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, 2000
                                       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 NASDAQ Stock Market

               Securities registered pursuant to Section 12(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]

                                   $2,180,180
                    ----------------------------------------
Aggregate  market value of voting stock (Common Stock) held by  nonaffiliates of
the Registrant as of March 9, 2001

                5,553,244 shares of Common Stock $.001 par value
        ----------------------------------------------------------------
        Number of shares of Common Stock outstanding as of March 9, 2001

                    Documents incorporated by reference: NONE



<PAGE>


                                     PART I
                                     ------


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

         General
         -------

     Cumberland  Technologies,  Inc. ("CTI" or "Cumberland"),  (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 speciality 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.  Traditionally,  this  segment of the
surety industry has delivered its products through an antiquated manual process.
Because  of this  need to  advance  technologically,  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-six  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 Cumberland 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 15 to 40
percent.

     In addition,  SSI generates  additional revenues through a joint partnering
agreement with St. Paul, Fire and Marine Group, f/k/a United States Fidelity and
Guaranty  Company  ("St.  Paul") to pursue  small to medium  size  contract  and
commercial  surety business on a country wide basis (the "St. Paul  Agreement").
The St. Paul Agreement  allows SSI to solicit surety business in states in which
CCS is not licensed,  thereby significantly  increasing the Company's geographic
spread of risk.  It also  facilitates  St. Paul agents  access to the  Company's
Bond-Pro(R)  issuance  system.  CCS  participates  in  the  St.  Paul  Agreement
underwriting risk through a retrocessional 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, 2000 are as follows:

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

         CCS............................          84%
         SSI............................           2%
         Qualex.........................           8%
         SA.............................           2%
         SG.............................           4%
                                              -----------
                                                 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 $500,000 with aggregate
ongoing  work of $1  million.  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 are 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.  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
secured 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. CTI offers its Bond-Pro(R) program to small and medium
size agencies in order to produce premiums for CCS. 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, publicly traded securities and trustees or mortgages on real property.
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
     -----------

     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.  Under the Transatlantic  Treaty, CCS retains risk no greater than 5%
of $2,700,000 or $145,000 per principal.  Under the  Transatlantic  Treaty,  the
reinsurer automatically assumes the risk of losses and 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.

     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.

     On a  limited  basis,  CCS  also  assumes  and  cedes  reinsurance  through
facultative and treaty agreements from other sureties.  The loss of one of these
customers or resources would not have a material impact on the operations of the
Company.  From October 1991 through May 1, 1997, CCS  participated  in a pooling
agreement with various  sureties,  which specialized in writing contract surety.
Effective to April 1, 1993, CCS assumed 25% of the business  underwritten by the
pooling  agreement;  12.5%  effective  April 1, 1995 and 10% effective  April 1,
1996.  Effective  April 1997, CCS elected not to participate in future  business
under the pooling agreement.

<PAGE>

     Reserves
     --------

     Reserves for losses and loss adjustment expenses are established based upon
reported  claims and historical  industry loss  development.  The amount of 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 2000, there were no material changes in the mix of business or types
of risk assumed.  However, the Company was effective in spreading the geographic
mix of the business.

     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.

     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.

<PAGE>


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

     Marketing
     ---------

     The Company  principally  markets its products in  twenty-six  states,  the
District of  Columbia  and Guam in which it is licensed  and  indirectly  in all
other states through its joint partnering  agreement with St. Paul. 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.
On occasion,  CCS will write business  directly with the customer,  but does not
actively seek such business.  The Company 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.

     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. While the
surety industry has experienced  slow premium growth,  competition has increased
as a result of 10 years of profitable underwriting experience.  This competition
has typically  manifested  itself through  reduced  premium  rates,  and greater
tolerance for relaxation of  underwriting  standards.  Management  believes such
competition will continue.

     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.

<PAGE>


     CCS is  domiciled  in Florida and  licensed in 26 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 level 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, 2000
and met the standards under the NAIC guidelines.

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

     Francis Williams, and "KC" (collectively "Majority Shareholder") owns 79.4%
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 judgement, could enhance their equity investment, even
though such  transactions  might involve risk to the other holders of the common
stock.

     Employees
     ---------

     On December 31, 2000,  the Company had 44 employees.  All are employed on a
full-time basis. None of the Company's employees are union members or subject to
collective  bargaining  agreements.  The  Company  believes  that  it  enjoys  a
favorable relationship with its employees

<PAGE>


     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 $12,123, pursuant to a lease that was executed
June 1, 1999 and is effective through May 31, 2009. Effective March 1, 2001, the
monthly rate will be $13,252 as a result of increased square footage.


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

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

     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.

     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 (the
Navy). Pursuant to this contract, the Company, as surety, executed and delivered
to the Navy certain  performance and payment bonds (the Bonds). At the time that
the Bonds were issued,  KC entered into an  indemnification  agreement  with the
Company,  whereby KC indemnified the Company from any and all losses, costs, and
expenses incurred related to the Bonds. In 1991, the Navy default and terminated
AEC on the contract.  The contract has been in litigation  since the termination
in 1991  generating  a  subrogation  receivable  in the amount of  approximately
$1,851,000 and $1,768,000 as of December 31, 2000,  and 1999,  respectively.  In
the event that the Company is unsuccessful in its litigation activities with the
Navy,  management of the Company believes that KC will reimburse the Company for
the losses and expenses incurred related to the Bonds.

<PAGE>


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

Edward J. Edenfield, IV ....   President               CCS     05/1996 to date
                               President               SSI     06/1997 to date
                               President               SG      01/1998 to date
                               President               SA      01/1998 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,
Cumberland  was  approved  and  included in the  trading on the Nasdaq  SmallCap
Market.  High and Low bid  prices  were set  forth in  Quotation  Market  Sheets
published  by  Nasdaq.  The high and low bid  prices  for 2000 and 1999  were as
follows:


                                     Bid Information
                           ------------------------------------
                                 2000               1999
                           ------------------------------------
                            High     Low       High      Low
                           ------------------------------------
First Quarter ..........   $2 3/4  $ 1 5/8   $ 2 5/8   $ 1 3/4

Second Quarter .........    2 1/8    1 9/16    2 3/8     1 7/8

Third Quarter ..........    2 3/32   1 5/8     2 1/8     1 7/8

Fourth Quarter .........    2 7/8    1 1/4     2 3/8     1 1/2

     As of March 1, 2001,  there were 830  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.  Cumberland  does  not  anticipate  paying  any  dividends  on
Cumberland 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
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 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>
Statement of Operations Data:
-----------------------------
                                                                        Year Ended December 31,
                                                    ------------ ------------ ------------- ------------ ------------
                                                           2000         1999         1998          1997         1996
                                                    ------------ ------------ ------------- ------------ ------------
                                                                 (In Thousands - except per share data)
 <S>                                              <C>         <C>          <C>           <C>         <C>
Operating data:
--------------
    Net premium income.......................       $    12,128  $     9,618  $    7,534    $     5,684  $    3,808
    Commission income........................               387          474         710            860       1,386
    Other income.............................             1,296          901         827            616         653
    Net investment income....................               576          333         377            408         404
    Net realized investment gain (losses)....                38          129        (437)           202         118
    Benefits and expenses....................            12,619       10,270       9,332          7,599       6,952
    Income (loss) before income taxes........             1,806        1,185        (321)           171        (583)
    Net income (loss)........................             1,042        1,148        (321)           171        (583)
Net income (loss) per share .................       $       .19  $       .21  $     (.06)   $       .03  $     (.14)

</TABLE>

<TABLE>
<CAPTION>
Balance Sheet Data:
                                                                        Year Ended December 31,
                                                    ------------ ------------ ------------- ------------ ------------
                                                           2000         1999         1998          1997         1996
                                                    ------------ ------------ ------------- ------------ ------------
                                                                             (In thousands)
<S>                                                <C>           <C>          <C>           <C>          <C>
Balance sheet data:
------------------
    Investments..............................       $     9,955  $     8,394  $    3,987    $     6,469  $    6,110
    Cash and cash equivalents................               694        2,000       4,202          1,804         669
    Accrued investment income................               185           66          55              -           -
    Accounts receivable......................             4,258        3,301       3,105          1,966         925
    Reinsurance recoverable..................             4,910        2,898       2,306          2,017       1,590
    Deferred policy acquisition costs........             1,955        1,601       1,247            813         635
    Intangibles..............................             1,115        1,267       1,456          1,681       1,957
    Other investment.........................               583          559         553            244           -
    Deferred tax asset.......................               175          305           -              -           -
    Income tax recoverable...................               168            -           -              -           -
    Other assets.............................               311          315          354           327          486
    Total assets.............................       $    24,309  $    20,706  $    17,265   $    15,321  $    12,372

Policy liabilities and accruals:
-------------------------------
    Unearned premiums........................       $     5,775        4,844        3,750         2,629        1,862
    Losses and LAE...........................             5,186        4,577        3,220         2,550        1,992
    Ceded reinsurance and accounts
       payable...............................             3,359        2,277        2,615         2,714        1,172
    Income tax payable.......................                 -           35            -             -            -
    Term note to affiliate...................             1,000        1,000        1,000             -            -
    Other debt...............................             1,103        1,281        1,331         1,419        1,533
    Total liabilities........................            16,423       14,014       11,916         9,312        6,559
    Total stockholders' equity...............       $     7,886  $     6,692  $     5,349   $     6,009   $    5,813

</TABLE>


<PAGE>

<TABLE>
<CAPTION>
Item 7.   Management's  Discussion and Analysis of Financial Condition and
-------   Results of Operations
          ---------------------------------------------------------------------

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.

                                                                                            Percentage Increase
                                                                                                 (Decrease)
                                                 Year Ended December 31,                  Year Ended December 31,
                                       -----------------------------------------------------------------------------
                                              2000            1999           1998          2000           1999
                                       -----------------------------------------------------------------------------
                                                                      (In thousands)
<S>                                    <C>            <C>           <C>                   <C>          <C>

Net premium income...................  $    12,128    $      9,618  $       7,534          26.1%         27.7%
Net investment income................          576             333            377          73.0%       (11.7)%
Net realized investment gains
    (losses).........................           38             129           (437)       (70.5)%        129.5%
Other revenues.......................        1,682           1,375          1,537          22.3%       (10.5)%
Losses and loss adjustment
    expenses.........................        3,360           2,395          2,648          40.3%        (9.6)%
Amortization of deferred
    acquisition costs................        3,767           2,895          2,252          30.1%         28.6%
General expenses and taxes...........        5,491           4,980          4,432          10.3%         12.4%
Income (loss) before income
    taxes............................        1,806           1,185           (321)         52.4%        469.2%
Income tax expense ..................          764              37              -       1,964.9%           -
Net income (loss)....................        1,042           1,148           (321)        (9.2)%        457.6%

</TABLE>

      Year Ended December 31, 2000 Compared to Year Ended December 31, 1999
      ---------------------------------------------------------------------

     Written direct and assumed  premiums  reached a record  $16,168,734  during
2000. Overall written premiums,  net of ceded premiums,  increased by $2,160,885
or 21%. Earned  premiums  increased by $2,510,161 or 26% to $12,127,953 for 2000
compared to $9,617,792 for 1999. The increase in earned  premiums  resulted from
CCS's continued growth in the direct surety bond market.

     During 2000, premiums written by CCS increased as a result of the continued
marketing  direction of the Company,  which is to  penetrate  the direct  market
while  decreasing the volume of reinsurance  premiums  assumed  through  pooling
agreements.  CCS's  reinsurance  assumed  premium  is a result  of  quota  share
agreements  whereby  CCS assumes a portion of the  premiums  written by agencies
contracted to produce business using Cumberland's  Bond-Pro(R) issuance program.
The increase in ceded premiums is correlated to the direct  premium  written and
the  association  to excess of loss  treaties on these  premiums.  The following
table reflects the written premium activity,  net of reinsurance ceded, for 2000
and 1999.

                                                  Written Premiums
                                ------------------------------------------------
                                        2000                 1999      % Change
                                ------------------------------------------------
Direct .................        $ 13,775,266         $ 10,816,114         27.4%
Assumed ................           2,393,468            2,421,346        (1.2)%
Ceded ..................          (3,510,537)          (2,740,148)        28.1%
                                ------------         ------------         ----
Total ..................        $ 12,658,197         $ 10,497,312         20.6%
                                ============         ============         ====
<PAGE>

     During the year ended  December 31, 2000 and 1999,  net  investment  income
earned was $576,406 and $333,462, respectively. Net realized gains for the years
ended  December 31, 2000 and 1999 were $38,381 and $129,101,  respectively.  The
increase in net investment income is attributed to a reallocation of investments
from money market funds to the bond portfolio. Net realized gains includes other
than temporary losses of $231,686 from certain investments.

     Other  revenue  consists  primarily  of  commissions  earned by  subsidiary
agencies and fee revenue earned by a subsidiary claims consulting group. For the
year ended December 31, 2000, other revenues increased by $307,249 or 22%, which
is  attributable  to  increased  business  by  the  Company's  claim  consulting
subsidiary.

     Losses and loss adjustment expenses increased to $3,360,258 from $2,394,532
for the year ended  December  31, 2000 and 1999,  respectively.  The increase of
$965,726  or 40.3%  is  attributed  to  claims  arising  from  increased  direct
writings. Losses as a percentage of earned premiums were 27.7% and 24.9% for the
years ended December 31, 2000 and 1999,  respectively.  Direct  incurred  losses
increased  $1,498,196  or  89.0%  while  losses  under  the  assumed  agreements
decreased  $475,117 or 72.7% when  comparing  current  year to prior  year.  The
following  tables  reflects the 2000 activity as it pertains to earned  premiums
and incurred claims:

                                     -------------------------------------------
                                     Premiums Earned    Claims Incurred    Ratio
                                     -------------------------------------------
Direct, net .................        $ 9,647,241        $ 3,182,274        33.0%
Assumed, net ................          2,480,712            178,084         7.2%
                                     -----------        -----------        ----
Total .......................        $12,127,953        $ 3,360,358        27.7%
                                     ===========        ===========        ====

     During the year ended  December 31, 2000 the net  amortization  of deferred
policy  acquisitions  costs increased to $3,767,107 from $2,895,834 for the year
ended  December 31, 1999.  The increase is  attributed to the increase in earned
premiums.

     During the year ended  December  31,  2000,  operating  expenses and taxes,
licenses  and  fees  (excluding  income  taxes)  increased  to  $5,288,520  from
$4,766,101  in 1999.  The  increase of $522,419 or 11% is a result of  increased
salary  expense  including  bonuses,  payroll  taxes and  employee  benefits  of
$617,066 and a decrease in general office  expenses of $94,647.  The increase in
salary  and  consulting  expenses  is  attributable  to the  cost of  additional
personnel and results from the Company's growth.

     Interest  expense on  non-affiliated  debt is  interest  paid to the Surety
Group and Surety  Associates  on notes due to agencies the Company  purchased in
1995.

     The  Company  incurred  income tax  expenses  during  2000 of  $764,390  as
compared  to $36,686  during  1999.  The income tax  expense  for the year ended
December 31, 1999 includes the reversal of a valuation allowance of $466,799.


      Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
      ---------------------------------------------------------------------

     Written direct and assumed  premiums  reached a record  $13,237,460  during
1999. Overall written premiums,  net of ceded premiums,  increased by $1,922,427
or 22%.  Earned  premiums  increased by $2,084,108 or 28% to $9,617,792 for 1999
compared to $7,533,684 for 1998. The increase in earned  premiums  resulted from
CCS's continued growth in the direct surety bond market.

<PAGE>


     During 1999, premiums written by CCS increased as a result of the continued
marketing  direction of the Company,  which is to  penetrate  the direct  market
while  decreasing the volume of reinsurance  premiums  assumed  through  pooling
agreements.  CCS's  reinsurance  assumed  premium  is a result  of  quota  share
agreements  whereby  CCS assumes a portion of the  premiums  written by agencies
contracted to produce business using Cumberland's  Bond-Pro(R) issuance program.
The increase in ceded premiums is correlated to the direct  premium  written and
the  association  to excess of loss  treaties on these  premiums.  The following
table reflects the written premium activity,  net of reinsurance ceded, for 1999
and 1998.

                                                 Written Premiums
                                ------------------------------------------------
                                        1999                 1998       % Change
                                ------------------------------------------------
Direct .................        $ 10,816,114         $  9,451,746          14.4%
Assumed ................           2,421,346            1,478,109          63.8%
Ceded ..................          (2,740,148)          (2,354,970)       (16.4)%
                                ------------         ------------        ------
Total ..................        $ 10,497,312         $  8,574,885          22.4%
                                ============         ============        ======

     During the year ended  December 31, 1999 and 1998,  net  investment  income
earned was $333,462 and  $377,218,  respectively.  Realized net losses and gains
for the years ended  December 31, 1999 and 1998 were  $129,101  and  $(437,565),
respectively.  CCS wrote down its investment in certain equity securities during
the fourth  quarter of 1998 as management  determined the decline in value to be
other than  temporary.  As a result,  CCS  recorded a loss of  $580,360 in 1998,
which was offset by net capital gains of $142,795.

     Other  revenue  consists  primarily  of  commissions  earned by  subsidiary
agencies and fee revenue earned by a subsidiary claims consulting group. For the
year ended December 31, 1999, other revenues  decreased by $162,145 or 11% which
is attributable  to the transfer of direct  writings by subsidiary  agencies for
other carriers in 1998 to CCS in 1999.

     Losses and loss adjustment expenses decreased to $2,394,532 from $2,648,074
for the year ended  December  31, 1999 and 1998,  respectively.  The decrease of
$253,542  or 9.6% is  attributed  to a decrease  on claims  incurred  on assumed
pooling  business.  Direct  incurred losses  increased  $423,081 or 183.9% while
losses under the assumed pooling agreements decreased $981,978 or 94.5%. Assumed
claims on the expired  pooling  agreements  were impacted  during 1998 by losses
incurred of $1,039,232.  The following  tables  reflects the 1999 activity as it
pertains to earned premiums and incurred claims:

                                    --------------------------------------------
                                    Premiums Earned    Claims Incurred     Ratio
                                    --------------------------------------------
Direct, net ......................       $7,538,112       $1,684,078       22.3%
Assumed, net .....................        2,079,680          653,201       31.4%
Assumed (pooling) net ............             --             57,253         --
                                         ----------       ----------       ----
Total ............................       $9,617,792       $2,394,532       24.9%
                                         ==========       ==========       ====

     During the year ended  December 31, 1999 the net  amortization  of deferred
policy  acquisitions  costs increased to $2,895,834 from $2,252,195 for the year
ended  December 31, 1998.  The increase is  attributed to the increase in earned
premiums.

<PAGE>

     During the year ended  December  31,  1999,  operating  expenses and taxes,
licenses  and  fees  (excluding  income  taxes)  increased  to  $4,766,101  from
$4,313,278  in 1998.  The  increase of $452,823 or 10% is a result of  increased
salary  expense  including  bonuses,  payroll  taxes and  employee  benefits  of
$112,550;  travel expenses of $102,665;  increased  taxes,  licenses and fees of
$141,370 and general office expenses of $96,238. The increase in salary,  travel
and related  expenses is the cost of additional  personnel  consistent  with the
Company  growth  while the  increase  in taxes,  licenses  and fees  expenses is
attributed to increased premiums written.

     Interest  expense on  non-affiliated  debt is  interest  paid to the Surety
Group and Surety  Associates  on notes due to agencies the Company  purchased in
1995.

     The Company incurred income tax expenses during 1999 of $36,686. Due to tax
loss  carryforwards,  the  Company  did  not  incur  income  tax  expense  on  a
consolidated basis for the year ended December 31, 1998.

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 Insurance, the Company is permitted to write net premiums up to an
amount equal to three times its statutory surplus, or approximately  $16,324,000
at December 31, 2000.  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 $4,177,000.

     At December 31, 2000, the Company's  $24,309,585 of total assets calculated
were  distributed  primarily as follows:  44.6  percent in cash and  investments
(including  accrued  investment   income),   37.7  percent  in  receivables  and
reinsurance  recoverables,  12.6  percent in  intangibles  and  deferred  policy
acquisition  costs, 1.4 percent in deferred income tax asset  (including  income
tax recoverable) and 3.7 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  provided  by  (used  in)  operating   activities  was  $214,494,
$1,965,077 and $(193,734) for the years ended December 31, 2000,  1999 and 1998,
respectively.  In 2000, the cash provided by operating  activities was primarily
attributed to a increase in policy  liabilities and accruals.  In 1999, the cash
provided by operating activities was primarily  attributable to increases in net
income and accrued policy  liabilities on claims and  reinsurance.  In 1998, the
decrease in cash provided by operating  activities is primarily attributed to an
increase in receivables of $1,422,588 and income taxes recoverable of $120,000.

     Net cash (used in)  provided  by  investing  activities  was  $(1,316,601),
$(4,133,973)  and  $1,410,318  for the years ended  December 31, 2000,  1999 and
1998,  respectively.  Investing  activities  consist  primarily of purchases and
sales of investments.

<PAGE>


     Net cash  (used  in)  provided  by  financing  activities  was  $(204,262),
$(33,308) and $1,182,237  for the years ended December 31, 2000,  1999 and 1998,
respectively.  Financing  activities  consist primarily of purchases of treasury
stock,  long-term and short-term  borrowings and repayment on borrowings  during
2000, 1999 and 1998.

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 are  determined  using  case-basis  evaluations  and  statistical
projections  and  represent  estimates  of the  ultimate  net cost of all unpaid
losses and LAE  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 2000, 1999 and 1998 to
the gross amounts reported in Cumberland's balance sheets:

<TABLE>
<CAPTION>

                                                                              December 31,
                                                     ---------------------------------------------------------------
                                                                   2000                1999                 1998
                                                     ---------------------------------------------------------------
<S>                                                 <C>                   <C>                 <C>
Liability for losses and LAE, net of reinsurance
   recoverable on unpaid losses, at beginning
   of year.........................................  $        2,808,727   $       1,680,580    $       1,392,931
                                                     ------------------   -----------------    -----------------
Provision for losses and LAE for claims occurring
   in the current year, net of reinsurance.........           4,363,435           2,810,532            2,331,074
(Decrease) increase in estimated losses and LAE for
   claims occurring in prior years, net of
   reinsurance.....................................          (1,003,077)           (416,000)             317,000
                                                     -------------------  ------------------   -----------------
Incurred losses during the current year, net of
   reinsurance.....................................           3,360,358           2,394,532            2,648,074
Losses and LAE payments for claims, net of
   reinsurance, occurring during:
   Current year....................................           2,450,587             135,635              557,997
   Prior years.....................................             383,749           1,130,750            1,802,428
                                                     ------------------   -----------------    -----------------
                                                              2,834,336           1,266,385            2,360,425
Liability for losses and LAE, net of reinsurance
   recoverable on unpaid losses, at end of year....           3,334,749           2,808,727            1,680,580
Reinsurance recoverables on unpaid losses at end of
   year............................................           1,850,877           1,767,812            1,539,877
                                                     ------------------   -----------------    -----------------
Liability for losses and LAE, gross of reinsurance
   recoverables on unpaid losses, at end of year...  $        5,185,626   $       4,576,539    $       3,220,457
                                                     ==================   =================    =================

</TABLE>


     Cumberland  experienced  $1,003,077  and  $416,000  in  redundancies  and a
$317,000  deficiency for losses and loss  adjustment  expenses in 2000, 1999 and
1998 respectively. The redundancies principally result from subrogation received
on  pooling  agreement  case  base  reserves  and  claims  in prior  years.  The
deficiency  in 1998  principally  results  from  settling  case  basis  reserves
established in prior years for amounts that were more than expected.

<PAGE>

     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, 2000 liability for losses and LAE
reported in the  accompanying  consolidated  financial  statements in accordance
with generally accepted accounting  principles ("GAAP") and that reported in the
annual  statement filed with the state insurance  departments in accordance with
statutory accounting practices ("SAP") are as follows:

Liability for losses and LAE on a SAP basis (which is net of
   reinsurance recoverables on unpaid losses and LAE) .............   $3,334,749
Reinsurance recoverables on unpaid losses and LAE .................    1,850,877
                                                                      ----------
Liability for losses and LAE, as reported in the accompanying
   GAAP basis consolidated financial statements ...................   $5,185,626
                                                                      ==========

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 1993 through 2000 (in thousands).

<TABLE>
<CAPTION>

                                    1993       1994       1995       1996       1997       1998       1999       2000
                                --------   --------   --------   --------   --------   --------   --------   --------
<S>                             <C>        <C>        <C>        <C>       <C>        <C>         <C>       <C>
Liability for losses and loss
  adjustment expenses, net
  of reinsurance.............   $  1,709   $  1,625   $  1,053   $    595   $  1,393   $  1,680   $  2,809   $  3,335
Liability re-estimated as of:
  One year later.............      3,815      1,384      1,716        644      1,710      1,264      1,806          -
  Two years later............      2,579      1,420      1,815      1,013      1,711        655          -          -
  Three years later..........      2,750      1,631      2,049      1,121      1,237          -          -          -
  Four years later...........      2,851      1,726      2,036        818          -          -          -          -
  Five years later...........      3,176      1,625      1,721          -          -          -          -          -
  Six years later............      3,139      1,328          -          -          -          -          -          -
  Seven years later..........      2,941          -          -          -          -          -          -          -
                                --------   --------   --------   --------   --------   --------   --------   --------
Cumulative (deficiency)
  redundancy.................   $ (1,232)  $    297   $   (668)  $   (223)  $    156   $  1,025   $  1,003   $  3,335
                                ========   ========   =========  =========  ========   ========   ========   ========

                                   1993        1994       1995       1996       1997       1998       1999       2000
                                --------   --------   --------   --------   --------   --------   --------   --------
Cumulative amount of
  liability, net of
  reinsurance recoverables,
  paid through:
     One year later..........   $   765    $  1,643   $  1,334   $    563   $  1,802   $  2,155   $  2,196   $       -
                                ========   ========   ========   ========   ========   ========   ========   =========
     Two years later.........   $ 1,058    $  2,316   $  2,186   $  1,631   $  2,856   $  1,878   $      -   $       -
                                ========   ========   ========   ========   ========   ========   ========   =========
     Three years later.......   $ 2,868    $  2,164    $ 2,997   $  2,466   $  2,575   $      -   $      -   $       -
                                ========   ========   ========   ========   ========   ========   ========   =========
     Four years later........   $ 3,717    $  2,875   $  3,506   $  2,336   $      -   $      -   $      -   $       -
                                ========   ========   ========   ========   ========   ========   ========   =========
     Five years later........   $ 4,442    $  3,230   $  3,360   $      -   $      -   $      -   $      -   $       -
                                ========   ========   ========   ========   ========   ========   ========   =========
     Six years later.........   $ 4,804    $  3,062   $      -   $      -   $      -   $      -   $      -   $       -
                                ========   ========   ========   ========   ========   ========   ========   =========
     Seven years later.......   $ 4,769    $      -   $      -   $      -   $      -   $      -   $      -   $       -
                                ========   ========   ========   ========   ========   ========   ========   =========
</TABLE>

<PAGE>

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, 2000 and
1999:
<TABLE>
<CAPTION>
                                                                                  2000 Expected Maturity Date
                                                                                  ---------------------------
                                                                                                                         Fair
                                                                                                      There-             Value
                                                    2001     2002      2003       2004     2005       after   Total     12/31/00
                                                 -----------------------------------------------------------------------------------
                                                                     (In thousands)
<S>                                               <C>      <C>      <C>        <C>       <C>        <C>      <C>       <C>
Assets
Debt securities available for sale ............. $  498    $  504   $  2,410   $  2,051   $  1,152   $  938   $ 7,553   $   7,553
   Average interest rate .......................    5.5%      6.4%       5.9%       6.2%       7.3%     7.3%      6.4%        6.4%

Debt securities held to maturity ...............    865       --         259        100         --       --     1,224       1,224
   Average interest rate .......................    6.3%      --         5.5        5.5%        --       --       5.8%        5.8%

Mortgage loans .................................    701         1          2          2          2       34       742         742
   Average interest rate .......................     .5%      7.5%       7.5%       7.5%       7.5%     7.5%      6.3%        6.3%

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

Liabilities
Debt including current
   portion ..................................... $1,184   $   189   $     70   $     77   $     84   $  499   $ 2,103    $  2,103
   Average interest rate .......................    9.0%      7.7%       8.6%       8.5%       8.4%     8.0%      8.4%        8.4%



</TABLE>

<PAGE>


<TABLE>
<CAPTION>


                                                              1999 Expected Maturity Date
                                                              ---------------------------

                                                                                                                              Fair
                                                                                                          There-             Value
                                                        2000       2001      2002       2003    2004      after     Total  12/31/99
                                                   ---------------------------------------------------------------------------------
                                                                     (In thousands)
<S>                                                <C>          <C>       <C>         <C>       <C>       <C>       <C>       <C>
Assets
Debt securities available for
   sale ........................................   $   3,099    $   --    $    --     $   121   $   --     $  478    $3,698  $3,698
   Average interest rate .......................         5.8%       --         --         5.8%      --        6.1%      5.9%    5.9%

Debt securities held to maturity ...............       1,500       865         --         255       95         --     2,715   2,715
   Average interest rate .......................         5.9%      6.3%        --         5.5%     5.5%        --       5.8%    5.8%

Mortgage loans .................................         896         1          1           2        2         38       940     940
   Average interest rate .......................         8.9%      7.5%       7.5%        7.5%     7.5%       7.5%      7.7%    7.7%

Short-term investments .........................         430        --         --          --       --         --       430     430
   Average interest rate .......................         4.7%       --         --          --       --         --       4.7%    4.7%

Liabilities
Debt including current
   portion .....................................   $     183    $1,184    $   183     $    70    $   84     $ 577     $2,281 $2,281
   Average interest rate .......................         9.4%      9.4%       9.7%        9.0%      8.0%      8.0%       8.4%   8.4%

</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  that  closely  parallel's  the money
market interest rate scenario.

     Additionally,  the risk that the Company's results of operations may suffer
from rapid changes in interest rates is  substantially  mitigated as a result of
all of the Company's  interest-earning  assets and interest-bearing  liabilities
being written at fixed rates.

     SFAS No. 133, Accounting for Derivative  Instruments and Hedging Activities
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 is speculative
in nature and was formerly  accounted  for as an insurance  contract  within the
policy  liabilities  for  loss  and  loss  adjustment  expenses  account  in the
consolidated balance sheet. The transition adjustment of approximately  $600,000
will be  reclassified  from the policy  liabilities for loss and loss adjustment
expenses  account to a liability for derivative  instruments  account within the
consolidated  balance  sheet.  The  adoption of SFAS 133 did not have a material
adverse impact on the results of operations,  financial position or liquidity of
the Company.

<PAGE>


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

     The consolidated  financial statements of the Company required by this Item
are listed in Item 14(a)(1) and (2) and are  submitted as a separate  section of
this report.

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

     On January 3, 2000,  the Company filed a Form 8-K to register its change in
certifying accountant.

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

     The current directors and executive officers of Cumberland are as follows:

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

Francis M. Williams ............      59      Chairman of the Board of Directors
Joseph M. Williams .............      44      President and Treasurer
Andrew J. Cohen ................      47      Director
R. Donald Finn .................      57      Director
Edward J. Edenfield IV .........      43      President, CCS

     All  Directors of Cumberland  hold office until the next annual  meeting of
stockholders and the election and qualification of their successors. Officers of
Cumberland 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 Cumberland:

     Francis M. Williams has been Chairman of the Board of Cumberland  since its
inception and, until June 1992,  was President of Cumberland.  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 been the  Secretary,  Treasurer  and a Director of
Cumberland  since its  inception  and  since  June  1992 has been  President  of
Cumberland.  In addition,  Mr.  Williams has been the Secretary and Treasurer of
Kimmins Corp. since October 1988, the Vice President,  Secretary,  and Treasurer
of CCS since April 1989,  and Vice  President,  Secretary,  and Treasurer of SSI
since August,  1989.  From June 1985 through  October 1988, Mr. Williams was the
secretary of Kimmins Corp. a predecessor  of KC. Mr.  Williams has been employed
by the Company and Kimmins Corp. in various  capacities since January 1984. From
January  1982 to December  1983,  he was the  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 & Co.
Joseph M. Williams is the nephew of Francis M. Williams.

<PAGE>


     Edward J.  Edenfield,  IV is the President and Chief  Operating  Officer of
Cumberland Casualty & Surety Company. Mr. Edenfield joined Cumberland Casualty &
Surety Company in May of 1996 as Chief  Operating  Officer,  and was promoted to
President in September of 1996.  He brings over sixteen (16) years of management
experience in the insurance industry, specializing in contract and miscellaneous
surety  bonds.  Prior to his  involvement  with  Cumberland,  Mr.  Edenfield had
various  management and senior management  positions in the insurance  industry.
Mr.  Edenfield began his career in 1980 with  Continental  Insurance  Company in
their New York home  office.  Within  the last five  years  prior to  Cumberland
Casualty & Surety Company, Mr. Edenfield has held the position of Assistant Vice
President in charge of surety at Meadowbrook Insurance Group from August 1995 to
May 1996;  Vice  President  in charge of  underwriting  at  Universal  Surety of
America  from  October  1994  to  August  1995;  Vice  President  in  charge  of
underwriting  at American  Bonding  Company from January 1992 to September 1994,
and Assistant  Secretary in charge of treaty and  facultative  reinsurance  from
March 1992 to December 1992. Mr.  Edenfield  completed his bachelor's  degree in
Business Administration with an emphasis in Economics from Lycoming College. Mr.
Edenfield is presently a Board Member of The American Surety Association, and is
involved in the National Association of Independent Sureties, as well as being a
member of the National  Association of Surety Bond Producers.  Mr.  Edenfield is
responsible  for  administration  and  finance of the  insurance  operations  at
Cumberland.

     Andrew J. Cohen was elected as a Director to  Cumberland'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.
Since June of 1972, Mr. Cohen has been co-President of ABC Fabric of Tampa, Inc.
which is now the fourth  largest  private  retail  fabric  company in the United
States.  Mr. Cohen  brings both  national  marketing  and  corporate  management
experiences to Cumberland.

     R. Donald Finn was elected as a Director to  Cumberland'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, 2000 all filing requirements applicable to its officers,
directors, and greater than 10 percent beneficial owners were complied with.


<PAGE>

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, 2000:

<TABLE>
<CAPTION>

                                                                                                            Long-Term Compensation
                                                                                                            ----------------------
                                                                                              Stock             All Other
                                                               Annual Compensation           Options           Compensation
                                                               -------------------           -------           ------------

Name of Individual and
Principal Position                                   2000          1999          1998         2000      2000      1999       1998
-----------------------------                      --------      --------      --------      ------     -----      ------    ----
<S>                                               <C>            <C>           <C>            <C>        <C>       <C>       <C>
Joseph M. Williams
President and Treasurer, CTI
   Salary ..................................      $ 95,000      $ 95,000      $ 95,000          --        $--      $--        $--
   Bonus ...................................      $ 64,000      $ 60,000      $ 30,000          --        $--      $--        $--

Edward J. Edenfield IV
President and CEO, CCS
   Salary ..................................      $115,000      $115,000      $116,731        10,000      $--      $--        $--
   Bonus ...................................      $ 50,500      $ 35,000      $ 25,000          --        $--      $--        $--


</TABLE>

Aggregate Option Exercises in 2000 and December 31, 2000 Option Values
----------------------------------------------------------------------

     The  following  table  shows  information  concerning  options  held by the
officers shown in the Summary  Compensation Table at the end of 2000. Mr. Joseph
M. Williams exercised 56,000 options in 2000.

                                                        Value of Unexercised
                        Number of Securities                In-the-Money
                       Underlying Unexercised              Options at Fiscal
                      Options at Fiscal Year End            Year End ($)(1)
Name                (#)Exercisable/Unexercisable      Exercisable/Unexercisable
----                ----------------------------      -------------------------

Joseph M. Williams                44,000/0                 $82,500/0
Edward J. Edenfield, IV           22,000/0                 $26,000/0

(1)  Represents the dollar value of the difference between the value at December
     31, 2000 and the option  exercise price of unexercised  options at December
     31, 2000.

(2)  Mr. Joseph M. Williams  acquired  56,000 shares of Cumberland  common stock
     through  exercising  shares issued in connection with the 1991 Stock Option
     Plan on June 8, 2000.

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,  2000,  the Company  paid  non-officer
Directors  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 Cumberland's  Common
Stock  beneficially  owned  as of  December  31,  2000 by (i)  persons  known by
Cumberland to own more than 5 percent of Cumberland's  outstanding Common Stock,
(ii) each  director  and  officer of  Cumberland,  and (iii) all  directors  and
executive officers of Cumberland 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                   3,782,441 (3)                  68.1%
Joseph M. Williams                      358,993 (4)                   6.5%
R. Donald Finn                            7,131 (5)                    .1%
Andrew J. Cohen                          47,590 (6)                    .9%
Edward J. Edenfield IV                   22,000 (7)                    .4%
Kimmins Corp.                         1,723,290                      31.0%
All directors and executive
Officers as a group (five persons)    4,846,966                      87.3%

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

(2)  Cumberland  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  2,464,522 shares owned by Mr. Francis Williams;  1,094,480 shares
     allocated to Mr.  Williams  based on his 63.5%  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;  18,296  shares held by Mr.
     Williams as custodian  under the New York  Uniform  Gifts to Minors Act for
     his Children; and 153,050 held by various Real Estate Partnerships of which
     Mr.  Williams  is  100  percent  Owner.  Mr.  Williams  owns  61.6%  of the
     outstanding  common  stock of Kimmins  Corp.  and is its Chairman and Chief
     Executive Officer.

(4)  Includes 88,800 shares owned by Mr. Joseph M. Williams;  options to acquire
     44,000 shares of Cumberland  Common Stock; 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  Cumberland  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 Cumberland 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 Cumberland common stock.

(7)  Includes options to acquire 22,000 shares of Cumberland 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 Insurance.  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, 2000,
no payments could be made under the terms of the debenture.

     CTI entered into a term note agreement with KC for the  outstanding  amount
of the  surplus  debenture,  including  interest in arrears of  ($4,291,049)  at
September  30,  1992 as part of the  Distribution.  The term note was pari passi
with the  other  debts of CCS,  had a 10  percent  interest  rate and was due on
October 1, 2002.

     Effective  October 1, 1996, CTI issued  1,723,290 shares at $3.00 per share
of its common stock to Kimmins  Corp.  (f/k/a  Kimmins  Environmental  Services,
Corp.) in exchange  for  surrender  of the  Company's  term note  payable in the
amount of $5,169,870.

     Effective   November  10,  1998   Cumberland   entered  into  a  $1,000,000
convertible term note agreement with TransCor Waste Services, Inc., a subsidiary
of KC. The note is due November  10, 2001 and bears  interest at 10%. 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 $4,413, $10,342 and $14,907 for the
years ended  December 31, 2000,  1999 and 1998,  respectively.  Qualex  performs
consulting services for KC and affiliates.  Revenue  attributable to transaction
with affiliates  were $171,292,  $ 117,075 and $289,207 for years ended December
31, 2000, 1999 and 1998, respectively.

Item 14.     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

          - Report of Independent Auditors
          - Report of Independent Certified Public Accountants
          - Consolidated balance sheets at December 31, 2000 and 1999
          - Consolidated statements of operations for each of the three years
            in the period ended December 31, 2000.
          - Consolidated statements of stockholders'equity for each of the three
            years in the period ended December 31, 2000.
          - Consolidated statements of cash flows for each of the three years in
            the period ended December 31, 2000.
          - 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(i)     -   Articles of Incorporation
          3(ii)    -   Bylaws
          10       -   Lease agreement with Cumberland Properties, Inc.
          11       -   Statement Re: Computation of Earnings Per Share
          22       -   Subsidiary list
          23.1     -   Consent of Deloitte & Touche LLP
          23.2     -   Consent of Ernst & Young LLP
                   -   (Previously filed as part of Registrant's
                       Registration Statement on Form 8, File No.
                       0-19727 and incorporated herein by reference
                       thereto.

<PAGE>

(b)  Reports on Form 8-K

     On  January 3, 2000 the  Company  filed a Form 8-K to  register  changes in
     Registrant's Certifying Accountants.

(c)  Exhibits

     The response to this portion of Item 14 is submitted as a separate  section
     of this report.

(d)  Financial Statement Schedules

     The response to this portion of Item 14 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.

Date:    April 17, 2001             CUMBERLAND TECHNOLOGIES, INC.

Date:    April 17, 2001             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:    April 17, 2001             By:      /s/ Joseph M. Williams
                                    --------------------------------------------
                                    Joseph M. Williams, President


Date:    April 17, 2001             By:      /s/ Francis M. Williams
                                    --------------------------------------------
                                    Francis M. Williams, Chairman of the Board


Date:    April 17, 2001             By:      /s/ R. Donald Finn
                                    --------------------------------------------
                                    R. Donald Finn, Director


Date:    April 17, 2001             By:      /s/ Andrew J. Cohen
                                    --------------------------------------------
                                    Andrew J. Cohen, Director


Date:    April 17, 2001             By:      /s/ Carol S. Black
                                    --------------------------------------------
                                    Carol S. Black, Secretary
                                    (Principal Financial and Accounting Officer)


<PAGE>

                           Annual Report on Form 10-K

                             Item 14(a), (c) and (d)

                    List of Consolidated Financial Statements

             Consolidated Financial Statement Schedules and Exhibits

                          Year Ended December 31, 2000


                          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 .................................................30

Report of Independent Certified Public Accountants ...........................31

Consolidated Balance Sheets at December 31, 2000 and 1999 .................32-33

Consolidated Statements of Operations for each of the
  three years in the period ended December 31, 2000 ..........................34

Consolidated Statements of Stockholders' Equity for each
  of the three years in the period ended December 31, 2000 ...................35

Consolidated Statements of Cash Flows for each of the
  three years in the period ended December 31, 2000 ..........................36

Notes to Consolidated Financial Statements ...................................37

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

Schedule II - Condensed Financial Information of Registrant ..................56

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, 2000 and
1999,  and the related  consolidated  statements  of  operations,  stockholders'
equity,  and cash flows for the years then ended.  Our audits also  included the
financial  statement schedule listed in the Index. 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, 2000 and 1999 and the  results of its  operations  and its cash
flows  for the  years  then  ended  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.




/s/  DELOITTE & TOUCHE LLP
Tampa, Florida

April 11, 2001

<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
               --------------------------------------------------

Board of Directors of
Cumberland Technologies, Inc.

     We have audited the  accompanying  consolidated  statement  of  operations,
stockholders'  equity, and cash flows of Cumberland  Technologies,  Inc. for the
year ended  December 31, 1998.  Our audit also included the financial  statement
schedules  listed in the Index at Item 14(a).  These  financial  statements  and
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these  financial  statements and schedules  based on
our audit.

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

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects, the consolidated results of operations
and cash flows of Cumberland Technologies, Inc. for the year then ended December
31, 1998, in conformity with  accounting  principles  generally  accepted in the
United States.  Also, in our opinion, the related financial statement schedules,
when considered in relation to the basic financial  statements taken as a whole,
present fairly, in all material respects, the information set forth therein.




/s/  ERNST & YOUNG LLP
Tampa, Florida

March 19, 1999




<PAGE>


                          CUMBERLAND TECHNOLOGIES, INC.

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

                                                                December 31,
                                                       -------------------------
                                                             2000           1999
                                                       -------------------------
  Investments:
  -----------
   Securities available-for-sale at fair value:
     Debt securities ...............................   $ 7,553,010   $ 3,698,506
     Equity securities .............................         2,716       602,194
   Debt securities held-to-maturity at amortized
     cost (fair value, 2000 - $1,227,130;
     1999 - $2,714,801) ............................     1,223,593     2,722,489
   Mortgage loans on real estate, at unpaid
     principal .....................................       742,068       940,304
   Short-term investments ..........................       433,993       430,239
                                                       -----------   -----------
     Total investments .............................     9,955,380     8,393,732

Cash and cash equivalents ..........................       693,778     2,000,147
Accrued investment income ..........................       185,011        66,088

Reinsurance recoverable ............................     4,910,443     2,898,422

Accounts receivable:

   Nonaffiliate less allowance for doubtful
     accounts of $13,750 and $27,000, respectively .     3,821,206     2,896,358
   Affiliate .......................................       436,997       404,481
Income tax recoverable .............................       167,588          --
Deferred income tax asset ..........................       175,234       304,983
Deferred policy acquisition costs ..................     1,955,018     1,601,427
Intangibles, net ...................................     1,115,316     1,266,635
Other investment ...................................       582,532       559,418
Other assets .......................................       311,082       314,859
                                                       -----------   -----------
                                                       $24,309,585   $20,706,550
                                                       ===========   ===========




                 See notes to consolidated financial statements.

<PAGE>

                          CUMBERLAND TECHNOLOGIES, INC.

                           CONSOLIDATED BALANCE SHEETS

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                               December 31,
                                                     ---------------------------
                                                             2000           1999
                                                     ---------------------------
Policy liabilities and accruals:
-------------------------------
   Loss and loss adjustment expenses ..............  $  5,185,626   $ 4,576,539
   Unearned premiums ..............................     5,775,524     4,843,606
Ceded reinsurance payable .........................       721,513       367,906
Accounts payable and other liabilities ............     2,637,748     1,909,578
Income tax payable ................................          --          35,132
Debt:
   Nonaffiliate ...................................     1,102,683     1,281,429
   Affiliate ......................................     1,000,000     1,000,000
                                                     ------------   ------------
   Total liabilities ..............................    16,423,094    14,014,190
Stockholders' equity:                                ------------   ------------

   Preferred stock, $.001 par value; 10,000,000
       shares authorized, no shares issued ........          --             --
   Common stock, $.001 par value; 10,000,000
       shares authorized; 5,871,356 and 5,815,356
       shares issued, respectively ................         5,872         5,816
   Capital in excess of par value .................     7,264,860     7,257,916
   Accumulated other comprehensive income (loss)...       104,485       (40,897)
   Retained earnings (accumulated deficit) ........       774,993      (266,756)
                                                     ------------   ------------
                                                        8,150,210     6,956,079
   Less treasury stock, at cost, 318,112  shares at
       December 31, 2000 and 1999 .................      (263,719)     (263,719)
                                                     ------------   ------------
   Total stockholders' equity .....................     7,886,491     6,692,360
                                                     ------------   ------------
                                                     $ 24,309,585   $20,706,550
                                                     ============   ============




                 See notes to consolidated financial statements.


<PAGE>
<TABLE>
<CAPTION>

                          CUMBERLAND TECHNOLOGIES, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                                             Years ended December 31,
                                                                         -----------------------------------------------------------
                                                                                 2000                   1999                    1998
                                                                         -----------------------------------------------------------
<S>                                                                      <C>                   <C>                     <C>
Revenue:
-------
Direct premiums earned ........................................            12,756,102             10,064,121              8,541,161
Reinsurance premiums assumed ..................................             2,480,712              2,079,680              1,268,032
Less reinsurance ceded ........................................            (3,108,861)            (2,526,009)            (2,275,509)
                                                                         ------------           ------------           ------------
Net premium income ............................................            12,127,953              9,617,792              7,533,684
Net investment income .........................................               576,406                333,462                377,218
Net realized investment gains (losses) ........................                38,381                129,101               (437,565)
Commission income .............................................               386,362                473,912                710,058
Other income:
    Affiliates ................................................               171,292                117,075                289,207
    Nonaffiliates .............................................             1,124,490                783,908                537,775
                                                                         ------------           ------------           ------------
Total revenue .................................................            14,424,884             11,455,250              9,010,377
                                                                         ------------           ------------           ------------
Benefits and Expenses:
Losses and loss adjustment expenses ...........................             3,360,358              2,394,532              2,648,074
Amortization of deferred policy acquisition
    costs .....................................................             3,767,107              2,895,834              2,252,195
Operating expenses ............................................             5,288,520              4,766,101              4,313,278
Interest expense:
    Affiliate .................................................               100,000                100,000                   --
    Nonaffiliate ..............................................               102,760                114,027                118,239
                                                                         ------------           ------------           ------------
Total expenses ................................................            12,618,745             10,270,494              9,331,786
                                                                         ------------           ------------           ------------

Income (loss) before income tax expense .......................             1,806,139              1,184,756               (321,409)
Income tax expense ............................................               764,390                 36,686                   --
                                                                         ------------           ------------           ------------
Net income (loss) .............................................          $  1,041,749           $  1,148,070           $   (321,409)
                                                                         ------------           ------------           ------------
Weighted average number of shares outstanding..................             5,528,849              5,475,613              5,447,966
                                                                         ============           ============           ============
Net income (loss) per share - basic............................          $        .19           $        .21           $       (.06)
                                                                         ============           ============           ============


                 See notes to consolidated financial statements.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>


                          CUMBERLAND TECHNOLOGIES, INC.

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                  YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000

                                                                              Accumulated
                                                                 Capital in      Other        Retained
                                           Common Shares          Excess of  Comprehensive    Earnings                    Total
                                        ----------------------      Par         Income      (Accumulated   Treasury    Stockholders'
                                          Stock        Amount      Value       (Loss)        Deficit)       Stock         Equity
                                        ---------     --------     -----      -----------    -----------    -----       ------------
<S>                                     <C>            <C>         <C>         <C>           <C>            <C>         <C>
Balance at January 1, 1998 .........    5,763,070      $5,763     $7,212,941     $134,201    $(1,093,417)  $(250,219)    $6,009,269

   Purchase of 4,500 shares
       of treasury stock ...........                                                                         (13,500)       (13,500)

   Net unrealized depreciation
       of available-for-sale
       securities, net of income tax                                             (325,130)                                 (325,130)

   Net loss ........................                                                            (321,409)                  (321,409)
                                                                                                                         -----------
   Comprehensive loss...............                                                                                       (646,539)
                                        -----------   -----------  -----------   -----------   -----------   ----------- -----------
Balance at December 31, 1998 .......     5,763,070       5,763     7,212,941     (190,929)    (1,414,826)    (263,719)    5,349,230

   Exercise of 52,286 shares
       under 1991 stock
       option plan ................         52,286          53        44,975                                                 45,028

   Net unrealized appreciation
       of available-for-sale
       securities, net of income tax                                              150,032                                   150,032

   Net income .....................                                                           1,148,070                   1,148,070
                                                                                                                         -----------

   Comprehensive income ...........                                                                                       1,298,102
                                      -----------   -----------   -----------  -----------    -----------   -----------   ----------
Balance at December 31, 1999 ......     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
                                      ===========   ===========   ===========  ===========   ===========   ===========   ===========




                 See notes to consolidated financial statements.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>


                          CUMBERLAND TECHNOLOGIES, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                                   Years ended December 31,
                                                                                ----------------------------------------------------
                                                                                       2000                1999                1998
                                                                                ----------------------------------------------------
<S>                                                                            <C>                 <C>                 <C>
Operating activities:
Net income (loss) ......................................................        $ 1,041,749         $ 1,148,070         $  (321,409)
Adjustments to reconcile net income (loss) to cash
   provided by (used in) operating activities:
       (Accretion) amortization of investment
           discounts and premiums ......................................            (21,358)               (165)                392
       Policy acquisition costs amortized ..............................          3,767,107           2,895,834           2,252,195
       Policy acquisition costs deferred ...............................         (4,120,698)         (3,250,706)         (2,686,005)
       Amortization ....................................................            151,319             188,890             225,108
       Net realized (gains) losses on sales of
           investments .................................................            (38,381)           (129,101)            437,565
       Provision for bad debts .........................................            (13,250)             27,000                --
       (Increase) decrease in:
           Accrued investment income ...................................           (118,923)            (10,740)             27,473
           Reinsurance recoverable .....................................         (2,012,021)           (592,050)           (289,616)
           Accounts receivables ........................................           (911,598)           (193,584)         (1,422,558)
           Income tax recoverable ......................................           (167,588)            120,000            (120,000)
           Deferred income tax asset ...................................             66,710            (304,983)               --
           Other assets ................................................              3,777             (80,868)             11,434
       Increase (decrease) in:
           Policy liabilities and accruals .............................          1,541,005           2,449,743           1,790,820
           Ceded reinsurance payable ...................................            353,607            (746,361)         (1,344,906)
           Accounts payable and other liabilities ......................            728,169             408,966           1,245,773
           Income tax payable ..........................................            (35,132)             35,132                --
                                                                                -----------         -----------         -----------
Net cash provided by (used in) operating activities ....................            214,494           1,965,077            (193,734)
Investing activities:
Securities available-for-sale:
       Purchases - fixed maturities ....................................         (6,670,793)         (2,998,992)           (968,313)
       Proceed from sales - fixed maturities ...........................          3,098,993           1,286,262           2,479,916
       Purchases - equities ............................................               --                  --            (2,819,999)
       Proceed from sales - equities ...................................            354,956             347,707           2,999,085
Proceeds from investment settlement ....................................            228,875                --                  --
Securities held-to-maturity:
       Purchases- fixed maturities .....................................               --            (1,860,015)           (100,000)
       Proceeds from maturities ........................................          1,500,000                --               127,140
Payments on (purchases of) - mortgage loan .............................            198,236            (895,877)               --
Other investment .......................................................            (23,114)             (6,812)           (308,398)
(Purchases of) proceeds from short-term investments ....................             (3,754)             (6,246)                887
                                                                                -----------         -----------         -----------
Net cash (used in) provided by  investing activities ...................         (1,316,601)         (4,133,973)          1,410,318
Financing activities:

Purchases of treasury stock ............................................               --                  --               (13,500)
Payments on debt, affiliate and non-affiliate...........................           (178,746)            (49,159)            (87,932)
Stock options exercised ................................................              7,000              45,028                --
Net change in advances to (from) affiliates ............................            (32,516)            (29,177)            283,669
Proceeds from affiliated debt ..........................................               --                  --             1,000,000
                                                                                -----------         -----------         -----------
Net cash (used in ) provided by financing activities ...................           (204,262)            (33,308)          1,182,237
                                                                                -----------         -----------         -----------
(Decrease) increase in cash and cash equivalents .......................         (1,306,369)         (2,202,204)          2,398,821
Cash and cash equivalents, beginning of year ...........................          2,000,147           4,202,351           1,803,530
                                                                                -----------         -----------         -----------
Cash and cash equivalents, end of year .................................        $   693,778         $ 2,000,147         $ 4,202,351
                                                                                ===========         ===========         ===========

Supplemental cash flows disclosure:
Cash paid for interest .................................................        $   102,760         $   114,027         $   118,239
                                                                                -----------         -----------         -----------
Cash paid for income taxes .............................................        $ 1,025,400         $   148,950         $   120,000
                                                                                ===========         ===========         ===========


                 See notes to consolidated financial statements.
</TABLE>


<PAGE>

                          CUMBERLAND TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

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

     Cumberland  Technologies,  Inc. ("CTI") 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
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.  Official Notary Service of Texas, Inc.  ("ONS"),  a Texas corporation
formed in February 1994, is an inactive  corporation.  Qualex  Consulting Group,
Inc.  ("Qualex"),  a Florida corporation formed in November 1994, provides claim
and contracting consulting services.  Florida Credit & Collection Services, Inc.
a Florida  corporation  formed in December 1996 was dissolved in June 1997.  CTI
and its subsidiaries are referred to herein as the "Company."

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
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, 2000, 1999 AND 1998

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,  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  on
available-for-sale  securities  are included in income.  The cost of  securities
sold is based on the specific  identification method.  Interest and dividends on
available-for-sale 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.

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

     The Company  considers all highly liquid  investments  having a maturity of
three 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").  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.  Goodwill is being amortized on a straight-line  basis
over 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.

<PAGE>


                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

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

     The carrying value of Goodwill and other intangible assets will be reviewed
if  circumstances  suggest that they may be impaired.  If this review  indicates
that the intangible  assets will not be recoverable,  as determined based on the
undiscounted  cash flows of the entity acquired over the remaining  amortization
period,  the Company's  carrying value of the Goodwill and  intangibles  will be
reduced to fair value.

     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.

     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.

     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, 2000, 1999 AND 1998

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
bases. 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  $175,234  at
December  31,  2000.  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, 2000, 1999 AND 1998

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  113,500  and  134,500  outstanding  stock  options at
December  31, 2000 and 1999,  respectively,  had no effect on the results of the
calculations of earnings per share. Additionally,  the 187,086 outstanding stock
options at December 31, 1998 were antidilutive.

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

     The majority of the Company's  business  relates to surety and  performance
bonds  for  contractors.   Accordingly,   the  occurrence  of  adverse  economic
conditions in the contracting  business could have a material  adverse effect on
the Company's  business although no such conditions have been encountered in the
past.  The Company only requires  collateral  from surety bond  customers if the
customer  meets 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
     ------------------------

     SFAS No. 133, Accounting for Derivative  Instruments and Hedging Activities
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 is speculative
in nature and was formerly  accounted  for as an insurance  contract  within the
policy  liabilities  for  loss  and  loss  adjustment  expenses  account  in the
consolidated balance sheet. The transition adjustment of approximately  $600,000
will be  reclassified  from the policy  liabilities for loss and loss adjustment
expenses  account to a liability for derivative  instruments  account within the
consolidated  balance  sheet.  The  adoption of SFAS 133 did not have a material
adverse impact on the results of operations,  financial position or liquidity of
the Company.


<PAGE>


                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

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

     New Accounting Standards (continued)
     -----------------------------------

     Effective  October 1, 2000, the Company adopted Staff  Accounting  Bulletin
No. 101  Revenue  Recognition  in  Financial  Statements  ("SAB  101").  SAB 101
summarizes certain of the Securities and Exchange Commission's views in applying
generally  accepted  accounting  principles to revenue  recognition in financial
statements.  The  requirements  of SAB 101 did not have a material effect on the
Company's consolidated financial statements.

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

     Certain amounts in the 1999 and 1998 consolidated financial statements have
been  reclassified  to  conform  to the 2000  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.  Revenues  attributable  to  surety  bonds  with KC and its
affiliates  were  $4,413,  $10,342 and $14,907 for the years ended  December 31,
2000, 1999 and 1998,  respectively.  Qualex performs  consulting services for KC
and  affiliates.  Other income from affiliates  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 $12,123, pursuant to a lease that was executed
June 1, 1999 and is effective through May 31, 2009. Effective March 1, 2001, the
monthly rate will be $13,252 as a result of increased square footage.

     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 (the
Navy). Pursuant to this contract, the Company, as surety, executed and delivered
to the Navy certain  performance and payment bonds (the Bonds). At the time that
the Bonds were issued,  KC entered into an  indemnification  agreement  with the
Company,  whereby KC indemnified the Company from any and all losses, costs, and
expenses incurred related to the Bonds. In 1991, the Navy default and terminated
AEC on the contract.  The contract has been in litigation  since the termination
in 1991  generating  a  subrogation  receivable  in the amount of  approximately
$1,851,000 and $1,768,000 as of December 31, 2000,  and 1999,  respectively.  In
the event that the Company is unsuccessful in its litigation activities with the
Navy,  management of the Company believes that KC will reimburse the Company for
the losses and expenses incurred related to the Bonds.

<PAGE>

                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

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

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

<TABLE>
<CAPTION>


                                                                                             Gross          Gross         Estimated
                                                                          Amortized       Unrealized     Unrealized         Fair
                                                                           Cost             Gains          Losses           Value
                                                                          ----------     -----------      ----------      ----------
<S>                                                                       <C>            <C>             <C>              <C>
Available-for-sale securities at December 31, 2000:
   Debt securities:
       U.S. Government bonds .......................................      $4,916,126      $  153,445      $      824      $5,068,747
       State and municipal bonds ...................................         546,488            --            32,773         513,715
       Industrial and miscellaneous bonds ..........................       1,900,751          69,797            --         1,970,548
                                                                          ----------      ----------      ----------      ----------
   Total debt securities ...........................................       7,363,365         223,242          33,597       7,553,010
   Equity securities ...............................................          24,838            --            22,122           2,716
                                                                          ----------      ----------      ----------      ----------
Total ..............................................................      $7,388,203      $  223,242      $   55,719      $7,555,726
                                                                          ==========      ==========      ==========      ==========

Held-to-maturity securities at December 31, 2000:
   Debt securities:
       U.S. Government bonds .......................................      $1,223,593      $    4,007      $      470      $1,227,130
                                                                          ==========      ==========      ==========      ==========

Available-for-sale securities at December 31, 1999:
   Debt securities:
       U.S. Government and government agency
          bonds ....................................................      $3,274,876      $     --        $    4,635      $3,270,241
       State and municipal bonds ...................................         496,433            --            68,168         428,265
                                                                          ----------      ----------      ----------      ----------
   Total debt securities ...........................................       3,771,309            --            72,803       3,698,506
   Equity securities ...............................................         570,288          31,906            --           602,194
                                                                          ----------      ----------      ----------      ----------
Total ..............................................................      $4,341,597      $   31,906      $   72,803      $4,300,700
                                                                          ==========      ==========      ==========      ==========

Held-to-maturity securities at December 31, 1999:
   Debt securities:
       U.S. Government bonds .......................................      $2,722,489      $    2,583      $   10,271      $2,714,801
                                                                          ==========      ==========      ==========      ==========
</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, 2000 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 ............................          $  496,469          $  498,440          $  864,457          $  865,000
Due after one year through five
   years ...........................................           5,921,387           6,116,855             359,136             362,130
Due after five years through
   ten yeas ........................................             449,021             474,000                --                  --
Due after twenty years .............................             496,488             463,715                --                  --
                                                              ----------          ----------          ----------          ----------
                                                              $7,363,365          $7,553,010          $1,223,593          $1,227,130
                                                              ==========          ==========          ==========          ==========

</TABLE>

<PAGE>

                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

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,  2000 and 1999,  the  Company  had $3.1  million and $2.9
million, respectively, in restricted investments (debt securities and short-term
investments).   Restricted   investments   primarily  represent  funds  held  as
collateral in connection  with  reinsurance  trust  agreements and funds held as
required under statutory regulations by state insurance departments.

     Net investment income for the Company is comprised of the following:

<TABLE>
<CAPTION>

                                                                                                   Year ended December 31
                                                                               -----------------------------------------------------
                                                                                     2000                1999                  1998
                                                                               -----------------------------------------------------
<S>                                                                            <C>                  <C>                   <C>

Debt and equity securities ..........................................           $ 501,853            $ 143,416            $ 246,618
Mortgage loans on real estate .......................................               3,384                3,480                6,711
Short-term investments, including cash and
    cash equivalents ................................................             106,089              199,208              135,926
                                                                                ---------            ---------            ---------
                                                                                  611,326              346,104              389,255
Less investment expenses ............................................             (34,920)             (12,642)             (12,037)
                                                                                ---------            ---------            ---------
Net investment income ...............................................           $ 576,406            $ 333,462            $ 377,218
                                                                                =========            =========            =========
Realized gains (losses) on available-for-sale
    securities:
    Debt securities - gains .........................................           $    --              $  10,592            $  15,589
    Equity securities - gains .......................................              38,381              118,509              226,613
    Equity securities - losses ......................................                --                   --               (679,767)
                                                                                ---------            ---------            ---------
Net realized investment gains (losses) ..............................           $  38,381            $ 129,101            $(437,565)
                                                                                =========            =========            =========
</TABLE>



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

     The carrying amounts and fair values of the Company's financial instruments
at December 31, 2000 and 1999 are as follows:

<PAGE>


                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


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

                                                           December 31, 2000
                                                   -----------------------------
                                                   Carrying Amount    Fair Value
                                                   -----------------------------
Assets:
------
  Cash and cash equivalents, including short-
     term investments ..........................   $    1,127,771    $ 1,127,771
  Investments ..................................        8,779,319      8,782,856
  Mortgage loans on real estate ................          742,068        742,068
  Accounts receivable ..........................        4,258,203      4,258,203
  Reinsurance recoverable ......................        4,910,443      4,910,443

Liabilities:
-----------
  Debt .........................................        2,102,683      2,025,897
  Ceded reinsurance payable ....................          721,513        721,513


                                                         December 31, 1999
                                                  ------------------------------
Assets:                                           Carrying Amount     Fair Value
------                                            ------------------------------
  Cash and cash equivalents, including short-
    term investments .........................    $     2,430,386   $  2,430,386
  Investments ................................          7,023,189      7,015,501
  Mortgage loans on real estate ..............            940,304        940,304
  Accounts receivable ........................          3,300,839      3,300,839
  Reinsurance recoverable ....................          2,898,422      2,898,422

Liabilities:
-----------
   Debt ......................................          2,281,429      2,190,520
   Ceded reinsurance payable .................            367,906        367,906

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

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

     Investments:  Fair values for debt  securities  are based on quoted  market
prices   and   are   recognized   in  the   consolidated   balance   sheet   for
available-for-sale  securities.  The fair values for equity securities are based
on quoted market prices and are recognized in the consolidated balance sheet.

     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.

<PAGE>


                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


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

     Intangibles are comprised of the following:

                                                        As of December 31,
                                              ----------------------------------
                                                       2000                 1999
                                              ----------------------------------
   Deferred state admission costs .........    $    227,171     $        227,171
   Customer lists and acquisition costs ...       1,084,041            1,084,041
   Product development ....................         262,194              262,194
   Goodwill ...............................         926,661              926,661
                                               ------------     ----------------
                                                  2,500,067            2,500,067
   Accumulated amortization ...............       1,384,751            1,233,432
                                               ------------     ----------------
   Total ..................................   $   1,115,316     $      1,266,635
                                              =============     ================

     Amortization  expense  amounted to  $151,319 in 2000,  $188,890 in 1999 and
$225,108 in 1998.

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:

                                                      Year ended December 31,
                                              ----------------------------------
                                                    2000        1999        1998
                                              ----------------------------------
Revenues ...........................          $  417,972  $  227,652  $ 310,877
Net income (loss) ..................              66,655    (677,516)  (452,055)

                                                   As of December 31,
                                              ----------------------------------
                                                   2000         1999
                                              ----------------------------------
Current assets .....................          $  732,669  $  574,964
Non-current assets .................              76,180     107,906
Current liabilities ................             386,633     269,781
Non-current liabilities ............           1,067,555   1,902,601

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, 2000, 1999 and 1998, to the gross amounts reported in the Company's
consolidated balance sheets:

<PAGE>


                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

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

<TABLE>
<CAPTION>
                                                                                                     December 31,
                                                                               -----------------------------------------------------
                                                                                   2000                 1999                1998
                                                                               -----------------------------------------------------
<S>                                                                            <C>                 <C>                  <C>

Liability for losses and LAE, net of reinsurance
    recoverable on unpaid losses, at beginning of
    year .............................................................         $ 2,808,727          $ 1,680,580          $ 1,392,931
Provision for losses and LAE for claims occurring
    in the current year, net of reinsurance ..........................           4,363,435            2,810,532            2,331,074
(Decrease) increase in estimated losses and
    LAE for claims occurring in prior years,
    net of reinsurance ...............................................          (1,003,077)            (416,000)             317,000
                                                                               -----------          -----------          -----------
Incurred losses during the current year, net of
    reinsurance ......................................................           3,360,358            2,394,532            2,648,074
Losses and LAE payments for claims, net of
    reinsurance, occurring during:
    Current year .....................................................           2,450,587              135,635              557,997
    Prior years ......................................................             383,749            1,130,750            1,802,428
                                                                               -----------          -----------          -----------
                                                                                 2,834,336            1,266,385            2,360,425
                                                                               -----------          -----------          -----------
Liability for losses and LAE, net of reinsurance
    recoverables on unpaid losses,
    at end of year ...................................................           3,334,749            2,808,727            1,680,580
Reinsurance recoverables on unpaid losses
    at end of year ...................................................           1,850,877            1,767,812            1,539,877
                                                                               -----------          -----------          -----------
Liability for losses and LAE, gross of reinsurance
    recoverables on unpaid losses,
    at end of year ...................................................         $ 5,185,626          $ 4,576,539          $ 3,220,457
                                                                               ===========          ===========          ===========
</TABLE>

     Cumberland  experienced  $1,003,077  and  $416,000  in  redundancies  and a
$317,000  deficiency for losses and loss  adjustment  expenses in 2000, 1999 and
1998 respectively. The redundancies principally result from subrogation received
on  pooling  agreement  case  base  reserves  and  claims  in prior  years.  The
deficiency  in 1998  principally  results  from  settling  case  basis  reserves
established in prior years for amounts that were more than expected.

     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.

<PAGE>


                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

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

     The provision for income taxes consists of the following:

                                                December 31,
                               -------------------------------------------------
                                       2000           1999                  1998
                               -------------------------------------------------
Current:
-------
    Federal ...............    $   595,707     $   283,252     $            --
    State .................        101,973          58,417                  --
                               -----------     -----------     -----------------
    Total current .........        697,680         341,669                  --
                               -----------     -----------     -----------------
Deferred:
--------
    Federal ...............         56,960        (260,407)                 --
    State .................          9,750         (44,576)                 --
                               -----------     -----------     -----------------
    Total deferred ........         66,710        (304,983)                 --
                               -----------     -----------     -----------------
    Total provision .......    $   764,390     $    36,686     $            --
                               ===========     ===========     =================

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

                                                 December 31,
                               -------------------------------------------------
                                       2000            1999                1998
                               -------------------------------------------------
Statutory federal rate ........         34%          34.00%             (34.00)%
State income taxes, net .......       3.63            0.78               (3.00)
Tax exempt income .............       (.49)           0.00               (9.70)
Change in valuation allowance .          -          (35.30)              31.20
Nondeductible expenses ........       1.52            0.46               15.50
Miscellaneous ............            3.66            3.16                  --
                                ----------       ----------     ----------------
Effective tax rate ............      42.32%           3.10%                 --
                                ==========       ==========     ================

     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, 2000, 1999 AND 1998

9.   Income Taxes (continued)
     ------------------------
<TABLE>
<CAPTION>

                                                                                                     December 31,
                                                                      --------------------------------------------------------------
                                                                                2000              1999                         1998
                                                                      --------------------------------------------------------------
<S>                                                                             <C>       <C>                          <C>

Deferred income tax liabilities:
-------------------------------
Deferred acquisition costs .............................................       $   (735,673)       $  (632,564)         $  (544,339)
State income taxes .....................................................                 --            (15,156)                  --
Unrealized gain on investments .........................................            (63,039)           (12,603)                  --
                                                                               -------------        -----------          -----------
Total deferred income tax
    liabilities ........................................................           (798,712)          (660,323)            (544,339)
                                                                               -------------        -----------          -----------
Deferred  income tax assets:

Basis difference in fixed assets .......................................             17,139             17,990               17,139
Unrealized loss in investments .........................................                 --                 --              290,236
Basis difference in investments ........................................            300,261             96,201               91,646
Reserve discounting ....................................................            102,537             33,112               54,885
Unearned premiums ......................................................            351,420            605,246              245,321
Amortization ...........................................................            100,275            105,358               96,160
Net operating loss carryforward ........................................                 --                 --               85,789
Alternative minimum credit
    carryforward .......................................................                 --                 --               27,648
Surplus notes ..........................................................            102,314            107,399              102,314
                                                                               ------------        -------------         -----------
Total deferred income tax assets .......................................            973,946            965,306            1,011,138
Valuation allowance ....................................................                 --                 --             (466,799)
                                                                               ------------        -------------         -----------
Total deferred income tax assets .......................................            973,946            965,306              544,339
                                                                               ------------        -------------         -----------
Net deferred income tax asset ..........................................       $    175,234        $   304,983           $       --
                                                                               ============        =============         ===========
</TABLE>

10.  Debt
     ----

     Debt as of December 31, consists of the following:

                                                       -------------------------
                                                             2000           1999
                                                       -------------------------
Affiliate:
---------
Convertible note payable due November 10,
     2001 ........................................     $1,000,000     $1,000,000
Nonaffiliate:

Note payable due March 1, 2002 ...................        249,109        374,086
Note payable due June 30, 2010 ...................        853,574        907,343
                                                       ----------     ----------
                                                       $2,102,683     $2,281,429
                                                       ==========     ==========
<PAGE>


                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

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

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

     Effective   November  10,  1998,   Cumberland  entered  into  a  $1,000,000
convertible term note agreement with TransCor Waste Services, Inc., a subsidiary
of KC. The note is due November  10, 2001 and bears  interest at 10%. The lender
may convert the principal  amount of the note or a portion thereof into a common
stock at $3.00 per share subsequent to a six month  anniversary and prior to 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 is due March 1, 2002 and bears interest at 8% through February 28, 2001 and
10% thereafter.  Principal payments of $125,000 are due annually beginning March
1,  2000.  The  other is due June 30,  2010 and  bears  interest  9%.  Principal
payments of $40,000 were due annually for three years beginning January 5, 1996.
Payments  of $11,104  including  principal  and  interest  are  payable  monthly
beginning April 1, 1997.

     Interest paid in 2000, 1999 and 1998 for term notes due  nonaffiliates  was
$102,760, $114,027 and $118,239, respectively.

     Maturities of notes payable are as follows:

             Year Ending
             December 31,
         ---------------------
                 2001          $      1,183,813
                 2002                   188,439
                 2003                    70,365
                 2004                    76,966
                 2005                    84,185
              Thereafter                498,915

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  $24,311,  $22,730,  and  $11,701  in 2000,  1999  and  1998,
respectively.

<PAGE>

                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

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 income and 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,
2000, 1999 and 1998:

<TABLE>
<CAPTION>

                                                      --------------------------   ----------------------          -----------------
                                                                2000                         1999                       1998
                                                      --------------------------   ----------------------          -----------------

                                                                 Weighted-Average           Weighted-Average       Weighted-Average
                                                                    Exercise                   Exercise                Exercise
                                                        Shares       Price          Shares      Price       Shares      Price
<S>                                                     <C>      <C>                <C>      <C>            <C>        <C>

Outstanding at
beginning of year ................................      134,500     $ .42          187,086     $ .35        189,086     $        .21

Grants ...........................................       39,000     $1.50             --       $  --         12,000     $       2.25

Exercised ........................................      (56,000)    $.125          (52,286)    $ .15           --       $         --
Forfeited ........................................       (4,000)    $1.88             (300)    $ .15        (14,000)    $        .15
                                                        --------                   --------                 --------

Outstanding
at end
of year ..........................................      113,500     $ .89          134,500     $ .42        187,086     $        .35
                                                        ========                   ========                =========

Exercisable
at end
of year ..........................................       79,900     $ .60          122,800     $ .30        168,486     $        .22
                                                        ========                   ========                =========

Weighted-average
fair value of
options granted
during the year ..................................           --     $1.52              --      $  --           --       $      2.375


</TABLE>


<PAGE>


                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

12.  Stock Option Plan  (continued)
     ------------------------------

     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, 2000:
<TABLE>
<CAPTION>

                     -----------------------------------                       -----------------------------------
                             Options Outstanding                                        Options Exercisable
                     -----------------------------------                       -----------------------------------
                          Number        Weighted-Average                            Number
Range of Exercise      Outstanding at      Remaining       Weighted-Average    Exercisable at     Weighted-Average
  Prices             December 31, 2000  Contractual Life     Exercise Price    December 31, 2000    Exercise Price
-----------------    -----------------  ----------------   ----------------    -----------------  ----------------
<S>                 <C>                 <C>                <C>                  <C>               <C>

$ .125 ..........          44,000             1 years      $        .125              44,000      $        .125
$ .75 - 1.00 ....          22,500             6 years      $        .780              22,500      $        .780
$ 2.25 ..........          10,000             8 years      $        2.25               6,000      $        2.25
$1.50-1.5625 ....          37,000             9 years      $        1.52               7,400      $        1.52
                     ------------                                              -------------
                          113,500                                                     79,900
                     ============                                              =============

</TABLE>

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, 2000.

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

     CCS assumes reinsurance through a program whereby its subsidiary,  SSI, has
contracted  through a joint  partnering  agreement with St. Paul Fire and Marine
Group,  f/k/a United States Fidelity and Guaranty Company ("St. Paul") to pursue
small to medium size contract and commercial  surety business in states in which
CCS is not licensed.  CCS  participates  in the St. Paul agreement  underwriting
risk through a retrocessional  treaty with St. Paul's  reinsurer,  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.
Cumberland  assumes  50% of the  premiums  written  by FIA and  cedes 50% of the
premiums written by CCS.

     CCS assumed reinsurance primarily from a pooling agreement which expired in
April, 1997 for which CCS assumed 10 percent of the risk with a maximum exposure
to CCS of $125,000 per bond.  CCS is still  receiving  residual  revenues from a
pooling  agreement  for which CCS  assumed 25 percent and 20 percent of the risk
with a maximum exposure to CCS of $125,000 and $600,000 per bond, respectively.

<PAGE>


                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

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

     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.  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.

     Gross and net written  premiums in 2000,  1999 and 1998 are  summarized  as
follows:

<TABLE>
<CAPTION>

                                  -----------------------------    ------------------------------     ------------------------------
                                                  2000                             1999                             1998
                                  -----------------------------    ------------------------------     ------------------------------
                                       Written           Earned          Written           Earned          Written          Earned

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

Direct  premiums .............      13,775,266       12,756,102     $ 10,816,114     $ 10,064,121     $  9,451,746     $  8,541,161

Assumed  premiums ............       2,393,468        2,480,712        2,421,346        2,079,680        1,478,109        1,268,032

Ceded
premiums .....................      (3,510,537)      (3,108,861)      (2,740,148)      (2,526,009)      (2,354,970)      (2,275,509)
                                  ------------     ------------     ------------     ------------     ------------     ------------

Net
premiums .....................    $ 12,658,197     $ 12,127,953     $ 10,497,312     $  9,617,792     $  8,574,885     $  7,533,684
                                  ============     ============     ============     ============     ============     ============

</TABLE>

     Loss and loss adjustment expenses in 2000, 1999, and 1998 are summarized as
follows:

                                      ------------   ------------   ------------
                                             2000           1999            1998
                                      ------------   ------------   ------------
Direct ............................   $ 6,301,778    $ 3,932,278    $ 1,743,448
Assumed ...........................       680,032        714,117      1,343,334
Ceded .............................    (3,621,452)    (2,251,863)      (438,708)
                                      -----------    -----------    -----------
Net losses and loss adjustment
     expenses .....................   $ 3,360,358    $ 2,394,532    $ 2,648,074
                                      ===========    ===========    ===========

     The Company reported reinsurance  recoverables on paid losses of $1,376,637
and $426,176 at December 31, 2000 and 1999, respectively.

<PAGE>

                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

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

     The Company leases certain office space and equipment  under  noncancelable
operating leases. Rent expense was $222,983, $178,429 and $163,409 for the years
ended December 31, 2000, 1999 and 1998, respectively.  Minimum future rental and
lease commitments as of December 31, 2000 for all noncancelable operating leases
with an initial or remaining term of over one year are as follows:

             Year Ending
             December 31,
         ---------------------
                 2001          $        201,484
                 2002                   169,063
                 2003                   166,987
                 2004                   160,747
                 2005                   154,507
              Thereafter                527,899

     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 its  prescribed  or permitted
statutory accounting practices for CCS is summarized as follows:

                                                  Year Ended December 31,
                                          ----------    ----------    ----------
                                                2000          1999          1998
                                          ----------    ----------    ----------
Statutory capital and surplus ........    $5,441,336    $5,106,241    $4,843,478
Net income ...........................       511,624       675,975        74,157

     CCS is domiciled in Florida and prepares its  statutory-basis  consolidated
financial  statements  in accordance  with  accounting  practices  prescribed or
permitted by the Florida Insurance Department. "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, is
effective  January 1, 2001.  CCS has estimated that the effects on its statutory
financial  statements  for the  implementation  of  Codification  will amount to
approximately  $453,187  of  surplus  as of  January  1,  2001.  This  change in
accounting  principle  will be shown in the capital  and surplus  section of the
statutory financial statements as a "cumulative change in accounting principle."


<PAGE>


                          CUMBERLAND TECHNOLOGIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


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

     Under applicable state insurance statues, CCS must maintain minimum capital
and  surplus of  $2,750,000  (as of  December  31,  2000).  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
Insurance.  As of December 31, 2000,  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,  deferred income
taxes  and  nonadmitted   assets.   Insurance   regulations   dictate  expensing
commissions and income taxes when paid.  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
                                                                                        Twelve Months Ended December 31,
                                                                           ---------------------------------------------------------
                                                                                  2000                  1999                    1998
                                                                           ---------------------------------------------------------
<S>                                                                        <C>                   <C>                    <C>

Net income (loss) ..............................................           $ 1,041,749            $ 1,148,070           $  (321,409)
Other comprehensive income (loss), net of income tax:
     Unrealized appreciation
        (depreciation) of available-for-
        sale securities arising during
        period .................................................               168,411                230,552              (830,088)
Less:  reclassification adjustment
        for gains (losses) included in
        net income .............................................                23,029                 80,520              (504,958)
                                                                           -----------            -----------           -----------
Comprehensive income (loss) ....................................           $ 1,187,131            $ 1,298,102           $  (646,539)
                                                                           ===========            ===========           ===========

</TABLE>

<PAGE>

                  SCHEDULE II - CONDENSED FINANCIAL INFORMATION
                                  OF REGISTRANT

                          CUMBERLAND TECHNOLOGIES, INC.

<TABLE>
<CAPTION>
                                                                                        December 31,
                                                                  ---------------------------------------------------------
Condensed Balance Sheets                                                       2000               1999
                                                                  ---------------------------------------------------------
Assets:
------
Investment in wholly-owned subsidiaries ........................         $6,957,172         $5,984,665
Other assets ...................................................              2,699             73,093
Other investments ..............................................            582,532            559,418
Deferred income tax asset ......................................            175,234            304,983
Income tax recoverable .........................................            167,588               --
Surplus debenture receivable from subsidiary ...................          2,048,734          2,048,734
                                                                         ----------         ----------
                                                                         $9,933,959         $8,970,893
Liabilities:                                                             ==========         ==========
-----------
Accounts payable to affiliates .................................         $2,005,911         $2,223,760
Income tax payable .............................................               --               35,132
Accounts payable ...............................................             41,557             19,641
                                                                         ----------         ----------
                                                                          2,047,468          2,278,533
Stockholders' equity:                                                    ----------         ----------
--------------------
Common stock ...................................................              5,872              5,816
Other stockholders' equity .....................................          7,880,619          6,686,544
                                                                         ----------         ----------
                                                                          7,886,491          6,692,360
                                                                         ----------         ----------
                                                                         $9,933,959         $8,970,893
                                                                         ==========         ==========



                                                                                              Year Ended December 31,
                                                          --------------------------------------------------------------------------
                                                                                  2000                  1999                   1998
                                                          --------------------------------------------------------------------------
<S>                                                                       <C>                  <C>                      <C>

Condensed Statements of Operations
----------------------------------
Management fees from wholly-
   owned subsidiaries ..........................................           $   526,309           $   233,226            $   217,892
Interest income from subsidiary ................................                  --                    --                  262,500
                                                                           -----------           -----------            -----------
                                                                               526,309               233,226                480,392
Costs and expenses:                                                        -----------           -----------            -----------
------------------
Selling and administrative
   expenses ....................................................               140,589               469,534                415,242
Interest expense to affiliates .................................               100,000               100,000                   --
                                                                           -----------           -----------            -----------
                                                                               240,589               569,534                415,242
Income (loss) before income taxes                                          -----------           -----------            -----------
   and equity in net income (loss)
   of subsidiaries .............................................               285,720              (336,308)                65,150
Income tax expense .............................................               764,390                36,686                   --
Equity in income (loss) of
   subsidiaries ................................................             1,520,419             1,521,064               (386,559)
                                                                           -----------           -----------            -----------
Net income (loss) ..............................................           $ 1,041,749           $ 1,148,070            $  (321,409)
                                                                           ===========           ===========            ===========

</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  "Cumberland"),  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")  (collectively together with Cumberland,  the "Company.")
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  Cumberland  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,  2000,  1999 and 1998,  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
(depreciation)  in  available-for-sale  securities  held by CCS, of $104,485 and
($40,897) as of December  31, 2000 and 1999,  respectively.  These  amounts 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 Insurance.  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 a result,  CCS  increased
paid-in-capital  to  $1,000,000.  As of December 31, 2000, no payments  could be
made under the terms of the debenture.