5,284,804          $ 6,245,819
                                                                               ===========         ===========          ===========

</TABLE>

     The Company  experienced  a  deficiency  of $348,740  for the period  ended
December 31, 2002.  The  deficiency is a result of settling claim basis reserves
established in prior years for amounts that were more than expected. The Company
experienced  $936,570  and  $1,003,077  in  redundancies  for  losses  and  loss
adjustment expenses in 2001 and 2000, respectively. The redundancies principally
result from  subrogation  received on pooling  agreement  case base reserves and
claims in prior years.

<PAGE>

     KC and SSI entered into an agreement with an independent contractor, AEC on
August 16, 1989 on a construction contract with the United States Navy ("Navy").
At the  time  the  bonds  were  issued  by CCS as  surety,  KC  entered  into an
indemnification  agreement,  whereby KC indemnified CCS from any and all losses,
costs and expenses  incurred  related to the bonds.  In 1991, the Navy defaulted
and terminated AEC on the contract.  The contract was subsequently litigated and
CCS was unsuccessful in its litigation activities with the Navy. As a result, KC
reimbursed CCS $1,500,000 of the total subrogation  recoverable of $1,850,877 in
November 2001 on the contract.  CCS wrote off the remaining $350,877 reinsurance
recoverable  as a charge to loss and loss  adjustment  expense  and  incurred an
additional $240,000 in legal fees during 2001.

     The  anticipated   effect  of  inflation  is  implicitly   considered  when
estimating liabilities for losses and LAE. While anticipated price increases due
to inflation are considered in estimating the ultimate claim costs, the increase
in average severities of claims is caused by a number of factors. Future average
severities are projected  based on historical  trends  adjusted for  anticipated
changes in  underwriting  standards,  policy  provisions,  and general  economic
trends.  These anticipated  trends are monitored based on actual development and
are modified if necessary.

     The differences  between the December 31, 2002 liability for losses and LAE
reported in the  accompanying  consolidated  financial  statements in accordance
with accounting  principles  generally  accepted in the United States of America
("GAAP")  and that  reported  in the  annual  statement  filed  with  the  state
insurance   departments  in  accordance  with  insurance   accounting  practices
prescribed  or permitted  by the Florida  Department  of  Financial  Services as
follows:

Statutory reserves for losses and LAE's (which is net of
   reinsurance recoverables on unpaid losses and LAE) ..........    $ 4,638,870
Reinsurance recoverables on losses and LAE's ...................      4,999,661
Subrogation recoverables on losses and LAE's ...................      1,304,649
Statutory reserve for derivative instrument ....................     (2,047,710)
                                                                    -----------
Liability for losses and LAE, as reported in the accompanying
   GAAP basis consolidated financial statements ................    $ 8,895,470
                                                                    ===========

Analysis of Loss and Loss Adjustment Expense Development
--------------------------------------------------------

     The following table  represents the development of the liability for unpaid
losses and LAE, net of reinsurance, for 1992 through 2002 (in thousands).


<TABLE>
<CAPTION>


                                      1992     1993     1994    1995     1996     1997     1998     1999     2000     2001     2002
                                  -------- -------- -------- ------- -------- -------- -------- -------- -------- -------- --------
<S>                              <C>       <C>      <C>     <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>

Gross liability for loss
  and LAE....................     $2,426   $  3,355 $  3,138  $2,352 $  2,305 $  2,550 $  3,220 $  6,409 $  6,246 $  5,285 $  8,895
Reinsurance..................          -          -        -       -     (313)       -        -   (1,832)  (1,060)  (1,171)  (4,999)
                                  ------   -------- --------  ------ -------- -------- -------- -------- -------- -------- --------
Liability for
losses and loss
  Adjustment
  expenses, net
  of reinsurance.............     $  2,426 $  3,355 $  3,138 $ 2,352 $  1,992 $  2,550 $  3,220 $  4,577 $  5,186 $  4,113 $  3,896
Liability
re-estimated as
of:
  One year later.............        3,884    5,327    2,684   3,113    1,801    3,117    3,033    3,657    3,783    4,462        -
  Two years later............        4,057    3,878    2,818   2,972    2,420    3,479    2,506    1,830    3,394        -        -
  Three years later..........        3,561    4,147    2,788   3,456    2,888    3,088      997    1,098        -        -        -
  Four years later...........        3,814    4,006    3,134   3,803    2,668    1,686      544        -        -        -        -
  Five years later...........        3,564    4,582    3,394   3,571    1,158    1,715        -        -        -        -        -
  Six years later............        4,376    4,905    3,180   2,082    1,253        -        -        -        -        -        -
  Seven years later..........        4,077    4,791    1,641   2,102        -        -        -        -        -        -        -
  Eight years later..........        4,045    3,211    1,654       -        -        -        -        -        -        -        -
  Nine years later...........        2,431    3,201        -       -        -        -        -        -        -        -        -
  Ten years later............        2,468        -        -       -        -        -        -        -        -        -        -
                                  -------- -------- -------- ------- -------- -------- -------- -------- -------- -------- --------
Cumulative
(deficiency)
redundancy...................     $   (42) $    154 $  1,484 $   250 $    739 $    835 $  2,676 $  3,479 $  1,792 $  (349) $      -
                                  ======== ======== ======== ======= ======== ======== ======== ======== ======== ======== ========
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                      1992     1993     1994    1995     1996     1997     1998     1999     2000     2001     2002
                                  -------- -------- -------- ------- -------- -------- -------- -------- -------- -------- --------
<S>                              <C>       <C>     <C>      <C>     <C>       <C>     <C>       <C>     <C>      <C>       <C>

Cumulative
 amount of
 liability, net
 of reinsurance
 recoverables,
 paid through:

  One year later............     $  1,151 $    765 $  1,643 $ 1,334 $   563  $ 1,802  $  2,155 $  2,196 $  2,249 $  4,071 $      -
                                 ======== ======== ======== ======= =======  =======  ======== ======== ======== ======== ========
  Two years later...........     $  1,834 $  1,058 $  2,316 $ 2,186 $ 1,631  $ 2,856  $  1,878 $     90 $  3,112 $      - $      -
                                 ======== ======== ======== ======= =======  =======  ======== ======== ======== ======== ========
  Three years later.........     $  2,088 $  2,868 $  2,164 $ 2,997 $ 2,466  $ 2,575  $    488 $     99 $      - $      - $      -
                                 ======== ======== ======== ======= =======  =======  ======== ======== ======== ======== ========
  Four years later..........     $  1,957 $  3,717 $  2,875 $ 3,506 $ 2,336  $ 1,345  $    271 $      - $      - $      - $      -
                                 ======== ======== ======== ======= =======  =======  ======== ======== ======== ======== ========
  Five years later..........     $  3,533 $  4,442 $  3,230 $ 3,360 $   929  $ 1,506  $      - $      - $      - $      - $      -
                                 ======== ======== ======== ======= =======  =======  ======== ======== ======== ======== ========
  Six years later...........     $  3,840 $  4,804 $  3,062 $ 1,906 $ 1,116  $     -  $      - $      - $      - $      - $      -
                                 ======== ======== ======== ======= =======  =======  ======== ======== ======== ======== ========
  Seven years later.........     $  2,278 $  4,769 $  1,572 $ 1,998 $     -  $     -  $      - $      - $      - $      - $      -
                                 ======== ======== ======== ======= =======  =======  ======== ======== ======== ======== ========
  Eight years later.........     $  2,183 $  3,204 $  1,633 $     - $     -  $     -  $      - $      - $      - $      - $      -
                                 ======== ======== ======== ======= =======  =======  ======== ======== ======== ======== ========
  Nine years later..........     $  2,424 $  3,199 $      - $     - $     -  $     -  $      - $      - $      - $      - $      -
                                 ======== ======== ======== ======= =======  =======  ======== ======== ======== ======== ========
  Ten years later...........     $  2,469 $      - $      - $     - $     -  $     -  $      - $      - $      - $      - $      -
                                 ======== ======== ======== ======= =======  =======  ======== ======== ======== ======== ========
</TABLE>

Effect of Inflation
-------------------

     Inflation has not had a material  impact upon the Company's  operations for
the last three years.

     Item 7A.   Quantitative and Qualitative Disclosures About Market Risk
     -------    ----------------------------------------------------------

     Interest Rate Sensitivity
     -------------------------

     The  following  tables  present  principal  maturity cash flows and related
weighted average interest rates by expected maturity as of December 31, 2002 and
2001:


<TABLE>
<CAPTION>

                                                                        2002 Expected Maturity Date
                                                                        ---------------------------
                                                                                                                              Fair
                                                                                                      There-                  Value
                                                  2003        2004      2005       2006     2007      after        Total    12/31/02
                                      ----------------------------------------------------------------------------------------------
                                                                              (In thousands)
<S>                                   <C>             <C>            <C>       <C>        <C>       <C>          <C>         <C>

Assets
------
Debt securities available for sale    $        2,876  $       630   $   976    $   1,724  $    293   $  1,259    $  7,758    $7,758
   Average interest rate ..........              5.4%        5.83%      6.1%         5.6%     7.48%       7.0%        6.0%      6.0%

Debt securities held to maturity ..              260          100      --           --        --          --          360    $  367
   Average interest rate ..........              5.5%         5.5%     --           --        --          --          5.5%      5.5%

Mortgage loans ....................               40            1         1            1         1        31           75    $   75
   Average interest rate ..........              7.5%         7.5%      7.5%         7.5%      7.5%      7.5%         7.5%      7.5%

Short-term investments ............              434          --       --           --        --          --          434    $  434
   Average interest rate ..........              2.3%         --       --           --        --          --          2.3%      2.3%

Liabilities
-----------
Debt including current
   portion ........................   $          676  $        72   $   72     $      72   $    72   $     95    $  1,059    $1,059
   Average interest rate ..........              9.8%         6.3%     6.3%          6.3%      6.3%       6.3%        6.8%      6.8%

</TABLE>

<PAGE>



<TABLE>
<CAPTION>



                                                                          2001 Expected Maturity Date
                                                                          ---------------------------
                                                                                                                              Fair
                                                                                                       There-                 Value
                                             2002       2003        2004       2005        2006         after       Total   12/31/01
                                          ------------------------------------------------------------------------------------------
                                                                                (In thousands)
<S>                                       <C>        <C>         <C>         <C>         <C>         <C>         <C>         <C>

Assets
------
Debt securities available for sale .....  $   502    $  3,424    $  1,140    $  1,757    $  1,071    $  1,445    $  9,339    $9,339
   Average interest rate ...............      6.4%        5.3%        5.8%        6.7%        5.8%        7.2%        6.2%      6.2%

Debt securities held to maturity .......     --           260         100        --          --          --           360    $  374
   Average interest rate ...............     --           5.5%        5.5        --          --          --           5.5%      5.5%

Mortgage loans .........................        2           2           2           2           2          31          41    $   41
   Average interest rate ...............      7.5%        7.5%        7.5%        7.5%        7.5%        7.5%        7.5%      7.5%

Short-term investments .................      434        --          --          --          --          --           434    $  434
   Average interest rate ...............      5.5%       --          --          --          --          --           5.5%      --

Liabilities
-----------
Debt including current
   portion .............................  $   729    $     72    $     72    $     72    $     72    $    239    $  1,256    $1,256
   Average interest rate ...............      8.1%        6.3%        6.3%        6.3%        6.3%        6.3%        6.6%      6.6%


</TABLE>

     The  operations of the Company are subject to risk  resulting from interest
rate fluctuations to the extent that there is a difference between the amount of
the  Company's  interest-earning  assets  and  the  amount  of  interest-bearing
liabilities that are prepaid/withdrawn,  mature or reprice in specified periods.
The principal objective of the Company's  asset/liability  management activities
is to provide maximum levels of net interest income while maintaining acceptable
levels of interest rate and liquidity risk and facilitating the funding needs of
the Company.

     Due to the  limited  nature and  duration of claims,  generally  one to two
years,  the Company  maintains a portfolio  with a yield that  approximates  the
money market interest rate scenario.

     Additionally,  the Company's exposure to rapid changes in interest rates is
partially  mitigated because most of the Company's  interest-earning  assets and
interest-bearing liabilities being written are at fixed rates.

     New Accounting Standards
     ------------------------

     In  August  2001,  the FASB  issued  SFAS No.  143,  Accounting  for  Asset
Retirement  Obligations ("SFAS 143"). SFAS 143 provides accounting and reporting
standards  related to  obligations  associated  with the  retirement of tangible
long-lived assets.  SFAS 143 is effective on January 1, 2003,  however,  earlier
application  is  encouraged.  The Company has not evaluated the effect,  if any,
that the adoption of SFAS 143 will have on the Company's  consolidated financial
statements.

     In April 2002, the FASB issued SFAS 145, "Rescission of FASB Statements No.
4, 44,  and 64,  Amendment  of FASB 13,  and  Technical  Corrections".  SFAS 145
rescinds FASB No. 4, Reporting Gains and Losses form Extinguishment of Debt, and
an amendment of that Statement, FASB 64, Extinguishments of Debt Made to Satisfy
Sinking-Fund  Requirements.  SFAS 145 also  rescinds  SFAS  44,  Accounting  for
Intangible  Assets  of Motor  Carriers",  and FASB 13,  Accounting  for  Leases,
eliminating an inconsistency  between certain  sale-leaseback  transaction.  The
provisions of SFAS 145 are effective  for fiscal years  beginning  after May 15,
2002.

<PAGE>

     In June 2002, the FASB issued SFAS 146,  "Accounting  for Costs  Associated
with Exit or Disposal  Activities".  SFAS 146 addresses financial accounting and
reporting for costs  associated  with exit or disposal  activities and nullifies
EITF Issue No. 94-3,  "Liability  Recognition for Certain  Employee  Termination
Benefits and Other Costs to Exit an Activity  (including  Certain Costs Incurred
in a  Restructuring)".  SFAS No.  146  requires  costs  associated  with exit or
disposal activities to be recognized when the costs are incurred, rather than at
a date of commitment to an exit or disposal.

     Item 8.    Consolidated financial statements and Supplementary Data
     ------     --------------------------------------------------------

     The consolidated  financial statements of the Company required by this Item
are listed in Item 15(a)(1) and (2) and are  submitted as a separate  section of
this report.

     The following  information  presents unaudited  quarterly operating results
for the Company for 2002 and 2001.  The data has been prepared by the Company on
a basis consistent with the Consolidated Financial Statements included elsewhere
in this Form 10-K, and include all  adjustments,  consisting of normal recurring
accruals, that the Company considers necessary for a fair presentation thereof.

<TABLE>
<CAPTION>



                                                                                 Three Months Ended
                                                                                 ------------------
(In thousands, except per share data)            12/31/02    9/30/02   6/30/02   3/31/02    12/31/01     9/30/01  6/30/01   3/31/01
------------------------------------            --------    --------  --------  --------    --------    --------  --------  --------
<S>                                            <C>       <C>          <C>        <C>        <C>        <C>       <C>        <C>

Revenue ...........................             $  3,136 $    4,795    $ 4,498    $ 3,812    $ 4,663    $ 4,217   $ 3,786   $ 3,856
                                                --------    -------    -------    -------    -------    -------   -------   -------
Benefit related expenses ..........                  597      4,728      4,590      2,737      3,176      2,889     1,891     1,979
Operating and other expenses ......                1,262      1,464      1,866      1,478      1,695      1,660     1,863     1,545
                                                --------    -------    -------    -------    -------    -------   -------   -------
Total benefits and expenses .......                1,859      6,192      6,456      4,215      4,871      4,549     3,754     3,524
                                                --------    -------    -------    -------    -------    -------   -------   -------
(Loss) income before income
  tax (benefit) expense and
  extraordinary gain ..............                1,277     (1,397)    (1,958)      (403)      (208)      (332)       32       332
Income tax (benefit) expense ......                 (267)      (297)      (745)      (137)        60       (131)        5       110
                                                --------    -------    -------    -------    -------    -------   -------   -------

(Loss) income before extraordinary
  gain ............................                1,010     (1,100)    (1,213)      (266)      (148)      (201)       27       222
Extraordinary gain (net of taxes) .                  --         --         --         --         158        --         --        --
                                                --------    -------    -------    -------    -------    -------   -------   -------
Net (loss) income .................             $  1,010 $   (1,100)   $(1,213)   $  (266)   $    10    $  (201)  $    27   $   222
                                                ========    =======    =======    =======    =======    =======   =======   =======
Weighted average shares
  Outstanding - basic .............                5,597      5,597      5,597      5,597      5,589      5,597     5,597     5,564
                                                 -------    -------    -------    -------    -------    -------   -------   -------
Net (loss) income per share - basic             $    .18 $    (0.20)   $ (0.22)   $ (0.05)   $ (0.01)   $  0.04   $  0.01   $ (0.04)
                                                 =======    =======    =======    =======    =======    =======   =======   =======
Weighted average shares
  Outstanding - diluted ...........                5,597      5,597      5,597      5,620      5,612      5,667     5,667     5,564
                                                 -------    -------    -------    -------    -------    -------   -------   -------
Net (loss) income per share -
  Diluted .........................             $    .18 $    (0.20)   $ (0.22)   $ (0.05)   $  0.01    $ (0.04)  $  0.01   $  0.04
                                                 =======    =======    =======    =======    =======    =======   =======   =======

</TABLE>

     Item 9.    Changes in and  Disagreements  with  Accountants on
     ------        Accounting and Financial Disclosure.
                   -----------------------------------

     None.

     Item 10.   Directors and Executive Officers of the Registrant
     -------    --------------------------------------------------

     The current directors and executive officers of the Company are as follows:

<PAGE>


          Name                      Age       Position
          ----                      ---       --------

          Francis M. Williams       61        Chairman of the Board of Directors
          Joseph M. Williams        46        President and Treasurer
          Andrew J. Cohen           49        Director
          R. Donald Finn            59        Director

     All  Directors of the Company hold office until the next annual  meeting of
stockholders and the election and qualification of their successors. Officers of
the Company are elected  annually by the Board of  Directors  and hold office at
the discretion of the Board.

     Set forth  below is  information  regarding  the  directors  and  executive
officers of the Company:

     Francis M. Williams has been Chairman of the Board of the Company since its
inception and, until June 1992, was President of the Company.  In addition,  Mr.
Williams  has  been  Chairman  of the  Board  and  Director  of CCS and SSI from
inception  and  President and Chairman of the Board of KC since its inception in
1979.  Prior to November  1988,  Mr.  Williams was the Chairman of the Board and
Chief Executive  Officer of Kimmins Corp. and its predecessors and sole owner of
K Management  Corp.  From June 1981 until  January  1988,  Mr.  Williams was the
Chairman of the Board of  Directors of College  Venture  Equity  Corp.,  a small
business  investment  company;  and since June 1981, he has been Chairman of the
Board, Director, and sole stockholder of Kimmins Coffee Service, Inc., an office
coffee service  company.  Mr.  Williams has also been a director of the National
Association of Demolition Contractors and a member of the executive committee of
the Tampa Bay International Trade Council.

     Joseph M. Williams has served as the Treasurer and President of the Company
since June 1992.  He also served as Vice  President and Secretary of the Company
from its inception on November 18, 1991 through June 1992. Mr.  Williams  served
as a member of the Board of  Directors  of the Company  from  November  18, 1991
through February 24, 1997. In addition,  Mr. Williams has been the Secretary and
Treasurer  of  Kimmins  Corp.  since  October  1988 and a member of the Board of
Directors of CCS since 1988.  He held the position of President of CCS from 1991
through  August of 1996.  On November  11,  2002,  Mr.  Williams  was elected as
President of CCS.  From 1989 through 1990 he held the position of Secretary  and
Treasurer  of CCS and from 1991  through  1994 served as  Treasurer  of CCS. Mr.
Williams  has  been  employed  by the  Company  and  Kimmins  Corp.  in  various
capacities  since 1994.  From  January  1982 to December  1983,  he was managing
partner of Williams and Grana, a firm engaged in public accounting. From January
1978 to December 1981, Mr. Williams was employed as a senior tax accountant with
Price  Waterhouse  &  Company.  Joseph M.  Williams  is the nephew of Francis M.
Williams.

     Andrew J. Cohen was elected as a Director to the Company's  Board effective
February 24, 1997.  Currently  Co-President  and Chief Executive  Officer of ABC
Capital Corp., an investment  management  firm based in Tampa,  Florida and also
acts as  Co-Chairman  on their Board of  Directors.  In  addition,  Mr. Cohen is
President of Albany Associates,  Inc., a Tampa based management consulting firm.
From June of 1972  through  1997,  Mr. Cohen was  co-President  of ABC Fabric of
Tampa,  Inc. which was the fourth  largest  private retail fabric company in the
United States. Mr. Cohen brings both national marketing and corporate management
experiences to the Company.

<PAGE>


     R. Donald Finn was elected as a Director to the Company's  Board  effective
September  9,  1999.  For more than the last  five  years,  Mr.  Finn has been a
partner in the law firm of Gibson,  McAskill & Crosby,  located in Buffalo,  New
York, where Mr. Finn has practiced law for more than the last 25 years.

Beneficial Ownership Reporting Compliance
-----------------------------------------

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10 percent of a registered
class of the  Company's  equity  securities,  to file reports of  ownership  and
changes in  ownership  with the  Securities  and  Exchange  Commission  ("SEC").
Officers,  directors,  and greater than 10 percent  stockholders are required by
SEC  regulation  to furnish the Company  with copies of all Section  16(a) forms
they  file.  Based  solely on the  Company's  review of the copies of such forms
received by it, or written  representations  from certain reporting persons that
no Form 5 was required for those persons,  the Company believes that, during the
year ended December 31, 2002 all filing requirements applicable to its officers,
directors, and greater than 10 percent beneficial owners were complied with.

     Item 11.   Executive Compensation and Other Information
     -------    --------------------------------------------

Summary Compensation Table
--------------------------

     The  following  table  provides  certain  summary  information   concerning
compensation  paid or  accrued by the  Company  and its  subsidiaries  to and on
behalf of the  Company's  President  and CCS's  President  for each of the three
years in the period ended December 31, 2002:


<TABLE>
<CAPTION>


                                                                                                                            All
                                                                                                           Other           Other
                                                                                                           Annual       Compensation
Name and Principal Position                                 Year         Salary           Bonus          Compensation        (1)
---------------------------                                 ----         ------           -----          ------------    -----------
<S>                                                        <C>          <C>              <C>              <C>              <C>

Joseph M. Williams, ...............................         2002         $125,000         $ 50,000         $ 10,800         $ 12,065
President and Treasurer - CTI .....................         2001         $125,000         $ 50,000         $ 10,800         $ 10,295
                                                            2000         $ 95,000         $ 64,000         $  7,650         $  8,641

</TABLE>

(1)  Represents  the Company's  contribution  to the  employee's  account of the
     Company's  401(k)  Plan and  premiums  paid by the  Company  for term  life
     insurance and long-term  disability.  These plans, subject to the terms and
     conditions of each plan, are available to all employees.

Aggregate Option Exercises in 2002 and December 31, 2002 Option Values
----------------------------------------------------------------------

     Mr.  Joseph M.  Williams  exercised  56,000 and 44,000  options in 2001 and
2000, respectively. During 2002, no options were exercised or granted.

Compensation Committee Interlocks and Insider Participation
-----------------------------------------------------------

     There is no  compensation  committee of the Company's Board of Directors or
other committee of the Board  performing  equivalent  functions.  The person who
performs the equivalent function is Francis M. Williams,  Chairman of the Board.
Francis Williams serves as an executive officer and director of Kimmins Corp. of
which Joseph Williams is also an executive officer.

<PAGE>

     Compensation of Directors
     -------------------------

     During the year ended December 31, 2002 and 2001, respectively, the Company
paid Francis M. Williams an annual fee of $75,000 as Chairman of the Board.  All
non-officer Directors received an annual fee of $5,000. Directors are reimbursed
for all  out-of-pocket  expenses  incurred in attending  Board of Directors  and
committee meetings.

Board Compensation Committee Report on Executive Compensation
-------------------------------------------------------------

     There is no formal  compensation  committee  of the Board of  Directors  or
other committee of the Board performing  equivalent  functions.  As noted above,
compensation is determined by Francis M. Williams,  Chairman of the Board of the
Company  under  the  direction  of the  Board of  Directors.  There is no formal
compensation policy for the Chief Executive Officer of the Company. Compensation
of the Chief Executive  Officer,  which primarily  consists of salary,  is based
generally on  performance  and the  Company's  resources.  Compensation  for Mr.
Joseph  Williams has been fixed annually each year by the Chairman of the Board.
Mr. Joseph Williams' compensation is not subject to any employment contract.

     Item 12.   Security  Ownership of Certain  Beneficial Owners
     -------      and Management
                  --------------

Common Stock Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------

     The following table sets forth the number of shares of the Company's Common
Stock  beneficially  owned as of December  31, 2002 by (i) persons  known by the
Company to own more than 5 percent of the  Company's  outstanding  Common Stock,
(ii) each  director  and officer of the  Company,  and (iii) all  directors  and
executive officers of the Company as a group:


                                      Amount and Nature of     Percent of Issued
      Name and Address                Beneficial Ownership of   and Outstanding
      of Beneficial Owner (1) (2)        Common Stock             Common Stock
      ---------------------------     ----------------------   -----------------

      Francis M. Williams                    3,897,145 (3)                 69.6%
      Joseph M. Williams                       360,493 (4)                  6.4%
      R. Donald Finn                             7,131 (5)                   .1%
      Andrew J. Cohen                           47,590 (6)                   .9%
      Kimmins Corp.                          1,723,290                     30.8%
      All directors and executive
        officers as a group (four persons)   4,886,215                     87.3%

(1)  The address of all officers and  Directors of the Company  listed above are
     in care of the  Company  at 4311 West  Waters  Avenue,  Suite  401,  Tampa,
     Florida 33614.

(2)  The Company  believes  that the persons named in the table have sole voting
     and   investment   power  with  respect  to  all  shares  of  common  stock
     beneficially owned by them, unless otherwise noted.


<PAGE>


(3)  Includes  2,677,322 shares owned by Mr. Francis Williams;  1,149,434 shares
     allocated to Mr.  Williams  based on his 66.7%  ownership in Kimmins Corp.,
     29,345  shares  owned by Mr.  Williams'  wife;  22,748  shares  held by Mr.
     Williams as trustee for his wife and children and 18,296 shares held by Mr.
     Williams as custodian  under the New York  Uniform  Gifts to Minors Act for
     his Children.  Mr. Williams owns 66.7% of the  outstanding  common stock of
     Kimmins Corp. and is its Chairman and Chief Executive Officer.

(4)  Includes 133,500 shares owned by Mr. Joseph M. Williams;  1,010 shares held
     by Mr.  Williams  as trustee  for his  children;  219 shares held by the KC
     401(K) Plan and ESOP of which Mr.  Williams is fully vested.  Also includes
     205,764  shares held by KC's 401(K)  Plan,  Profit  Participation  Plan and
     ESOP,  options to acquire 20,000 shares of the Company's  Common Stock held
     by the ESOP, of which Mr.  Williams is a trustee;  Mr.  Williams  disclaims
     beneficial ownership of these shares.

(5)  Includes  2,131  shares  owned by Mr. R. Donald Finn and options to acquire
     5,000 shares of the Company's common stock.

(6)  Includes  72,540 shares owned by C&C  Properties a partnership in which Mr.
     Cohen has a 50% ownership, 6,320 shares held in trust for Mr. Cohen's minor
     children and options to acquire 5,000 shares of the Company's common stock.

     Item 13.   Certain Relationships and Related Transactions
     -------    ----------------------------------------------

     Surplus Debentures/Term Note
     ----------------------------

     In 1988,  CCS issued a surplus  debenture to KC in exchange for  $3,000,000
which bears  interest at 10 percent per annum.  In 1992, the debenture due to KC
from CCS was  assigned to CTI.  Interest and  principal  payments are subject to
approval by the Florida Department of Financial Services.  On April 1, 1997, CTI
forgave  $375,000 of its $3,000,000  surplus  debenture due to CCS. As a result,
CCS increased  paid-in-capital by $375,000. As of December 31, 1999, no payments
could be made under the terms of the  debenture.  On June 30, 1999,  CTI forgave
$576,266  of its  $2,625,000  surplus  debenture  due to CCS.  As a result,  CCS
increased  paid-in-capital to $1,000,000 from $423,734. As of December 31, 2002,
no payments could be made under the terms of the debenture. In 2003, CTI forgave
the balance of its surplus note to CCS in the amount of $2,048,734.  As a result
paid-in and contributed surplus of CCS increased to $3,048,734.

     Effective  November  10,  1988,  the  Company  entered  into  a  $1,000,000
convertible term note agreement with TransCor Waste Services, Inc., a subsidiary
of KC. The note, originally due November 10, 2001, has been extended to November
10,  2004.  The annual  rate of interest is equal to one half of one percent per
annum in excess of the stated interest rate  established by the Bank of America.
The average  interest rate for 2002 was 8.6%. On December 26, 2001,  the Company
made a principal  note payment of $395,945  reducing  the note to $604,055.  The
lender may convert the  principal  amount of the note or a portion  thereof into
common stock at $3.00 per share subsequent to a six-month  anniversary and prior
to the close of business on the maturity date.


<PAGE>


     CCS writes surety bonds for KC and its affiliates. Revenues attributable to
transactions  with KC and its affiliates were $264, $88 and $7,816 for the years
ended December 31, 2002, 2001 and 2000, respectively. Qualex performs consulting
services  for  KC and  affiliates.  Revenue  attributable  to  transaction  with
affiliates  were  $16,586,  $121,089 and  $171,292 for years ended  December 31,
2002, 2001 and 2000, respectively.

     Item 14.   Controls and Procedures
     -------    -----------------------

     Within the 90-day  period to the filing of this  report,  evaluations  were
carried out under the  supervision and with the  participation  of the Company's
management,  including  the  President  and  Chief  Financial  Officer,  of  the
effectiveness  of the  design  and  operation  of the  disclosure  controls  and
procedures  (as defined in Rule 13a-14(c)  under the Securities  Exchange Act of
1934). Based upon those  evaluations,  the President and Chief Financial Officer
concluded  that,  (subject  to the  limitations  noted  below),  the  design and
operation of these  disclosure  controls,  and  procedures  were  effective.  No
significant changes have been made in internal controls or in other factors that
could  significantly  affect  these  controls  subsequent  to  the  date  of the
evaluations.

     Limitations on the Effectiveness of Controls
     --------------------------------------------

     Management,  including the President and Chief Financial Officer,  does not
expect that  disclosure  controls  and  procedures  and internal  controls  will
prevent all error and all fraud. A control system,  no matter how well conceived
and operated,  can provide only  reasonable,  not absolute,  assurance  that the
objective,  of the  control  system  are met.  Further,  the design of a control
system  must  reflect  the fact that  there are  resource  constraints,  and the
benefits of controls must be considered relative to their costs.  Because of the
inherent  limitations  in all control  systems,  no  evaluation  of controls can
provide  absolute  assurance that all control  issues and instance of fraud,  if
any, within the Company have been detected.  These inherent  limitations include
the  realities  that  judgments  in  decision-making  can be  faulty,  and  that
breakdowns can occur because of simple error or mistake. Additionally,  controls
can be circumvented by the individual acts of some persons,  by collusion of two
or more people, or by management override of the control.

     The design of any  system of  controls  also is based in part upon  certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving  its stated goals under all  potential
future  conditions;  over time, control may become inadequate because of changes
in conditions or the degree of  compliance  with the policies or procedures  may
deteriorate.  Because of the inherent  limitations in a  cost-effective  control
system, misstatements due to error or fraud may occur and not be detected.

     Item  15.  Exhibits,  Consolidated  financial  statements,  Schedules,  and
     --------     Reports on Form 8-K
                  -------------------

(a) The following documents are filed as part of this Annual Report on Form 10-K

     1.   Consolidated Financial Statements

          -    Independent Auditors' Report
          -    Consolidated Balance Sheets at December 31, 2002 and 2001
          -    Consolidated Statements of Operations for each of the three years
               in the period ended December 31, 2002.

<PAGE>


          -    Consolidated  Statements of Stockholders'  Equity for each of the
               three years in the period ended December 31, 2002.
          -    Consolidated Statements of Cash Flows for each of the three years
               in the period ended December 31, 2002.
          -    Notes to Consolidated Financial Statements

     2.   Financial Statement Schedule

          Schedule II - Condensed Financial Information of Registrant

     All  other  schedules  for  which  provision  is  made  in  the  applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related  instructions or are inapplicable  and,  therefore,  have been
omitted.

     3.   The following documents are filed as exhibits to this Annual Report on
          Form 10-K:

          3(a)  - Articles of Incorporation* 3(b) - Bylaws*
          10(a) - Lease agreement with Cumberland Properties, Inc.*
          10(c) - 1991 Stock Option Plan*
          11    - Statement Re: Computation of Earnings Per Share
          21    - Subsidiary list
          99.1  - Certification  under Section 906 of the  Sarbanes-Oxley  Act
                  of 2002
          99.2  - Certification  under Section 906 of the  Sarbanes-Oxley  Act
                  of 2002

          *    Note - Incorporated by reference to the same exhibit number filed
               with the Registrant's Registration Statement on Form 10 (File No.
               0-19727.)

(b)  Reports on Form 8-K - On September 12, 2002 the Company filed a Form 8-K to
     announce that it will be delisted from the NASDAQ SmallCap Market.

     On October 3, 2002 the Company filed a Form 8-K to announce that it will be
     listed on the Nasdaq OTC Bulletin Board.

(c)  Exhibits  - The  response  to this  portion  of Item 15 is  submitted  as a
     separate section of this report.

(d)  Financial  Statement Schedules - The response to this portion of Item 15 is
     submitted as a separate section of this report.


<PAGE>



                                   SIGNATURES
                                   ----------

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunder duly authorized.

                                    CUMBERLAND TECHNOLOGIES, INC.
                                    -----------------------------


Date:    May 6, 2003                By:      /s/ Joseph M. Williams
                                    --------------------------------------------
                                    Joseph M. Williams, President

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

Date:    May 6, 2003                By:      /s/ Joseph M. Williams
                                    --------------------------------------------
                                    Joseph M. Williams, President


Date:    May 6, 2003                By:      /s/ Francis M. Williams
                                    --------------------------------------------
                                    Francis M. Williams, Chairman of the Board


Date:    May 6, 2003                By:      /s/ R. Donald Finn
                                    --------------------------------------------
                                    R. Donald Finn, Director


Date:    May 6, 2003                By:      /s/ Andrew J. Cohen
                                    --------------------------------------------
                                    Andrew J. Cohen, Director


Date:    May 6, 2003                By:      /s/ Carol S. Black
                                    --------------------------------------------
                                    Carol S. Black, Secretary
                                    (Principal Financial and Accounting Officer)



<PAGE>


                           Annual Report on Form 10-K

                             Item 15(a), (c) and (d)

                    List of Consolidated Financial Statements

             Consolidated Financial Statement Schedules and Exhibits

                          Year Ended December 31, 2002


                          Cumberland Technologies, Inc.

                                 Tampa, Florida



<PAGE>


                          CUMBERLAND TECHNOLOGIES, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS,
                   FINANCIAL STATEMENT SCHEDULES AND EXHIBITS
                   ------------------------------------------

     The following consolidated financial statements of Cumberland Technologies,
Inc. are included herein:

                                                                            Page
                                                                            ----


Independent Auditors' Report..................................................34

Consolidated Balance Sheets at December 31, 2002 and 2001..................35-36

Consolidated Statements of Operations for each of the three years
  in the period ended December 31, 2002.......................................37

Consolidated Statements of Stockholders' Equity for each of the three
  years in the period ended December 31, 2002.................................38

Consolidated Statements of Cash Flows for each of the three years
  in the period ended December 31, 2002.......................................39

Notes to Consolidated Financial Statements....................................40

The following financial statement schedule is filed as part of this report:

Schedule II - Condensed Financial Information of Registrant...................63

All other  schedules for which  provision is made in the  applicable  accounting
regulation of the Securities and Exchange  Commission are not required under the
related instructions or are inapplicable and, therefore, have been omitted.

<PAGE>



                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------


To the Board of Directors of
Cumberland Technologies, Inc.

We have  audited the  accompanying  consolidated  balance  sheets of  Cumberland
Technologies,  Inc. and subsidiaries (the "Company") as of December 31, 2002 and
2001,  and the related  consolidated  statements  of  operations,  stockholders'
equity,  and cash flows for each of the three years in the period ended December
31, 2002. Our audits also included the financial  statement  schedule  listed in
the Index to Consolidated  Financial  Statements,  Financial Statement Schedules
and Exhibits.  These consolidated  financial  statements and financial statement
schedule are the responsibility of the Company's management.  Our responsibility
is to  express  an  opinion  on  these  consolidated  financial  statements  and
financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain reasonable  assurance about whether the consolidated
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  consolidated  financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall  consolidated  financial  statement  presentation.  We
believe that our audits provide 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
December 31, 2002 and 2001 and the results of its  operations and its cash flows
for each of the three years in the period ended December 31, 2002, in conformity
with accounting  principles  generally accepted in the United States of America.
Also, in our opinion, the related financial statement schedule,  when considered
in relation to the basic  consolidated  financial  statements  taken as a whole,
presents fairly in all material respects the information set forth therein.

As discussed in Note 2 to the  consolidated  financial  statements,  the Company
changed in 2002 its method of accounting for goodwill to conform to Statement of
Financial Standards No. 142, Goodwill and Other Intangible Assets and changed in
2001 its method for  accounting  for  derivatives  to  conform to  Statement  of
Financial  Accounting  Standards No. 133, Accounting for Derivative  Instruments
and Hedging Activities.

/s/  DELOITTE & TOUCHE LLP
Tampa, Florida

March 31, 2003


<PAGE>



                          CUMBERLAND TECHNOLOGIES, INC.

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS
                                     ------

                                                                December 31,
                                                       -------------------------
                                                              2002          2001
                                                       -------------------------
Investments:
-----------
   Debt securities available-for-sale at fair value    $ 7,758,657   $ 9,339,353
   Debt securities held-to-maturity at amortized
     cost (fair value, 2002 - $367,681; and
     2001 - $374,436) ..............................       359,898       359,475
   Mortgage loan on real estate, at unpaid
     principal .....................................       716,413       681,790
   Short-term investments ..........................       433,993       433,993
                                                       -----------   -----------
     Total investments .............................     9,268,961    10,814,611

Cash and cash equivalents ..........................       593,259     2,654,131
Accrued investment income ..........................       123,894       154,527
Reinsurance recoverable ............................    12,089,177     6,634,497

Accounts receivable:
-------------------
   Nonaffiliate less allowance for doubtful
     accounts of $116,323 and $40,289,
     respectively ..................................     2,518,187     4,615,327
   Affiliate .......................................          --          72,201
Income tax recoverable .............................     1,073,686          --
Deferred income tax asset ..........................       401,738       499,145
Deferred policy acquisition costs ..................     1,665,694     1,903,547
Intangibles, net ...................................       288,473       380,951
Goodwill ...........................................       152,780       152,780
Other investment ...................................       700,124       640,872
Other assets .......................................       302,515       371,893
                                                       -----------   -----------
     Total assets ..................................   $29,178,488   $28,894,482
                                                       ===========   ===========



                 See notes to consolidated financial statements.


<PAGE>

                          CUMBERLAND TECHNOLOGIES, INC.

                           CONSOLIDATED BALANCE SHEETS

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

                                                                December 31,
                                                     ---------------------------
                                                            2002            2001
                                                     ---------------------------
Policy liabilities and accruals:
-------------------------------
   Loss and loss adjustment expense reserves .....   $  8,895,470   $ 5,284,804
   Derivative instruments ........................      4,346,285     3,597,782
   Unearned premiums .............................      4,587,175     5,582,640

Ceded reinsurance payable ........................         26,883     1,755,105
Accounts payable and other liabilities ...........      3,775,924     3,388,269
Income tax payable ...............................           --         113,284
Debt:
----
   Nonaffiliate ..................................        455,417       651,940
   Affiliate .....................................        604,055       604,055
                                                     ------------   ------------
   Total liabilities .............................     22,691,209    20,977,879
                                                     ------------   ------------

Stockholders' equity:
--------------------
   Common stock, $.001 par value; 10,000,000
       shares authorized; 5,915,356
       shares issued .............................          5,916         5,916
   Capital in excess of par value ................      7,270,316     7,270,316
   Accumulated other comprehensive income ........        210,574        70,729
   (Accumulated deficit) retained earnings .......       (735,808)      833,361
                                                     ------------   ------------
                                                        6,750,998     8,180,322
   Less treasury stock, at cost, 318,112 shares at
       December 31, 2002 and 2001 ................       (263,719)     (263,719)
                                                     ------------   ------------
   Total stockholders' equity ....................      6,487,279     7,916,603
                                                     ------------   ------------
       Total liabilities and stockholders' equity    $ 29,178,488  $ 28,894,482
                                                     ============  =============



                 See notes to consolidated financial statements.


<PAGE>


                          CUMBERLAND TECHNOLOGIES, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      -------------------------------------


<TABLE>
<CAPTION>

                                                                                             Years ended December 31,
                                                                           ---------------------------------------------------------
                                                                                   2002                  2001                  2000
                                                                           ---------------------------------------------------------
<S>                                                                       <C>                   <C>                    <C>

Revenue:
-------
Direct premiums earned ...........................................         $ 13,980,567          $ 14,465,244          $ 12,756,102
Reinsurance premiums assumed .....................................            3,497,789             3,788,443             2,480,712
Less reinsurance ceded ...........................................           (4,046,606)           (4,612,371)           (3,108,861)
                                                                           ------------          ------------          ------------
Net premium income ...............................................           13,431,750            13,641,316            12,127,953

Net investment income ............................................              486,138               604,463               576,406
Net realized investment gains ....................................               66,239               305,461                38,381
Commission income ................................................              507,112               413,422               386,362
Income from investment in affiliate ..............................               59,252                61,457                19,996
Other income:
------------
    Affiliate ....................................................               16,586               121,089               171,292
    Nonaffiliate .................................................            1,673,501             1,374,916             1,124,490
                                                                           ------------          ------------          ------------
Total revenue ....................................................           16,240,578            16,522,124            14,444,880
                                                                           ------------          ------------          ------------

Benefits and Expenses:
---------------------
Losses and loss adjustment expenses ..............................            8,552,315             4,511,910             3,360,358
Derivative expense ...............................................              505,816             1,060,799                  --
Amortization of deferred policy acquisition
    costs ........................................................            3,593,701             4,362,721             3,767,107
Operating expenses ...............................................            6,008,072             6,159,044             5,308,516
Impairment of long-lived assets ..................................                 --                 437,418                  --
Interest expense:
----------------
    Affiliate ....................................................               59,423                69,198               100,000
    Nonaffiliate .................................................                2,451                97,208               102,760
                                                                           ------------          ------------          ------------
Total benefits and expenses ......................................           18,721,778            16,698,298            12,638,741
                                                                           ------------          ------------          ------------

(Loss) income before income tax (benefit)
    expense and  extraordinary gain ..............................           (2,481,200)             (176,174)            1,806,139
Income tax (benefit) expense .....................................             (912,031)              (75,932)              764,390
                                                                           ------------          ------------          ------------
(Loss) income before extraordinary gain ..........................           (1,569,169)             (100,242)            1,041,749
Extraordinary gain (net of income tax) ...........................                 --                 158,610                  --
                                                                           ------------          ------------          ------------
Net (loss) income ................................................         $ (1,569,169)         $     58,368          $  1,041,749
                                                                           ============          ============          ============

Income per basic share:
----------------------
    Income (loss) before extraordinary gain ......................         $       (.28)         $      (0.02)         $       0.19
    Extraordinary gain ...........................................                 --                    0.03                  --
                                                                           ------------          ------------          ------------
    Net (loss) income ............................................         $       (.28)         $       0.01          $       0.19
                                                                           ============          ============          ============
Weighted average shares outstanding - basic ......................            5,597,244             5,589,167             5,528,849
Income per diluted share:
------------------------
    Income (loss) before extraordinary gain ......................         $       (.28)         $      (0.02)         $       0.19
    Extraordinary gain ...........................................                 --                    0.03                  --
                                                                           ------------          ------------          ------------
    Net (loss) income ............................................         $       (.28)         $       0.01          $       0.19
                                                                           ============          ============          ============
Weighted average shares outstanding - diluted ....................            5,597,244             5,611,667             5,642,349
                                                                           ============          ============          ============
</TABLE>




                 See notes to consolidated financial statements.




<PAGE>


                          CUMBERLAND TECHNOLOGIES, INC.

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                 -----------------------------------------------
                  YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002


<TABLE>
<CAPTION>

                                                                             Accumulated   (Accumulated
                                      Common Shares           Capital in        Other       Deficit)                      Total
                                      -------------           Excess of     Comprehensive   Retained     Treasury     Stockholders'
                                  Stock           Amount      Par Value     (Loss) Income   Earnings      Stock          Equity
                                  -----           ------      ---------     -------------   --------     ---------    --------------
<S>                              <C>          <C>            <C>           <C>            <C>           <C>             <C>

Balance at January 1, 2000 ..     5,815,356    $     5,816    $ 7,257,916   $  (40,897)   $  (266,756)   $  (263,719)   $ 6,692,360

   Exercise of 56,000 shares
       under 1991 stock
       option plan...........        56,000             56          6,944                                                     7,000

   Net unrealized
       appreciation
       of available-for-sale
       securities, net of
       income tax ...                                                         145,382                                       145,382

   Net income ..............                                                                1,041,749                     1,041,749
                                                                                                                        -----------

   Comprehensive income.....                                                                                              1,187,131
                                -----------    -----------    -----------   -----------    -----------    -----------    -----------
Balance at December 31, 2000      5,871,356          5,872      7,264,860     104,485         774,993       (263,719)     7,886,491

   Exercise of 44,000 shares
       under 1991 stock
       option plan..........         44,000             44          5,456                                                     5,500

   Net unrealized
       depreciation
       of available- for-sale
       securities, net of                                                    (33,756)                                       (33,756)
       income tax..........

   Net income .............                                                                    58,368                        58,368
                                                                                                                         -----------

   Comprehensive income ...                                                                                                  24,612
                                -----------    -----------    -----------   -----------    -----------    -----------    -----------
Balance at December 31, 2001      5,915,356          5,916      7,270,316        70,729        833,361       (263,719)    7,916,603

   Net unrealized
      appreciation
      of available-for-sale
      securities, net of
      income tax...........                                                     139,845                                     139,845

   Net loss ...............                                                                (1,569,169)                   (1,569,169)
                                                                                                                         -----------

   Comprehensive loss .....                                                                                              (1,429,324)
                                -----------    -----------    -----------   -----------    -----------    -----------    -----------
Balance at December 31, 2002      5,915,356    $     5,916    $ 7,270,316   $   210,574    $  (735,808)   $  (263,719)   $6,487,279
                                ===========    ===========    ===========   ===========    ===========    ===========    ===========

</TABLE>



                 See notes to consolidated financial statements.


<PAGE>


                          CUMBERLAND TECHNOLOGIES, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------

<TABLE>
<CAPTION>


                                                                                                Years ended December 31,
                                                                              ------------------------------------------------------
                                                                                     2002                 2001                2000
                                                                              ------------------------------------------------------
<S>                                                                           <C>                  <C>                  <C>

Operating activities:
--------------------
Net (loss) income ...................................................         $(1,569,169)         $    58,368          $ 1,041,749
Adjustments to reconcile net income to cash
   (used in) provided by operating activities:
       Extraordinary gain on restructuring
           of note payable ..........................................                --               (158,610)                --
       Amortization (accretion) of investment
           premiums discounts .......................................              28,532              (15,094)             (21,358)
       Policy acquisition costs amortized ...........................           3,593,701            4,362,721            3,767,107
       Policy acquisition costs deferred ............................          (3,355,848)          (4,311,250)          (4,120,698)
       Amortization .................................................              92,478              144,267              151,319
       Impairment of long-lived assets ..............................                --                437,318                 --
       Net realized gains on sales of investments ...................             (66,239)            (305,461)             (38,381)
       Recoveries for bad debts .....................................                --                   --                (13,250)
       (Increase) decrease in:
           Accrued investment income ................................              30,633               30,484             (118,923)
           Reinsurance recoverable ..................................          (5,454,680)            (663,862)          (1,240,262)
           Accounts receivable ......................................           2,097,140             (794,121)            (911,598)
           Income tax recoverable ...................................          (1,073,686)             167,588             (167,588)
           Deferred income tax asset ................................              33,400             (421,123)              66,710
           Other investment .........................................             (59,252)             (58,340)             (23,114)
           Other assets .............................................              69,378              (60,811)               3,777
       Increase (decrease) in:
           Loss and loss adjustment expense
           reserve and unearned premiums ............................           2,615,201             (533,888)             769,246
           Derivative liability .....................................             748,503            2,977,772                 --
           Ceded reinsurance payable ................................          (1,728,222)           1,033,592              353,607
           Accounts payable and other liabilities ...................             387,653              750,521              728,169
           Income tax payable .......................................            (113,284)             113,284              (35,132)
                                                                              -----------          -----------          -----------
Net cash (used in) provided by operating activities .................          (3,723,761)           2,753,355              191,380
                                                                              -----------          -----------          -----------
Investing activities:
--------------------
Securities available-for-sale:
       Purchases - debt securities ..................................          (3,172,826)          (6,405,825)          (6,670,793)
       Proceed from sales - debt securities .........................           4,994,660            4,907,176            3,098,993
       Proceed from sales - equities ................................                --                    939              354,956
Proceeds from investment settlement .................................                --                   --                228,875
Securities held-to-maturity:
       Proceeds from maturities .....................................                --                865,000            1,500,000
(Purchases of) net payments on - mortgage loans .....................             (34,623)              60,278              198,236
(Net purchases of short-term investments ............................                --                   --                 (3,754)
                                                                              -----------          -----------          -----------
Net cash provided by (used in) investing activities .................           1,787,211             (572,432)          (1,293,487)
                                                                              -----------          -----------          -----------
Financing activities:
--------------------
Payments on debt, affiliate and
   Non-affiliate ....................................................            (196,523)            (590,866)            (178,746)
Stock options exercised .............................................                --                  5,500                7,000
Net change in advances to (from) affiliates .........................              72,201              364,796              (32,516)
                                                                              -----------          -----------          -----------
Net cash used in financing activities ...............................            (124,322)            (220,570)            (204,262)
                                                                              -----------          -----------          -----------
(Decrease) Increase in cash and cash equivalents ....................          (2,060,872)           1,960,353           (1,306,369)
Cash and cash equivalents, beginning of year ........................           2,654,131              693,778            2,000,147
                                                                              -----------          -----------          -----------
Cash and cash equivalents, end of year ..............................         $   593,259          $ 2,654,131          $   693,778
                                                                              ===========          ===========          ===========

Supplemental cash flows disclosure:
----------------------------------
Cash paid for interest ..............................................         $     2,451          $    33,834          $   102,760
                                                                              -----------          -----------          -----------
Cash paid for income taxes ..........................................         $   214,300          $   164,909          $ 1,025,400
                                                                              ===========          ===========          ===========
</TABLE>


                 See notes to consolidated financial statements.


<PAGE>

                          CUMBERLAND TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                  --------------------------------------------


1.   Ownership and Organization
     --------------------------

     Cumberland  Technologies,  Inc. ("CTI" or "the Company")  f/k/a  Cumberland
Holdings, Inc., a Florida corporation,  was formed on November 18, 1991, to be a
Holding company and a wholly-owned subsidiary of Kimmins Corp. ("KC"). Effective
October 1, 1992, KC contributed  all of the  outstanding  common stock of two of
its  other  wholly-owned  subsidiaries,  Cumberland  Casualty  & Surety  Company
("CCS") and Surety Specialists,  Inc. ("SSI") to CTI. KC then distributed to its
stockholders CTI's common stock on the basis of one share of common stock of CTI
for each five  shares of KC common  stock and Class B common  stock  owned  (the
"Distribution".)  Effective January 30, 1997, Cumberland Holdings,  Inc. changed
its name to Cumberland Technologies, Inc. CTI conducts its business through five
wholly-owned  subsidiaries.  CCS,  a  Florida  corporation  formed  in May 1988,
provides underwriting for specialty surety and performance and payment bonds for
contractors.  The surety services provided include direct surety and to a lesser
extent,  assumed reinsurance.  SSI, a Florida corporation formed in August 1988,
is a general lines agency which operates as an independent  agent.  Surety Group
("SG"), a Georgia  corporation,  and Associates  Acquisition  Corp. d/b/a Surety
Associates ("SA"), a South Carolina corporation,  purchased in February and July
1995,  respectively,  are general lines  agencies  which operate as  independent
agencies. Qualex Consulting Group, Inc. ("Qualex"), a Florida corporation formed
in November 1994, provides claim and contracting consulting services.

2.   Summary of Significant Accounting Policies
     ------------------------------------------

     Principles of Consolidation
     ---------------------------

     The consolidated  financial  statements include the accounts of CTI and its
wholly-owned  subsidiaries.  All material intercompany transactions and balances
have been eliminated in consolidation.

     Basis of Presentation
     ---------------------

     The accompanying  consolidated  financial  statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America which,  as to the subsidiary  insurance  company,  differ from statutory
accounting  practices  prescribed  or permitted by regulatory  authorities.  The
significant accounting policies followed by CTI and subsidiaries that materially
affect the consolidated financial statements are summarized in this note.

     Investments
     -----------

     The Company accounts for marketable securities in accordance with Statement
of  Financial  Accounting  Standard  ("SFAS")  No. 115,  Accounting  for Certain
Investments in Debt and Equity Securities.

<PAGE>



                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                  --------------------------------------------


2.   Summary of Significant Accounting Policies (continued)
     ------------------------------------------------------

     Debt  securities  that the Company has both the positive intent and ability
to hold to maturity are  classified  as  "held-to-maturity"  securities  and are
reported at amortized  cost. The amortized  cost of debt  securities is adjusted
for  amortization  of  premiums  and  accretion  of  discounts  from the date of
purchase to maturity. Such amortization and accretion, which is calculated under
the interest method, is included in investment income.

     Marketable   equity  securities  and  debt  securities  not  classified  as
"held-to-maturity"   or  "trading"  are   classified  as   "available-for-sale."
Available-for-sale  securities  are reported at estimated  fair value,  with the
unrealized  gains and losses,  net of any related  income  taxes,  reported as a
separate component of equity and of other comprehensive income (loss).  Realized
gains and losses and  declines in value  judged to be  other-than-temporary  are
included  in  income.  The cost of  securities  sold is  based  on the  specific
identification  method.  Interest and  dividends on  securities  are included in
investment income.

     Short-term  investments  primarily  include  certificates of deposit having
maturities  of more than three  months when  purchased.  These  investments  are
reported at cost, which approximates fair value.

     Investments  in which the Company has a 20% - 50%  ownership  interest  are
accounted  for using the equity  method.  The Company's  proportionate  share of
income  generated  by an  investee  accounted  for  under the  equity  method of
$59,252,  $61,457,  and $19,996 for the years ended December 31, 2002,  2001 and
2000, respectively, are included in income.

     Cash Equivalents
     ----------------

     The Company  considers all highly liquid  investments  having a maturity of
twelve months or less when purchased to be cash equivalents.

     Deferred Policy Acquisition Costs
     ---------------------------------

     To the  extent  recoverable  from  future  policy  revenues,  the  costs of
acquiring  new  surety  business,  principally  commissions,  are  deferred  and
amortized in a manner which charges each year's  operations in direct proportion
to the premium revenue recognized.

     Intangibles
     -----------

     Intangible  assets are stated at cost and principally  represent  purchased
customer  accounts  and the excess of costs over the fair value of  identifiable
net assets acquired ("Goodwill").

<PAGE>



                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                  --------------------------------------------


2.   Summary of Significant Accounting Policies (continued)
     ------------------------------------------------------

     Purchased customer accounts,  noncompete agreements, and purchased contract
agreements  are  being  amortized  on a  straight-line  basis  over the  related
estimated lives and contract periods,  which range from 3 to 15 years. Purchased
customer  accounts are records and files obtained from acquired  businesses that
contain  information on insurance  policies and the related insured parties that
is essential to policy renewals.

     In accordance with SFAS 142,  "Goodwill and Other Intangible  Assets",  the
Company  discontinued the amortization of goodwill effective January 1, 2002. At
December  31, 2002 and 2001,  goodwill,  net of  accumulated  amortization,  was
$152,780. Goodwill amortization expense was $55,813 for years ended December 31,
2001 and 2000.  As a result of the  impairment  test  required by SFAS 142,  the
Company's goodwill was found not to be impaired.

     In accordance with SFAS 144,  "Accounting for the Impairment or Disposal of
Long-Lived  Assets",  which  became  effective  for the Company as of January 1,
2002, the Company  periodically  reviews the carrying value of long-lived assets
to determine if impairment has occurred. Impairment losses, if any, are recorded
in the period identified.  Significant judgment is required to determine whether
or not impairment has occurred. The determination is made by evaluating expected
future  undiscounted  cash  flows  or the  anticipated  recoverability  of costs
incurred  and,  if  necessary,  determining  the amount of the loss,  if any, by
evaluating the fair value of the assets.

     At  December  31,  2001,  Goodwill  and other  long-lived  assets that were
capitalized in conjunction  with the purchase of Associates  Acquisition  Corp.,
d/b/a Surety  Associates  were deemed  impaired as such an impairment  charge of
$437,418 was recorded in the consolidated statement of operations.

     Loss and Loss Adjustment Expenses
     ---------------------------------

     The liability for loss and loss adjustment  expenses including incurred but
not  reported  losses is based on the  estimated  ultimate  cost of settling the
claim using  traditional  paid and  incurred  loss  development  methods.  These
estimates are subject to the effects of trends in loss  severity and  frequency.
Although  considerable  variability  is inherent in such  estimates,  management
believes  that  the  liabilities  for  loss and  loss  adjustment  expenses  are
adequate.  The estimates are  continually  reviewed and adjusted as necessary as
experience  develops or new  information  becomes known.  Such  adjustments  are
included  in  current  operations.  A  liability  for all costs  expected  to be
incurred in connection  with the  settlement of unpaid loss and loss  adjustment
expenses is accrued  when the related  liability  for unpaid  losses is accrued.
Loss adjustment  expenses include costs associated directly with specific claims
paid or in the process of settlement,  such as legal and adjusters'  fees.  Loss
adjustment  expenses  also include  other costs that cannot be  associated  with
specific  claims but are related to losses paid or in the process of settlement,
such as internal costs of the claims function.


<PAGE>

                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                  --------------------------------------------


2.   Summary of Significant Accounting Policies (continued)
     ------------------------------------------------------

     The Company does not  discount its reserves for losses and loss  adjustment
expenses.  The Company  writes  primarily  surety  contracts  which are of short
duration.

     The Company does not consider investment income in determining if a premium
deficiency relating to short duration contracts exists.

     Derivative Instruments
     ----------------------

     The Company adopted SFAS No. 133 "Accounting for Derivative Instruments and
Hedging  Activities"  effective  January 1, 2001.  The  Company  identified  one
product that meets the definition of a derivative  instrument as defined in SFAS
No. 133. The policy is issued to registered  investment  advisors  ("Advisors"),
and insures  losses  suffered by the Advisors as a result of market  declines on
covered  investment  principal,  provided  that the Advisors  have  followed the
investment  guidelines  required by the policy.  The  identified  derivative was
formerly  accounted for as an insurance  contract within the policy  liabilities
for loss and loss adjustment expenses account in the consolidated  balance sheet
for  periods  prior to  January  1, 2001 and on  January  1,  2001  there was no
cumulative  effect of change in  accounting  principal  due to the fact that the
policy liability  recorded for this policy at December 31, 2000 approximated the
fair value of the  derivative  instrument at January 1, 2001.  The fair value of
the  derivative  instrument  at  December  31, 2002 and 2001 is  $4,346,285  and
$3,597,782,  respectively.  At December  31, 2002 and 2001 the fair value of the
derivative  instrument  has been  determined  by using a  financial  model  that
incorporates  market data and other  assumptions.  Due to the  volatility in the
marketplace, the Company suspended marketing of this product effective September
2001. The Company is not involved in any hedging activities.

     Unearned Premiums
     -----------------

     Unearned premiums are deferred and amortized on a pro-rata basis.

     Reinsurance
     -----------

     The  Company  assumes and cedes  reinsurance  and  participates  in various
pools. The accompanying  consolidated  financial  statements  reflect  premiums,
benefits and settlement expenses,  and deferred policy acquisition costs, net of
reinsurance  ceded.  Amounts  recoverable  from reinsurers for unpaid losses are
estimated in a manner  consistent with the claim  liability  associated with the
reinsured policies.

<PAGE>



                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                  --------------------------------------------


2.   Summary of Significant Accounting Policies (continued)
     ------------------------------------------------------

     Revenue Recognition
     -------------------

     Premiums earned on direct insurance and assumed  reinsurance are recognized
on a pro-rata basis over the period of risk.  Commission income, which is earned
on ceded premiums and premiums written for other third party insurance carriers,
is  recognized  at  the  effective  date  of the  bonds  issued.  Other  income,
consisting  primarily of  consulting  fees, is  recognized  when the  negotiated
services are provided.

     Stock-Based Compensation
     ------------------------

     The  Company  has  adopted  only the pro  forma  disclosure  provisions  of
Statement No. 123,  Accounting for  Stock-Based  Compensation  ("SFAS No. 123").
SFAS No. 123 encourages,  but does not require companies to record at fair value
compensation  cost for  stock-based  employee  compensation  plans.  The Company
accounts for  equity-based  compensation  arrangements  in  accordance  with the
intrinsic value method prescribed by Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations. Intrinsic
value is the amount by which the market price of the  underlying  stock  exceeds
the  exercise  price of the  stock  option  or award  on the  measurement  date,
generally the date of grant.

     Income Taxes
     ------------

     Deferred  income tax assets and  liabilities  are recognized for the future
tax  consequences  attributable to differences  between the financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
basis. Deferred income tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those  temporary
differences  are  expected to be  recovered  or settled.  The effect on deferred
income tax  assets and  liabilities  of a change in tax rates is  recognized  in
income in the period that includes the enactment date.

     The  Company  has  recorded a deferred  income  tax asset of  $401,738  and
$499,145 at December 31, 2002 and 2001,  respectively.  Realization of the asset
is dependent on generating  sufficient taxable income in future years.  Although
realization is not assured,  management believes it is more likely than not that
all of the deferred income tax asset will be realized.

     The  Company  files a  consolidated  tax return  that  includes  all of its
subsidiaries.



<PAGE>




                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                  --------------------------------------------


2.   Summary of Significant Accounting Policies (continued)
     ------------------------------------------------------

     Earnings Per Share
     ------------------

     The Company computes and discloses  earnings (loss) per share in accordance
with the  provisions  of Statement of Financial  Accounting  Standards  No. 128,
Earnings Per Share. The 39,500,  69,500 and 113,500 outstanding stock options at
December 31, 2002, 2001 and 2000, respectively,  had an immaterial effect on the
results  of  the  calculations  of  earnings  per  share.  Additionally,  47,000
outstanding  stock  options  were  antidilutive  at December  31, 2002 and 2001,
respectively. There were no antidilutive stock options at December 31, 2000.

     Business Concentration
     ----------------------

     The  majority of the  Company's  business  relates to surety  bonds,  which
provide performance and payment bonds for individual and commercial contractors,
and market performance  products,  which provide specific liability coverage for
professional services rendered by registered  investment advisors.  Accordingly,
the  occurrence of adverse  economic  conditions  could have a material  adverse
effect on the Company's business,  although for surety bonds, no such conditions
have been encountered in the Company's past experience.  For surety bonding, the
Company requires  collateral from surety bond customers if the customer fails to
meet between 80 percent to 99 percent of the  Company's  underwriting  criteria.
Customers that fail to meet at least 80 percent of the  requirements  are denied
surety bonding.

     Use of Estimates
     ----------------

     The preparation of the consolidated financial statements in conformity with
accounting  principles  generally  accepted  in the  United  States  of  America
requires  management to make estimates and  assumptions  that affect the amounts
reported in the consolidated  financial  statements and accompanying notes. Such
estimates and assumptions could change in the future as more information becomes
known which would affect the amounts reported and disclosed herein.

     New Accounting Standards
     ------------------------

     The Financial  Accounting  Standards  Board  ("FASB")  recently  issued the
following SFAS's, and the Company is currently determining the impact that these
standards will have on its financial statements.

     In August 2001, the FASB issued SFAS 143,  "Accounting for Asset Retirement
Obligations". SFAS 143 requires entities to record the fair value of a liability
for an asset  retirement  obligation  in the  period in which it  occurred.  The
standard is effective for fiscal years beginning after June 15, 2002.


<PAGE>



                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                  --------------------------------------------


2.   Summary of Significant Accounting Policies (continued)
     ------------------------------------------------------

     In June 2002,  the FASB issued SFA 146,  "Accounting  for Costs  Associated
with Exit or Disposal  Activities".  SFAS 146 addresses financial accounting and
reporting for costs  associated  with exit or deposal  activities  and nullifies
EITF Issue No. 94-3,  "Liability  Recognition for Certain  Employee  Termination
Benefits and Other Costs to Exit an Activity  (including  Certain Costs Incurred
in a  Restructuring)".  SFAS No.  146  requires  costs  associated  with exit or
disposal activities to be recognized when the costs are incurred, rather than at
a date of commitment to an exit or disposal.

     Reclassifications
     -----------------

     Certain amounts in the 2001 and 2000 consolidated financial statements have
been  reclassified  to  conform  to the 2002  consolidated  financial  statement
presentation.

3.   Related Party Transactions
     --------------------------

     CTI  and  its  subsidiaries  have  entered  into  transactions  with KC and
companies  affiliated  through common ownership.  CCS writes surety bonds for KC
and its affiliates.  Qualex performs  consulting services for KC and affiliates.
Other income from  affiliates  in the  accompanying  consolidated  statements of
operations consist primarily of consulting services provided to KC.

     Affiliate accounts receivable  represents funds advanced and joint expenses
that have not yet been reimbursed from KC and its affiliates.  These receivables
are paid  periodically  and no interest is charged on the  outstanding  balances
which are payable on demand.

     The  Company's  operating  subsidiaries  rent or lease  office space in the
cities in which they are  located.  CCS and Qualex  lease office space in Tampa,
Florida from a company owned by Francis  Williams,  the Chairman of the Board of
the Company, at a monthly rate of $10,885, pursuant to a lease that was executed
June 1, 1999 and is effective through May 31, 2009.

     KC and SSI entered into an agreement with an independent contractor, AEC on
August 16, 1989 on a construction contract with the United States Navy ("Navy").
At the  time  the  bonds  were  issued  by CCS as  surety,  KC  entered  into an
indemnification  agreement,  whereby KC indemnified CCS from any and all losses,
costs and expenses  incurred  related to the bonds.  In 1991, the Navy defaulted
and terminated AEC on the contract.  The contract was subsequently litigated and
CCS was unsuccessful in its litigation activities with the Navy. As a result, KC
reimbursed CCS $1,500,000 of the total subrogation  recoverable of $1,850,877 in
November 2001 on the contract.  CCS wrote off the remaining $350,877 reinsurance
recoverable  as a charge to loss and loss  adjustment  expense  and  incurred an
additional $240,000 in legal fees during 2001.

<PAGE>



                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                  --------------------------------------------


4.   Investments
     -----------

     The   Company's   investments   in   available-for-sale    securities   and
held-to-maturity securities are summarized as follows:

<TABLE>
<CAPTION>


                                                                                         Gross            Gross
                                                                         Amortized     Unrealized       Unrealized           Fair
                                                                           Cost          Gains           Losses              Value
                                                                       -----------      ----------      -----------       ----------
<S>                                                                    <C>              <C>             <C>               <C>

Available-for-sale securities at December 31, 2002:
       U.S. Government bonds ...................................       $3,062,496       $   79,128       $     --         $3,141,624
       State and municipal bonds ...............................          496,609            3,761             --            500,370
       Industrial and miscellaneous bonds ......................        3,861,932          256,951            2,220        4,116,663
                                                                       ----------       ----------       ----------       ----------

Total available-for-sale securities ............................        7,421,037          339,840            2,220        7,758,657
                                                                       ----------       ----------       ----------       ----------

Held-to-maturity securities at December 31, 2002:
       U.S. Government bonds ...................................          359,898            7,783             --            367,681
                                                                       ----------       ----------       ----------       ----------

Total securities ...............................................       $7,780,935       $  347,623       $    2,220       $8,126,338
                                                                       ==========       ==========       ==========       ==========

Available-for-sale securities at December 31, 2001:
       U.S. Government bonds ...................................       $5,304,913       $   48,834       $   17,507       $5,336,240
       State and municipal bonds ...............................          546,547             --             19,457          527,090
       Industrial and miscellaneous bonds ......................        3,354,093          125,067            3,137        3,476,023
                                                                       ----------       ----------       ----------       ----------

Total available-for-sale securities ............................        9,205,553          173,901           40,101        9,339,353
                                                                       ----------       ----------       ----------       ----------

Held-to-maturity securities at December 31, 2001:
       U.S. Government bonds ...................................          359,475           14,961             --            374,436
                                                                       ----------       ----------       ----------       ----------

Total securities ...............................................       $9,565,028       $  188,862       $   40,101       $9,713,789
                                                                       ==========       ==========       ==========       ==========

</TABLE>

     The  amortized  cost and fair value of the  Company's  investments  in debt
securities,  segregated by available-for-sale and held-to-maturity,  at December
31, 2002 are summarized, by stated maturity, as follows:

<TABLE>
<CAPTION>


                                                                  Available-for-Sale                      Held-to-Maturity
                                                                  ------------------                      ----------------
Maturity                                                     Amortized Cost       Fair Value        Amortized Cost        Fair Value
--------                                                     --------------       ----------        --------------        ----------
<S>                                                           <C>                 <C>               <C>                  <C>

Due in one year or less ............................          $2,843,920          $2,875,916          $  259,898          $  262,681
Due after one year through five
   years ...........................................           3,402,685           3,623,775             100,000             105,000
Due after five years through
   ten years .......................................             677,822             758,596                --                  --
Due after twenty years .............................             496,610             500,370                --                  --
                                                              ----------          ----------          ----------          ----------
                                                              $7,421,037          $7,758,657          $  359,898          $  367,681
                                                              ==========          ==========          ==========          ==========
</TABLE>


<PAGE>



                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                  --------------------------------------------


4.   Investments (continued)
     -----------------------

     The Company held no investments in any person or its affiliates  (excluding
obligations of the U.S.  Government or its agencies),  which exceeded 10 percent
of stockholders' equity at the end of the respective year.

     At December 31, 2002 and 2001, the Company had restricted  investments held
totaling  $4,520,022  and  $3,405,564,   respectively.   Restricted  investments
primarily  represent  funds held as collateral in  connection  with  reinsurance
trust  agreements and bonds placed on deposit with various state  departments of
insurance under statutory deposit  requirements.  At December 31, 2002 and 2001,
respectively,  bonds placed on deposit with state departments of insurance total
$4,432,514  and  $3,319,588 of which  $2,290,971  and  $1,282,022 is held by the
Florida Department of Financial Services.

     Net investment  income and net realized  investment  gains (losses) for the
Company is comprised of the following:

<TABLE>
<CAPTION>


                                                                                             Year ended December 31,
                                                                              ------------------------------------------------------
                                                                                     2002                2001                  2000
                                                                              ------------------------------------------------------
<S>                                                                           <C>                  <C>                   <C>

Debt and equity securities .......................................            $ 503,603             $ 573,345             $ 501,853
Mortgage loans on real estate ....................................                5,498                 3,289                 3,384
Short-term investments, including cash and
    cash equivalents .............................................               31,007                77,203               106,089
                                                                              ---------             ---------             ---------
                                                                                540,108               653,837               611,326
Less investment expenses .........................................              (53,970)              (49,374)              (34,920)
                                                                              ---------             ---------             ---------
Net investment income ............................................            $ 486,138             $ 604,463             $ 576,406
                                                                              =========             =========             =========
Realized gains (losses) on available-for-sale
    securities:
    Debt securities - gains ......................................            $  91,826             $ 329,360             $  38,381
    Debt securities - losses .....................................              (25,587)                 --                    --
    Equity securities - losses ...................................                 --                 (23,899)                 --
                                                                              ---------             ---------             ---------
Net realized investment gains ....................................            $  66,239             $ 305,461             $  38,381
                                                                              =========             =========             =========
</TABLE>


<PAGE>


                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                  --------------------------------------------


5.   Fair Value of Financial Instruments
     -----------------------------------

     The carrying amounts and fair values of the Company's financial instruments
at December 31, 2002 and 2001 are as follows:

                                                           December 31, 2002
                                                    ----------------------------
                                                    Carrying Amount   Fair Value
                                                    ----------------------------
Assets:
------
   Cash and cash equivalents, including short-
       term investments ............................    $1,027,252    $1,027,252
   Securities ......................................     8,118,555     8,126,337
   Mortgage loans on real estate ...................       716,413       716,413
   Accounts receivable .............................     2,518,187     2,518,187
   Reinsurance recoverable .........................    12,089,177    12,089,177

Liabilities:
-----------
   Debt ............................................     1,059,472     1,059,472
   Ceded reinsurance payable .......................        26,883        26,883
   Derivative instrument ...........................     4,346,285     4,346,285

                                                            December 31, 2001
                                                      --------------------------
                                                      Carrying Amount Fair Value
                                                      --------------------------
Assets:
------
   Cash and cash equivalents, including short-
       term investments ............................    $3,088,124    $3,088,124
   Investments .....................................     9,698,828     9,713,758
   Mortgage loans on real estate ...................       681,790       681,790
   Accounts receivable .............................     4,687,528     4,687,528
   Reinsurance recoverable .........................     6,634,497     6,634,497

Liabilities:
-----------
   Debt ............................................     1,255,995     1,255,995
   Ceded reinsurance payable .......................     1,755,105     1,755,105
   Derivative instrument ...........................     3,597,782     3,597,782

     The  following  methods  and  assumptions  were  used  by  the  Company  in
estimating its fair value disclosures for financial instruments:

<PAGE>




                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                  --------------------------------------------


5.   Fair Value of Financial Instruments (continued)
     -----------------------------------------------

     Cash and cash equivalents,  short-term  investments,  accounts  receivable,
reinsurance  recoverable  and ceded  reinsurance  payable:  The carrying  amount
reported in the consolidated balance sheet approximates fair value.

     Securities:  Fair values for held-to maturity and debt securities are based
on quoted market prices and are  recognized in the  Consolidated  Balance Sheet.
The fair values for equity  securities are based on quoted market prices and are
recognized in the consolidated balance sheet.

     Mortgage loans: The mortgage loans represent three mortgages. Two are small
mortgages  totaling  $75,369 which were current at December 31, 2002.  The other
mortgage  (referred to as the Mundy  mortgage)  totals $641,044 and was obtained
through  a bond  that  went  into  default  whereby  CCS  held the  mortgage  as
collateral on the Mundy mortgage.

     The value of the  collateral  is in excess of  $1,000,000  and  because  it
greatly   exceeds  the  balance  on  the  mortgage,   an  allowance  was  deemed
unnecessary.

     Debt: Fair value of debt is based on discounted expected future cash flows,
using risk rates  currently  available for debt with similar terms and remaining
maturities.

6.   Intangibles
     -----------

     Intangibles are comprised of the following:

                                                            As of December 31,
                                                     ---------------------------
                                                           2002             2001
                                                     ---------------------------
Deferred state admission costs ...............       $  227,171       $  227,171
Customer lists and acquisition costs .........          567,163          567,163
Product development ..........................          262,194          262,194
Goodwill .....................................          280,623          280,623
                                                     ----------       ----------
                                                      1,337,151        1,337,151
Accumulated amortization .....................          895,898          803,420
                                                     ----------       ----------
Total ........................................       $  441,253       $  533,731
                                                     ==========       ==========

     Amortization  expense  amounted  to $92,478 in 2002,  $144,267  in 2001 and
$151,319  in 2000 and is  recorded in  operating  expenses  in the  consolidated
statements of operations.


<PAGE>




                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                  --------------------------------------------


6.   Intangibles (continued)
     -----------------------

     In July 2001,  the FASB  issued  SFAS 142  "Goodwill  and Other  Intangible
Assets"  which was  adopted by the  Company  as of  January  1,  2002.  SFAS 142
requires  goodwill and intangible  assets with indefinite  lives to no longer be
amortized, but instead be tested for impairment on an annual basis.

     SFAS 142 provided a six-month  transitional  period from the effective date
of adoption  for the  Company to perform an  assessment  of whether  there is an
indication  that  goodwill  is  impaired.  To the extent that an  indication  of
impairment existed, the Company was required to perform a second test to measure
the amount of the  impairment.  In the first  step,  the Company  identified  no
indications of impairment. Therefore the Company was not required to perform the
second step of the initial goodwill impairment test.

     A  reconciliation   of  net  loss  and  loss  per  share  reported  in  the
consolidated  statements of operations to the proforma  amounts adjusted for the
exclusion of goodwill amortization, net of the related income (loss) tax effect,
is presented below. The unaudited  proforma results  reflecting the exclusion of
goodwill  amortization  have been  prepared  only to  demonstrate  the impact of
goodwill amortization on net (loss) income and (loss) earnings per share and are
for comparative purposes only.

<TABLE>
<CAPTION>


                                                                                                       December 31,
                                                                       -------------------------------------------------------------
                                                                                    2002                 2001                   2000
                                                                       -------------------------------------------------------------
<S>                                                                    <C>                 <C>                   <C>

Reported net (loss) income ......................................      $      (1,569,169)  $           58,368     $        1,041,749
Add: Goodwill amortization, net of tax ..........................                   --                 40,900                 35,914
                                                                       -----------------   ------------------     ------------------
Adjusted net (loss) income ......................................      $      (1,569,169)  $           99,268     $        1,077,663
                                                                       =================   ==================     ==================
Net (loss) income per share - basic and
   diluted ......................................................      $           (0.28)  $             0.01     $             0.19
Add: Goodwill amortization, net of tax ..........................                   --     $             0.01     $             0.01
                                                                       -----------------   ------------------     ------------------
Adjusted net (loss) income per share - basic
   and diluted ..................................................      $           (0.28)  $             0.02     $             0.20
                                                                       =================   ==================     ==================
</TABLE>

7.   Other Investment
     ----------------

     The  Company  has a 30 percent  investment  in Global  Solutions  Insurance
Services,  Inc.  ("GSIS"),  an agency  located in  California  that issues cargo
insurance and customs bonds, which is accounted for under the equity method.

     Summarized unaudited financial information of GSIS is as follows:



<PAGE>


                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                  --------------------------------------------


7.    Other Investment (continued)
      ----------------------------

                                                 Year ended December 31,
                                     -------------------------------------------
                                          2002             2001             2000
                                     -------------------------------------------
Revenues ....................         $703,465         $600,530         $417,972
Net income ..................          197,507          178,738           66,655

                                                          As of December 31,
                                                   -----------------------------
                                                         2002               2001
                                                   -----------------------------
Current assets ...........................         $2,310,459         $1,034,572
Non-current assets .......................            230,974            250,955
Current liabilities ......................          1,755,760            726,402
Non-current liabilities ..................          1,744,442          1,607,555

8.   Reserve for Losses and Loss Adjustment Expenses
     -----------------------------------------------

     The following table provides a  reconciliation  of the beginning and ending
liability  balances,  net of  reinsurance  recoverables,  for  the  years  ended
December 31, 2002, 2001 and 2000, to the gross amounts reported in the Company's
consolidated balance sheets:

<TABLE>
<CAPTION>


                                                                                                    December 31,
                                                                               -----------------------------------------------------
                                                                                      2002               2001                 2000
                                                                               -----------------------------------------------------
<S>                                                                                  <C>             <C>               <C>

Gross liability for losses and LAE at beginning
   of year ...........................................................         $ 5,284,804         $ 6,245,819          $ 6,408,490
Recoverables on losses and LAE .......................................           1,812,616           2,911,070            3,599,763
                                                                               -----------         -----------          -----------
Liability for losses and LAE on unpaid losses before
   adjustment for incurred and paid losses ...........................           3,472,188           3,334,749            2,808,727
Incurred losses and LAE's claims, net of
   reinsurance, occurring during:
   Current year ......................................................           8,203,575           5,448,480            4,363,435
   Prior year ........................................................             348,740            (936,570)          (1,003,077)
                                                                               -----------         -----------          -----------
Total incurred losses, net of reinsurance ............................           8,552,315           4,511,910            3,360,358
Losses and LAE payments for claims, net of
   reinsurance, occurring during:
   Current year ......................................................           5,469,929           1,798,145            2,450,587
   Prior years .......................................................           3,936,415           2,576,326              383,749
                                                                               -----------         -----------          -----------
Total payments .......................................................           9,433,344           4,374,471            2,834,336
                                                                               -----------         -----------          -----------
Liability for losses and LAE, net ....................................           2,591,159           3,472,188            3,334,749

Add:  recoverables on losses and LAE's ...............................           6,304,311           1,812,616            2,911,070
                                                                               -----------         -----------          -----------
Liability for losses and LAE, at end of year .........................         $ 8,895,470         $ 5,284,804          $ 6,245,819
                                                                               ===========         ===========          ===========
</TABLE>

<PAGE>



                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                  --------------------------------------------


8.   Reserve for Losses and Loss Adjustment Expenses (continued)
     -----------------------------------------------------------

     The  Company  experienced  a  deficiency  of  $348,740  for the year  ended
December 31, 2002.  The  deficiency is a result of settling claim basis reserves
established in prior years for amounts that were more than expected. The Company
experienced  $936,570  and  $1,003,077  in  redundancies  for  losses  and  loss
adjustment  expenses in 2001 and 2000. The redundancies  principally result from
subrogation received on pooling agreement case base reserves and claims in prior
years.

     The  anticipated   effect  of  inflation  is  implicitly   considered  when
estimating liabilities for losses and LAE. While anticipated price increases due
to inflation are considered in estimating the ultimate claim costs, the increase
in average severities of claims is caused by a number of factors. Future average
severities are projected  based on historical  trends  adjusted for  anticipated
changes in  underwriting  standards,  policy  provisions,  and general  economic
trends.  These anticipated  trends are monitored based on actual development and
are modified if necessary.

9.   Income Taxes
     ------------

     Income tax (benefit) expense consists of the following:

                                                      December 31,
                                       -----------------------------------------
                                             2002           2001            2000
                                       -----------------------------------------
Current:
-------
    Federal .....................      $(945,431)      $ 294,737       $ 595,707
    State .......................           --            50,453         101,973
                                       ---------       ---------       ---------
    Total current ...............       (945,431)        345,190         697,680
                                       ---------       ---------       ---------

Deferred:
--------
    Federal .....................         28,518        (276,568)         56,960
    State .......................          4,882         (47,342)          9,750
                                       ---------       ---------       ---------
    Total deferred ..............         33,400        (323,910)         66,710
                                       ---------       ---------       ---------
    Total provision .............      $(912,031)      $  21,280       $ 764,390
                                       =========       =========       =========

     The provision is reported as follows:


<PAGE>



                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                  --------------------------------------------


9.       Income Taxes (continued)

                                                      December 31,
                                         ---------------------------------------
                                               2002           2001          2000
                                         ---------------------------------------
(Benefit) for (loss) income
    before extraordinary gain ......     $(912,031)     $ (75,932)     $ 764,390
Expense for extraordinary
    gain on restructuring of
    note ...........................          --           97,212           --
                                         ---------      ---------      ---------
Total income tax (benefit)
    expense ........................     $(912,031)     $  21,280      $ 764,390
                                         =========      =========      =========

     A  reconciliation  of the  statutory  federal  income  tax  rate  with  the
Company's effective income tax rate is as follows:

                                                        December 31,
                                            ------------------------------------
                                              2002           2001          2000
                                            ------------------------------------
Statutory federal rate ............         34.00%         34.00%         34.00%
State income taxes ................          3.63           3.63           3.63
Tax exempt income .................           .36         (11.04)          (.49)
Nondeductible expenses ............         (1.23)           .13           1.52
Miscellaneous .....................           --             --            3.66
                                            -----          -----          -----
Effective tax rate ................         36.76%         26.72%         42.32%
                                            =====          =====          =====

     The  following  summarizes  the effect of deferred  income  taxes items and
their  impact  of  "temporary   differences"   between  amounts  of  assets  and
liabilities for financial reporting purposes and such amounts as measured by tax
laws.  Temporary  differences  and  carry-forwards  which give rise to  deferred
income tax assets and liabilities are as follows:


<PAGE>


                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                  --------------------------------------------


     9. Income Taxes (continued)
        ------------------------
                                                             December 31,
                                                   -----------------------------
                                                           2002             2001
                                                   -----------------------------

Deferred income tax liabilities:
-------------------------------
Deferred acquisition costs ...................     $  (626,801)     $  (716,305)
Unrealized gain on investments ...............        (127,046)         (63,039)
                                                   -----------      -----------
Total deferred tax liabilities ...............        (753,847)        (779,344)
                                                   -----------      -----------

Deferred  income tax assets:
---------------------------
Basis difference in fixed assets .............          17,139             --
Basis difference in investments ..............         101,411          120,766
Reserve discounting ..........................         415,464          442,163
Unearned premiums ............................         251,891          333,791
Amortization .................................         163,945          279,455
Surplus notes ................................         102,314          102,314
State net operating loss carryforward ........         103,421             --
                                                   -----------      -----------
Total deferred income tax assets .............       1,155,585        1,278,489
                                                   -----------      -----------
Net deferred income tax asset ................     $   401,738      $   499,145
                                                   ===========      ===========

10.  Debt
     ----

     Debt as of December 31, consists of the following:
     -------------------------------------------------

                                                       -------------------------
                                                             2002           2001
                                                       -------------------------
Affiliate:
---------
Convertible note payable due November 10,
     2002 ........................................     $  604,055     $  604,055
Nonaffiliate:
------------
Note payable due March 1, 2002 ...................           --          124,523
Note payable due June 30, 2010 ...................        455,417        527,417
                                                       ----------     ----------
                                                       $1.059,472     $1,255,995
                                                       ==========     ==========


<PAGE>


                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                  --------------------------------------------


10.  Debt (continued)
     ----------------

     Convertible Note Payable to Affiliate
     -------------------------------------

     Effective  November  10,  1988,  the  Company  entered  into  a  $1,000,000
convertible term note agreement with TransCor Waste Services, Inc., a subsidiary
of KC. The note, originally due November 10, 2001, has been extended to November
10,  2003.  The annual  rate of interest is equal to one half of one percent per
annum in excess of the stated interest rate  established by the Bank of America.
The average  interest rate for 2002 was 8.6%. On December 26, 2001,  the Company
made a principal  note payment of $395,945  reducing  the note to $604,055.  The
lender may convert the  principal  amount of the note or a portion  thereof into
common stock at $3.00 per share subsequent to a six-month  anniversary and prior
to the close of business on the maturity date.

     Notes Payable to Nonaffiliates
     ------------------------------

     In connection  with the  acquisition of certain  agencies  during 1995, the
Company entered into two notes payable with the agencies'  previous owners.  One
note was due March 1, 2002 and bore interest at 8% through February 28, 2001 and
10% thereafter.  Principal payments of $125,000 are due annually beginning March
1, 2000. The other note is due June 30, 2010 and originally bore interest at 9%.
Principal  payments  of $40,000  were due  annually  for three  years  beginning
January 5, 1996.  Payments of $11,104 including principal and interest were paid
monthly  from April 1, 1997  through  March 31,  2001.  On December 3, 2001,  SA
reached an agreement with the holder on this note payable,  whereby the terms of
the note were  modified,  such  that  interest  rate was  reduced  to zero,  and
principal  payments became payable at $6,000 per month.  The modification of the
terms of the note resulted in an extraordinary gain of $158,610 (net of deferred
income  taxes of  $97,212).  Payments  totaling  $113,312  including  a lump sum
payment of $50,000 were made during 2001.

     Interest  incurred in 2002, 2001 and 2000 for term notes due  nonaffiliates
was $2,451, $97,208 and $102,760, respectively.

     Maturities of affiliate and non-affiliate notes payable are as follows:

         --------------------- --------------------
             Year Ending
             December 31,
         --------------------- --------------------
                 2003          $        676,055
                 2004                    72,000
                 2005                    72,000
                 2006                    72,000
                 2007                    72,000
                                         95,417
                               ----------------
                               $      1,059,472
                               ----------------


<PAGE>



                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                  --------------------------------------------


11.  Employee Benefit Plan
     ---------------------

     On April 1, 1996, CTI adopted a defined  contribution  401(k) plan covering
substantially  all employees.  Under the plan,  the Company makes  contributions
equal to one  percent  of the  participant's  compensation,  not to  exceed  six
percent of the participant's  annual deferrals.  The Company's  contributions to
the  plan  totaled  $32,663,  $33,502,  and  $24,311  in 2002,  2001  and  2000,
respectively.

12.  Stock Option Plan
     -----------------

     During the fiscal year ended December 31, 1999, the Company  registered the
1991 Stock Option Plan. (the"Plan").  The Company applies APB Opinion No. 25 and
related interpretations in accounting for the Plan. Accordingly, no compensation
cost has been  recognized for the Plan. Had  compensation  cost been  determined
based on the fair  market  value at the grant  dates for  awards  under the Plan
consistent with the method of FASB Statement No.123, the effect on the Company's
net (loss) income and (loss) earnings per share would have been immaterial.

     The fair value of each option  grant is  estimated on the date of the grant
using the  Black-Scholes  option-pricing  model. The following  weighted-average
assumptions  were used for the  grant  for the year  ended  December  31,  1998;
dividend  yield of 0%, risk free  interest  rate of 5.40%,  expected  life of 10
years and volatility of 99.98%. The following weighted-average  assumptions were
used for grants for the year ended December 31, 2000; dividend yield of 0%, risk
free  interest  rates of  6.54%,  and  6.31%,  expected  lives  of 10 years  and
volatility of 80.59%.

     Options  granted  under this plan have a term of ten years and vest ratably
over a four year period  immediately  following  the grant date.  The  following
table  summarizes all stock option  transaction for the years ended December 31,
2002, 2001 and 2000:


<PAGE>

                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                  --------------------------------------------


12.   Stock Option Plan (continued)
      -----------------------------
<TABLE>
<CAPTION>



                                                                   ---------------------  ----------------------  ------------------
                                                                            2002                 2001                   2000
                                                                   ---------------------  ----------------------  ------------------
                                                                              Weighted-               Weighted-            Weighted-
                                                                              Average                 Average              Average
                                                                              Exercise                Exercise             Exercise
                                                                   Shares     Price       Shares      Price       Shares   Price
                                                                  --------    ---------   --------    ---------   -------  ---------
<S>                                                               <C>         <C>         <C>         <C>         <C>      <C>
Outstanding at
beginning of year...........................................       69,500     $    1.38   113,500     $     .42   134,500  $     .42
Grants .....................................................         --       $     --       --       $     --     37,000  $    1.50
Exercised ..................................................         --       $     --    (44,000)    $    .125   (56,000) $    .125
Forfeited ..................................................      (30,000)    $   1.125      --       $     --     (2,000) $    1.88
                                                                  -------                 -------                 -------
Outstanding
at end of year..............................................       39,500     $    1.67    69,500     $    1.38   113,500  $     .89
                                                                  =======                  ======                 =======
Exercisable
at end of year..............................................       28,700     $    1.73    45,300     $    1.28    79,900  $     .60
                                                                  =======                  ======                 =======

Weighted-averagefair value of
  options granted during the year...........................      $ --        $     --     $ --       $     --    $37,000  $    1.52

</TABLE>

     The proceeds from the exercise of stock options  include certain income tax
benefits, which are included in capital in excess of par value.

     The following table summarizes  information about stock options at December
31, 2002:

<TABLE>
<CAPTION>


                                              Options Outstanding                                        Options Exercisable
                                              -------------------                                        -------------------
                                          Number                                                     Number
                                       Outstanding at      Weighted-Average                       Exercisable at
                                        December 31,         Remaining        Weighted-Average     December 31,    Weighted-Average
Range of Exercise Prices                   2002            Contractual Life   Exercise Price          2002          Exercise Price
------------------------                -------------      ----------------   ---------------      -------------   -----------------
<S>                                     <C>                <C>               <C>                   <C>             <C>

$1.00 ...........................             2,500            5 years        $    1.00              2,500          $           1.00
$1.50-$1.56 .....................            27,000            8 years        $    1.53             16,200          $           1.53
$2.25 ...........................            10,000            7 years        $    2.25             10,000          $           2.25
                                             ------                                                 ------
                                             39,500                                                 28,700
                                             ======                                                 ======
</TABLE>



<PAGE>



                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                  --------------------------------------------


13.  Preferred Stock
     ---------------

     CTI is authorized to issue 10,000,000 shares of preferred stock,  $.001 par
value,  with such rights and privileges as determined by the Board of Directors.
The preferred stock shall be issued at such times and for such  consideration as
determined by the Board of Directors.  No shares have been issued as of December
31, 2002.

14.  Reinsurance
     -----------

     CCS assumes reinsurance  premiums through a program whereby its subsidiary,
SSI has contracted  through two joint  partnering  agreements (St. Paul Fire and
Marine  Group,  f/k/a United States  Fidelity and Guaranty  Company and Peerless
Insurance Company) to pursue small to medium size contract and commercial surety
business in states in which CCS is not licensed.  Effective July 1, 2002,  these
programs were discontinued.  CCS participates in the underwriting risk through a
retrocession treaty with Transatlantic Reinsurance Company.

     Effective  October 1, 1996,  CCS entered into a quota share  agreement with
First Indemnity of America Insurance Company ("FIA") whereby all of the premiums
written  through a shared  underwriting  office are subject to this treaty.  The
Company assumes 50% of the premiums written by FIA and cedes 50% of the premiums
written by CCS.

     The Company cedes to Transatlantic Reinsurance Company on an excess of loss
treaty  95% of the risk  insured  with a  maximum  exposure  to the  Company  of
$235,000 per principal prior to June 30, 2001 and a maximum exposure of $300,000
per principal  effective  July 1, 2001 through June 30, 2002.  Effective July 1,
2002, net exposure is limited to $250,000 through its reinsurance  program after
a $1.4 million annual aggregate  deductible,  limited to $350,000 per principal,
is satisfied.  Transatlantic  Reinsurance  Company is rated A+ by A.M. Best. For
its liability line of registered  investment advisor insurance,  the Company has
reduced its exposure on any one risk, with a purchase of a quota share agreement
with Dorinco  Reinsurance  (Dorinco Treaty) which is rated A (Excellent) by A.M.
Best. Under the Dorinco Treaty, CCS cedes 50% of its liability on all registered
investment  advisor  policies,  which have an aggregate net  liability  limit of
$500,000 per  endorsement.  The Company  continues to have  exposure to risk for
reinsurance  ceded  in the  event  that  the  reinsurer  is  unable  to meet its
obligation  under  the  reinsurance  agreement  in force.  Reinsurance  does not
relieve an insurer of its liability to policyholders,  however, the reinsurer is
obligated to the insurer for the portion assumed by such reinsurer.

     Effective  July 1, 2002,  CCS  entered  into a quota share  agreement  with
Transatlantic  Reinsurance Company whereby CCS cedes 35% of the premiums, net of
commissions,  on its commercial surety bonds with penal sums less than $100,000.
The quota share treaty is renegotiated annually.


<PAGE>


                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                  --------------------------------------------


14.  Reinsurance (continued)
     -----------------------

     Gross and net written  premiums in 2002,  2001 and 2000 are  summarized  as
follows:

<TABLE>
<CAPTION>


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

Direct  premiums...............   $ 13,849,396     $ 13,980,567     $ 13,866,876     $ 14,465,244       13,775,266     $ 12,756,102

Assumed  premiums..............      2,633,495        3,497,789        4,193,927        3,788,443        2,393,468        2,480,712

Ceded premiums ................     (4,139,382)      (4,046,606)      (4,653,722)      (4,612,371)      (3,510,537)      (3,108,861)
                                  ------------     ------------     ------------     ------------     ------------     ------------

Net premiums .................    $ 12,343,509     $ 13,431,750     $ 13,407,081     $ 13,641,316     $ 12,658,197     $ 12,127,953
                                  ============     ============     ============     ============     ============     ============
</TABLE>

     Losses and loss adjustment  expenses in 2002, 2001, and 2000 are summarized
as follows:

                                   ---------------------------------------------
                                           2002            2001            2000
                                   ---------------------------------------------
Direct .........................   $ 12,300,811    $  5,827,451    $  6,301,778
Assumed ........................      5,920,064       1,217,945         680,032
Ceded ..........................     (9,668,560)     (2,533,486)     (3,621,452)
                                   ------------    ------------    ------------
Net losses and loss adjustment
     Expenses ..................   $  8,552,315    $  4,511,910    $  3,360,358
                                   ============    ============    ============

15.  Commitments and Contingencies
     -----------------------------

     The Company leases certain office space and equipment  under  noncancelable
operating  leases.  Rent expense was  $303,366,  $241,158,  and $222,983 for the
years ended  December  31, 2002,  2001 and 2000,  respectively.  Minimum  future
rental and lease  commitments  as of  December  31,  2002 for all  noncancelable
operating  leases  with an  initial  or  remaining  term of over one year are as
follows:

         --------------------- --------------------
             Year Ending
             December 31,
         --------------------- --------------------
                 2003          $        261,942
                 2004                   253,710
                 2005                   205,204
                 2006                   195,378
                 2007                   194,235
              Thereafter                235,200
                               ----------------
                               $      1,345,669
                               ================

<PAGE>


                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                  --------------------------------------------


15.  Commitments and Contingencies (continued)
     -----------------------------------------

     CCS was named as a defendant in a class action lawsuit in the United States
District  Court for the District of Colorado.  The  plaintiffs  are clients of a
registered investment advisor (the "Advisor") and have alleged that the Advisor,
a registered  broker-dealer,  and certain other defendants  (excluding CCS) were
negligent  or  otherwise  responsible  for  losses  suffered  by the  plaintiffs
resulting from embezzlement of the plaintiffs'  investments by a third party. As
a separate  count in the  lawsuit,  the  plaintiffs  have also  asserted  claims
against CCS based on a policy of  insurance  issued by CCS to the  Advisor.  The
policy does not provide  coverage  for  embezzlement,  rather it insures  losses
caused  by  market  declines,  providing  that  the  Advisor  has  followed  the
investment  guidelines  required by the policy.  On July 31, 2002,  the District
Court granted CCS motion for summary  judgment and dismissed the claims  against
CCS.

     The Company and its  subsidiaries  are involved in various lawsuits arising
in the ordinary course of its business operations as an insurer. Management does
not  believe  that any of these  lawsuits  will  have a  material  effect on the
consolidated financial position, future operations or cash flows of the Company.

16.  Statutory Accounting Practices and Regulatory Requirements
     ----------------------------------------------------------

     Statutory capital and surplus and net income as reported to the domiciliary
state insurance  department in accordance with prescribed or permitted statutory
accounting practices for CCS is summarized as follows:

                                                 Year Ended December 31,
                                      ------------------------------------------
                                             2002            2001           2000
                                      ------------------------------------------
Statutory capital and surplus ....    $ 4,734,899     $ 6,503,218    $ 5,441,336
Statutory net (loss) income ......     (1,748,676)        105,513        511,624

     CCS is  domiciled in Florida and  prepares  its  statutory-basis  financial
statements in  accordance  with  insurance  accounting  practices  prescribed or
permitted  by  the  Florida  Department  of  Financial  Services.   "Prescribed"
statutory  accounting  practices  include state laws,  regulations,  and general
administrative  rules,  as well as a variety  of  publications  of the  National
Association  of  Insurance   Commissioners   ("NAIC").   "Permitted"   statutory
accounting practices encompass all accounting practices that are not prescribed;
such  practices  may differ  from state to state,  may  differ  from  company to
company  within a state,  and may change in the future.  In 1998,  the  National
Association  of Insurance  Commissioner  adopted the  Codification  of Statutory
Accounting  Principles  (Codification)  for insurance  companies.  Codification,
which is intended to  standardize  regulatory  accounting  and reporting for the
insurance industry, was effective January 1, 2001. The effect on CCS's statutory
financial  statements for the  implementation  of  Codification is an additional
$453,187 of surplus  which is shown as a change in  accounting  principle in the
capital and surplus  section of the statutory  financial  statements of CCS as a
"cumulative change in accounting principle."


<PAGE>

                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                  --------------------------------------------


16.  Statutory Accounting Practices and Regulatory Requirements (continued)
     ----------------------------------------------------------------------

     Under  applicable  state  insurance  statutes,  CCS must  maintain  minimum
capital and surplus of $3,250,000 (as of December 31, 2002). In addition,  under
applicable state laws and  regulations,  CCS is restricted from paying dividends
to the extent of surplus  profits less any dividends  that have been paid in the
preceding  twelve  months or net  investment  income for the year,  whichever is
less,  unless the Company obtains prior approval from the Florida  Department of
Financial Services. As of December 31, 2002, no dividends from CCS are available
for payment to CTI without the prior  approval of the  Department  of Insurance.
The  more  significant  variances  between  statutory  reporting  and  generally
accepted  accounting  principles  are  deferred  policy  acquisition  costs  and
nonadmitted  assets.   Insurance  regulations  dictate  expensing   commissions.
Nonadmitted  assets  represent  non-liquid  assets  and are  excluded  from  the
statutory statement of admitted assets, liabilities and capital and surplus.

17.  Comprehensive Income
     --------------------

     Comprehensive  income is defined as any change in equity from  transactions
and other events originating from nonowner sources. The Company's  comprehensive
income is  comprised  of  reported  net  income and  changes  in the  unrealized
appreciation  of  available-for-sale  securities.  The following  summarizes the
components of comprehensive income:

<TABLE>
<CAPTION>

                                                                                Consolidated Statements of Comprehensive Income
                                                                                         For the Year Ended December 31,
                                                                    ----------------------------------------------------------------
                                                                           2002                      2001                      2000
                                                                    ----------------------------------------------------------------
<S>                                                                        <C>                   <C>                     <C>

Holding gains ........................................              $   281,385               $   253,529               $   262,046
Tax effect ...........................................                  (98,485)                  (88,735)                  (91,716)
Reclassification:
     Realized gains ..................................                  (66,239)                 (305,461)                  (38,381)
     Income tax ......................................                   23,184                   106,911                    13,433
                                                                    -----------               -----------               -----------
Other comprehensive income ...........................                  139,845                   (33,756)                  145,382
Net (loss) income ....................................               (1,569,169)                   58,368                 1,041,749
                                                                    -----------               -----------               -----------
Comprehensive (loss) income ..........................              $(1,429,324)              $    24,612               $ 1,187,131
                                                                    ===========               ===========               ===========
</TABLE>


<PAGE>





                  SCHEDULE II - CONDENSED FINANCIAL INFORMATION
                                  OF REGISTRANT
                                  -------------
                          CUMBERLAND TECHNOLOGIES, INC.


                                                             December 31,
                                                       -------------------------
Condensed Balance Sheets                                     2002           2001
------------------------                               -------------------------
Assets:
------
Investment in wholly-owned subsidiaries ..........     $3,508,968     $6,301,161
Other assets .....................................         43,012          1,973
Other investments ................................        700,124        640,872
Deferred income tax asset ........................        401,738        499,145
Income tax recoverable ...........................      1,073,686           --
Surplus debenture receivable from subsidiary .....      2,048,734      2,048,734
                                                       ----------     ----------
                                                       $7,776,262     $9,491,885
                                                       ==========     ==========
Liabilities:
-----------
Accounts payable to affiliates ...................     $1,280,663     $1,450,710
Income tax payable ...............................           --          113,284
Accounts payable .................................          8,320         11,288
                                                       ----------     ----------
                                                       $1,288,983     $1,575,282
                                                       ----------     ----------
Stockholders' equity:
--------------------
Common stock .....................................          5,916          5,916
Other stockholders' equity .......................      6,481,363      7,910,687
                                                       ----------     ----------
                                                       $6,487,279     $7,916,603
                                                       ----------     ----------
                                                       $7,776,262     $9,491,885
                                                       ==========     ==========

<TABLE>
<CAPTION>

                                                                                             Year Ended December 31,
                                                                       -------------------------------------------------------------
                                                                               2002                     2001                    2000
                                                                       -------------------------------------------------------------
<S>                                                                   <C>                      <C>                      <C>

Condensed Statements of Operations
----------------------------------
Revenue:
-------
Management fees from wholly-
   Owned subsidiaries .......................................            $   533,763             $   533,332             $   526,309
                                                                         -----------             -----------             -----------
                                                                             533,763                 533,332                 526,309
                                                                         -----------             -----------             -----------
Costs and expenses:
                                                                                                                         -----------
Operating expenses ..........................................                128,976                 175,161                 140,589
Interest expense to affiliates ..............................                 59,423                  69,198                 100,000
                                                                         -----------             -----------             -----------
                                                                             188,399                 244,359                 240,589
                                                                         -----------             -----------             -----------
Income before income taxes
   and equity in net income and
   extraordinary gain of subsidiaries........................                345,364                 288,973                 285,720
Income tax expense ..........................................                130,409                 109,116                 120,916
Equity in (loss) income of
   subsidiaries before extraordinary gains...................             (1,784,124)               (280,099)                876,945
Equity in extraordinary gain
   of subsidiaries ..........................................                   --                   158,610                    --
                                                                         -----------             -----------             -----------
Net income ..................................................            $(1,569,169)            $    58,368             $ 1,041,749
                                                                         ===========             ===========             ===========
</TABLE>




<PAGE>

                  SCHEDULE II - CONDENSED FINANCIAL INFORMATION
                            OF REGISTRANT (CONTINUED)
                            -------------------------
                          CUMBERLAND TECHNOLOGIES, INC.


Supplemental Schedule of Noncash Investing and Financing Activities
-------------------------------------------------------------------

     The  Company  operates  through  its  wholly-owned   subsidiaries  and  all
operating activities have been funded by its subsidiaries.

Notes to Condensed Financial Statements
---------------------------------------

1.   Organization and summary of significant accounting policies
     -----------------------------------------------------------

     Organization - Cumberland  Technologies,  Inc. ("CTI" or "the Company"),  a
Florida  corporation,  was formed on November 18, 1991, to be a holding  company
and a  wholly-owned  subsidiary of Kimmins Corp.  ("KC").  Effective  October 1,
1992,  KC  contributed  all  of  the  outstanding  common  stock  of  two of its
wholly-owned  subsidiaries,  Cumberland  Casualty & Surety  Company  ("CCS") and
Surety Specialists, Inc. ("SSI") to CTI. KC then distributed to its stockholders
CTI's  common  stock on the basis of one  share of common  stock of CTI for each
five  shares  of  KC  common   stock  and  Class  B  common   stock  owned  (the
"Distribution").  CTI conducts its business through its subsidiaries,  CCS, SSI,
Surety Group,  Inc. ("SG"),  Surety  Associates  ("SA"),  and Qualex  Consulting
Group, Inc.  ("Qualex") CCS, a Florida  corporation formed in May 1988, provides
performance and payment bonds for contractors and miscellaneous  surety bonds to
federal and local  government  agencies.  The surety services  provided  include
direct surety and, to a lesser extent,  reinsurance.  SSI, a Florida corporation
formed  in  August  1988,  is a  general  lines  agency  which  operates  as  an
independent agent. SG, a Georgia corporation,  and Associates  Acquisition Corp.
d/b/a Surety Associates, a South Carolina corporation,  purchased by the Company
in February and July 1995,  respectively,  are general lines insurance  agencies
which operate as independent  agencies.  Qualex, a Florida corporation formed in
November 1995, provides claim and contracting consulting services.

     For the years  ended  December  31,  2002,  2001 and 2000,  CTI charged its
subsidiaries, excluding CCS, a management fee.

2. Basis of Presentation - In the parent-company-only  financial statements, the
Company's   investment  in  subsidiaries  is  stated  at  cost  plus  equity  in
undistributed  earnings  of  subsidiaries  since  the date of  acquisition.  The
Company's  share of net income (loss) of its  subsidiaries is included in income
using the equity method. Parent-company-only financial statements should be read
in conjunction with the Company's consolidated financial statements.

     Investment in subsidiaries includes the net unrealized appreciation, net of
income tax in available-for-sale securities held by CCS, of $210,574 and $70,729
as of December 31, 2002 and 2001,  respectively.  These  amounts,  net of income
taxes, have been included in the CTI "other stockholders' equity" amounts.


<PAGE>


                  SCHEDULE II - CONDENSED FINANCIAL INFORMATION
                            OF REGISTRANT (CONTINUED)
                            -------------------------
                          CUMBERLAND TECHNOLOGIES, INC.


3.   Surplus Debenture Receivable from Subsidiary
     --------------------------------------------

     In 1988,  CCS issued a surplus  debenture to KC in exchange for  $3,000,000
which bears  interest at 10 percent per annum.  In 1992, the debenture due to KC
from CCS was  assigned to CTI.  Interest and  principal  payments are subject to
approval by the Florida Department of Financial Services.  On April 1, 1997, CTI
forgave $375,000 of its $3,000,000  surplus debenture due from CCS. As a result,
CCS  increased  paid-in-capital  by  $375,000.  On June 30,  1999,  CTI  forgave
$576,266  of its  $2,625,000  surplus  debenture  due from CCS as well as future
interest.  As a result,  CCS  increased  paid-in-capital  to  $1,000,000.  As of
December 31, 2002, no payments could be made under the terms of the debenture.

     In 2003,  CTI forgave the balance of its surplus  note to CCS in the amount
of $2,048,734.  As a result paid-in and contributed  surplus of CCS increased to
$3,048,734.


<PAGE>


                                 CERTIFICATIONS
                                 --------------

I, Joseph M. Williams, certify that:

1. I reviewed this annual report on Form 10-K of Cumberland Technologies, Inc.:

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

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

4.  The  registrant's  other  certifying  officer  and  I  are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a)   Designed  such  disclosure  controls  and  procedures  to  ensure  the
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;

     b)   Evaluated the  effectiveness of the registrant's  disclosure  controls
          and  procedures as of a date within 90 days prior to the filing ate of
          this annual report (the "Evaluation Date"; and

     c)   Presented in this annual report our conclusion about the effectiveness
          of the disclosure  controls and procedures  based on our evaluation as
          of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

     a)   All  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The registrant's other certifying officers and I have indicated to this
     annual report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.



Date:  May 6, 2003                                 By:/s/ JOSEPH M. WILLIAMS
                                                   -----------------------------
                                                   Joseph M. Williams, President


<PAGE>



                                 CERTIFICATIONS
                                 --------------

I, Carol S. Black, certify that:

1. I reviewed this annual report on Form 10-K of Cumberland Technologies, Inc.:

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

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

4.  The  registrant's  other  certifying  officer  and  I  are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a)   Designed  such  disclosure  controls  and  procedures  to  ensure  the
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;

     b)   Evaluated the  effectiveness of the registrant's  disclosure  controls
          and  procedures as of a date within 90 days prior to the filing ate of
          this annual report (the "Evaluation Date"; and

     c)   Presented in this annual report our conclusion about the effectiveness
          of the disclosure  controls and procedures  based on our evaluation as
          of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

     a)   All  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated to this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.



Date:  May 6, 2003                    By:/s/ CAROL S. BLACK
                                      ------------------------------------------
                                      Carol S. Black
                                      Secretary and
                                      Principal Financial and Accounting Officer