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

                                   FORM 10-QSB

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

     For the quarterly period ended March 31, 2002


( )  TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
     OF 1934

     For the transition period from         to

     Commission File No. 0-32331

                              SURETY HOLDINGS CORP.
      ---------------------------------------------------------------------
                 (Name of Small Business Issuer in its Charter)

                  Delaware                                   52-2229054
   -------------------------------                       -----------------------
   State of other jurisdiction of                        (IRS Employer
   incorporation or organization                         Identification No.)

                              850 Fort Plains Road
                            Howell, New Jersey 07731
           ----------------------------------------------------------
                    (Address of Principal Executive Offices)

   Registrant's telephone number including area code        732-886-0706
                                                            ------------

   Check whether the issuer (1) filed all reports required to be filed by
   Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for
   such shorter period that the Registrant was required to file such reports,
   and (2) has been subject to such filing requirements for the past 90 days.

   (1)   YES    X     NO                  (2)   YES    X     NO
               ---      ---                           ---      ---

   State the number of shares outstanding of each of the Registrant's classes of
   common equity, as of the latest applicable date:

                           6,738,000 - - May 15, 2002


<PAGE>


                      SURETY HOLDINGS CORP. AND SUBSIDIARY

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                   PAGE
<S>                                                                                               <C>
Part I - Financial Information

          Item 1 - Condensed Consolidated Financial Statements

               Balance Sheet as of March 31, 2002                                                     1

               Statements of Income for Three Months Ended March 31, 2002 and 2001                    2

               Statements of Cash Flows for Three Months Ended March 31, 2002 and 2001                3

               Notes to the Financial Statements                                                    4-7

          Item 2 - Management's Discussion and Analysis or Plan of Operation                       8-14

Part II - Other Information

          Item 1 - Legal Proceedings                                                                 15

          Item 2 - Change in Securities                                                              15

          Item 3 - Defaults Upon Senior Securities                                                   15

          Item 4 - Submission of Matters to a Vote of Security Holders                               15

          Item 5 - Other Information                                                                 15

          Item 6 - Exhibits and Reports on Form 8-K                                                  15

          SIGNATURE                                                                                  16
</TABLE>


<PAGE>


                      SURETY HOLDINGS CORP. AND SUBSIDIARY

                      CONDENSED CONSOLIDATED BALANCE SHEET
                                 MARCH 31, 2002
                                   (UNAUDITED)

          ASSETS

CURRENT ASSETS
  Cash                                                           $  10,312,000
  Real estate held for sale, current                                 2,438,000
  Other current assets                                                 182,000
                                                                 -------------
      Total current assets                                          12,932,000

NOTES RECEIVABLE, less current maturities                            1,537,000

REAL ESTATE HELD FOR SALE                                           36,704,000

NOTES RECEIVABLE AND ACCRUED INTEREST,
   MARINE FOREST RESORT, INC., net of a $7.2
   million allowance for loan losses.                                3,814,000

REAL ESTATE DEVELOPMENT COSTS                                       36,164,000

PROPERTY AND EQUIPMENT, net of accumulated depreciation
  and amortization of $1,909,000                                     3,195,000

DEFERRED TAX ASSET                                                   3,475,000
                                                                 -------------

                                                                 $  97,821,000
                                                                 =============




                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Notes payable, current maturity                                $      30,000
  Notes payable, president, including accrued
    interest of $3,600                                                 224,000
  Accounts payable                                                     253,000
  Accrued expenses and other current liabilities                       143,000
                                                                 -------------
      Total current liabilities                                        650,000
                                                                 -------------

LONG-TERM LIABILITIES,
Notes payable, less current maturity                                   428,000
                                                                 -------------


COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
  Common stock, $.001 par value,
    200,000,000 shares authorized,
    6,738,000 shares issued and
    outstanding                                                          7,000
  Capital in excess of par value                                   101,678,000
  Accumulated deficit                                               (4,942,000)
                                                                 -------------
      Total stockholders' equity                                    96,743,000
                                                                 -------------

                                                                 $  97,821,000
                                                                 =============

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

                                       1
<PAGE>

                      SURETY HOLDINGS CORP. AND SUBSIDIARY

                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                   THREE MONTHS ENDED MARCH 31, 2002 AND 2001
                                   (UNAUDITED)

                                                   2002                2001
                                              -------------       -------------

REVENUES                                      $     945,000       $     275,000


COST OF REVENUES                                    415,000             159,000
                                              -------------       -------------

GROSS PROFIT                                        530,000             116,000

GENERAL AND ADMINISTRATIVE
 EXPENSES                                           394,000            391,000
                                              -------------       -------------

INCOME (LOSS) FROM OPERATIONS                       136,000            (275,000)
                                              -------------       -------------

OTHER INCOME (EXPENSE)
  Interest income                                    74,000             328,000
  Interest expense                                  (13,000)            (13,000)
                                              -------------       -------------
                                                     61,000             315,000
                                              -------------       -------------

INCOME BEFORE INCOME TAXES                          197,000              40,000

INCOME TAXES                                        (49,000)            (16,000)
                                              -------------       -------------

NET INCOME                                    $     148,000       $      24,000
                                              =============       ==============

NET INCOME PER COMMON
 SHARE, basic and diluted                     $        0.02       $   nil
                                              =============       =============

WEIGHTED AVERAGE COMMON SHARES
 OUTSTANDING, basic and diluted                   6,738,000           6,738,000
                                              =============       =============


SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

                                       2

<PAGE>

                      SURETY HOLDINGS CORP. AND SUBSIDIARY

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                   THREE MONTHS ENDED MARCH 31, 2002 AND 2001
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                2002              2001
                                                           -------------      ------------
<S>                                                        <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                               $     148,000      $     24,000
  Adjustments to reconcile net income
   to net cash used in operating activities:
     Depreciation and amortization                                38,000            36,000
     Deferred income taxes                                        45,000            16,000
     Accrued interest receivable,
      Marine Forest Resorts, Inc.                                                 (226,000)
     Gain on sales of property                                  (675,000)
     Loss on sale of notes receivable                             79,000
     Increase (decrease) in cash
      attributable to changes in operating
      assets and liabilities:
        Other current assets                                     (34,000)          (91,000)
        Accounts payable                                        (185,000)           60,000
        Accrued expenses and other
         current liabilities                                      16,000           (39,000)
                                                           -------------      ------------

NET CASH USED IN OPERATING ACTIVITIES                           (568,000)         (220,000)
                                                           -------------      ------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of property and equipment                            (27,000)          (80,000)
  Proceeds from sales of property                                710,000
  Real estate development expenditures                          (387,000)         (616,000)
  Proceeds from repayments of notes receivable                   838,000           451,000
  Advances to Marine Forest Resort, Inc.                                        (1,700,000)
                                                           -------------      ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES            1,134,000        (1,945,000)
                                                           -------------      ------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Principal payments on mortgage
    notes payable and bank line of credit                         (7,000)           (2,000)
  Proceeds from notes payable, president                                            95,000
  Repayments of notes payable, president                        (155,000)
                                                           -------------      ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES             (162,000)           93,000
                                                           -------------      ------------
NET INCREASE (DECREASE) IN CASH                                  404,000        (2,072,000)
CASH
  Beginning of year                                            9,908,000        10,147,000
                                                           -------------      ------------
  End of year                                              $  10,312,000      $  8,075,000
                                                           =============      ============
</TABLE>

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

                                       3

<PAGE>

                      SURETY HOLDINGS CORP. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.    NATURE OF OPERATIONS

Surety Holdings Corp. ("Surety") and its wholly-owned subsidiary,  Surety Kohala
Corporation ("Kohala") (collectively, the "Company") is primarily engaged in the
development  of a property on 642 acres of land in the North Kohala  district of
Hawaii  Island in the state of  Hawaii.  This  development,  referred  to as the
Mahukona  development  project (see Note 3), was initially slated to be a hotel,
18-hole golf course and resort homes.  However,  the Company is exploring  other
avenues  of  development  for the  642  acres  most  notably,  an  all-inclusive
fractional interest club community.

The  current  operations  of the Company  include  the sale of its  non-Mahukona
development project real estate and other ancillary activities, all of which are
not deemed to be the future of the Company's business.

2.    UNAUDITED STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

UNAUDITED STATEMENTS

The accompanying  condensed consolidated financial statements of Surety Holdings
Corp.  and  Subsidiary as of March 31, 2002 and for the three months ended March
31, 2002 and 2001 are  unaudited  and reflect  all  adjustments  of a normal and
recurring nature to present fairly the consolidated financial position,  results
of operations and cash flows for the interim periods.  These unaudited condensed
consolidated  financial statements have been prepared by the Company pursuant to
instructions to Form 10-QSB.  Pursuant to such  instructions,  certain financial
information  and  footnote  disclosures  normally  included  in  such  financial
statements have been omitted.

These unaudited condensed  consolidated  financial  statements should be read in
conjunction  with  the  consolidated  audited  financial  statements  and  notes
thereto,   together  with  management's  discussion  and  analysis  or  plan  of
operations,  contained in the Company's Annual Report on the Form 10-KSB for the
year ended  December 31, 2001.  The results of  operations  for the three months
ended  March 31, 2002 are not  necessarily  indicative  of the results  that may
occur for the year ending December 31, 2002.

INCOME PER COMMON SHARE

The Company complies with Statement of Financial  Accounting  Standards ("SFAS")
No. 128,  "Earnings  Per Share" which  requires dual  presentation  of basic and
diluted  earnings per share.  Basic earnings per share excludes  dilution and is
computed  by  dividing   income   available  to  common   stockholders   by  the
weighted-average  common shares  outstanding for the year.  Diluted earnings per
share  reflects the  potential  dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the
entity.  Since the Company has no securities or other  contracts to issue common
stock, basic and diluted net income per common share for the three-month periods
ended March 31, 2002 and 2001 were the same.

PRINCIPLES OF CONSOLIDATION

The condensed  consolidated  financial statements include the accounts of Surety
and Kohala.  All significant  intercompany  transactions  and balances have been
eliminated in consolidation.

                                       4
<PAGE>

                      SURETY HOLDINGS CORP. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3.    REAL ESTATE DEVELOPMENT COSTS

At March 31, 2002, real estate development costs, attributed primarily to the
Company's Mahukona development project, consist of the following:


 Land and land acquisition costs                    $ 23,896,000
 Planning and studies                                  2,091,000
 Egineering and architectural                            551,000
 Infrastructure                                        6,032,000
 Professional and consulting fees                      2,183,000
 Other                                                 1,411,000
                                                    ------------
                                                    $ 36,164,000
                                                    ============

4.   STOCKHOLDERS' EQUITY

In February 2002, the Company's  board of directors  authorized a  three-for-one
stock  split  effected  in the form of a 200 percent  stock  dividend  which was
distributed on February 15, 2002 to  stockholders of record on February 4, 2002.
Stockholders'  equity has been restated to give  retroactive  recognition to the
stock split for all periods presented by reclassifying from capital in excess of
par value to common stock the par value of the  additional  shares  arising from
the split. In addition,  all references in the condensed  consolidated financial
statements to number of shares and per share amounts have been restated.

5.    COMMITMENTS AND CONTINGENCIES

The  prior  approvals  obtained  for  the  Mahukona   development   project  are
conditional;  that is,  each  approval  is  subject  to  various  conditions  of
approval.  Certain  of these  conditions  of  approval  contain  time  limits or
financial  compliance  requirements,  which if not met, may ultimately result in
legislative and/or administrative actions to void or revoke the prior approvals.
The effect of such adverse  actions would be to return the land  entitlements to
the former  zoning,  or more  appropriate  zoning as determined by the County of
Hawaii.  The  Company  believes  that it has  continued  to  maintain  the prior
approvals  through  compliance  with all applicable  conditions.  In the future,
however,  the Company may not be able to maintain compliance with all applicable
conditions.

The  Company has entered  into  various  consulting  agreements  for  investment
banking, project development and other services.

The Company is involved in certain legal actions that arose in the normal course
of business. In the opinion of the Company's management, the resolution of these
matters will not have a material  adverse  effect on the condensed  consolidated
financial position, results of operations or cash flows of the Company.

6.    RELATED PARTY TRANSACTIONS

PRESIDENT

From time to time, the Company's  President advances the Company monies pursuant
to one-year  5%  promissory  notes.  At March 31,  2002,  the amount owed to the
Company's President pursuant to such notes was approximately  $224,000.  Related
interest  expense  for the  three  months  ended  March  31,  2002  and  2001 is
approximately $4,000 and $3,000, respectively.


                                       5
<PAGE>

                      SURETY HOLDINGS CORP. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6.    RELATED PARTY TRANSACTIONS (CONTINUED)

MARINE FOREST RESORT, INC. ("MARINE FOREST")

Pursuant to  uncollateralized  promissory  notes,  the Company  advanced  Marine
Forest, a related Japanese corporation that owns approximately 400 acres of land
in Okinawa,  Japan,  $9.75  million.  The notes bear interest at the U.S.  prime
rate, at date of issuance,  plus one percent.  Under their original  terms,  the
notes were due six months after date of  issuance,  extended an  additional  six
months and subsequently extended to December 31, 2002, as a concession to Marine
Forest to advance Marine Forest's development projects. In connection therewith,
the Company continues to discuss the possibility of a strategic arrangement with
Marine  Forest,  including the Company  acquiring  Marine Forest.  However,  the
parties are waiting the  completion  of the revised  Mahukona  development  plan
(expected  in the  second  quarter of 2002) to further  its  discussion  in this
regard.  Related  interest  income for the three  months ended March 31, 2001 is
approximately  $226,000.  In 2002, the Company  discontinued  accruing  interest
income on the promissory notes in light of its 2001 impairment  charge (see next
paragraph).  Through  March  31,  2002,  no  interest  has  been  paid,  however
management anticipates that all accrued interest receivable will be reclassified
to principal and settled in connection with the parties' contemplated  strategic
arrangement.

At December  31, 2001,  in light of the  speculative  nature of Marine  Forest's
contemplated development projects among other reasons and in accordance with its
compliance  with the  requirements  of SFAS No.  114,  the  Company  recorded an
impairment charge of approximately $7.2 million.

OTHER

During the three  months  ended  March 31,  2002 and 2001,  the  Company  rented
properties to related  individuals for aggregate annual rentals of approximately
$10,000 and $20,000, respectively.

Subsequent to March 31 2002, the Company sold property and improvements  thereon
to Kohala's President for approximately $575,000.

7.    SEGMENT REPORTING

As discussed in Note 1, the  Company's  primary  business  focus is the Mahukona
development  project.  Nonetheless,  the  Company  complies  with  SFAS No.  131
"Disclosures  about  Segments of an Enterprise and Related  Information",  which
provides information about the Company's current business activities. Management
has divided the Company into the following segments:  real estate sales, rental,
cattle sales and other. Transactions between segments are not common and are not
material to the segment  information.  Some business  activities  that cannot be
classified in the aforementioned segments are shown under "corporate".

Operating  results,  by segment,  for the three  months ended March 31, 2002 and
2001 are as follows (in thousands):


                                       6
<PAGE>

                      SURETY HOLDINGS CORP. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7.    SEGMENT REPORTING (CONTINUED)

<TABLE>
<CAPTION>
                        THREE MONTHS ENDED MARCH 31, 2002

                                               Real Estate     Rental     Cattle
                                                  Sales       Activity     Sales        Other       Corporate       Total
                                               ----------------------------------------------------------------------------
<S>                                              <C>           <C>         <C>         <C>           <C>           <C>
 Total revenues                                  $    710      $   99      $   81      $    55       $      -      $    945
 Total cost of revenues                               270          28          48           69                          415
                                               ----------------------------------------------------------------------------

 Segment profit (loss)                                440          71          33          (14)                         530
 General and administrative expenses                                                                     (394)         (394)
 Interest income and other, net                                                                            61            61
 Income taxes                                                                                             (49)          (49)
                                               ----------------------------------------------------------------------------

 Net income (loss)                               $    440      $   71      $   33      $   (14)      $   (382)     $    148
                                               ============================================================================

 Total assets                                    $ 40,679      $   53      $  106      $ 1,039       $ 55,944      $ 97,821
                                               ============================================================================

 Capital expenditures                            $      -      $    -      $    -      $    27       $    387      $    414
                                               ============================================================================

 Depreciation and amortization                   $      -      $    1      $    4      $    18       $     15      $     38
                                               ============================================================================
</TABLE>


<TABLE>
<CAPTION>
                        THREE MONTHS ENDED MARCH 31, 2001

                                               Real Estate     Rental     Cattle
                                                  Sales       Activity     Sales        Other       Corporate       Total
                                               ----------------------------------------------------------------------------
<S>                                              <C>           <C>         <C>         <C>           <C>           <C>
 Total revenues                                   $      -     $   131     $    88     $   56        $      -      $    275
 Total cost of revenues                                 14          41          45         59                           159
                                               -----------------------------------------------------------------------------

 Segment profit (loss)                                 (14)         90          43         (3)                          116
 General and administrative expenses                                                                     (391)         (391)
 Interest Income, net                                                                                     315           315
 Income taxes                                                                                             (16)          (16)
                                               -----------------------------------------------------------------------------

 Net income (loss)                               $     (14)    $    90     $    43     $   (3)       $    (92)     $     24
                                               ============================================================================

 Total assets                                    $  42,478     $ 2,040     $   842     $  204        $ 54,631      $100,195
                                               ============================================================================

 Capital expenditures                            $       -     $     7     $     -     $   69        $    620      $    696
                                               ============================================================================

 Depreciation and amortization                   $       -     $     2     $     2     $   17        $     15      $     36
                                               ============================================================================
</TABLE>


                                       7
<PAGE>


Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

NOTE ON FORWARD-LOOKING INFORMATION

This Form 10-QSB contains certain forward-looking  statements. For this purpose,
any  statements  contained  in this  Form  10-QSB  that  are not  statements  of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing,  words such as "may," "will," "expect," "believe," "anticipates,"
"estimates," or "continue" or comparable terminology or the negative thereof are
intended to identify  certain  forward-looking  statements.  These statements by
their  nature  involve  substantial  risks  and  uncertainties,  both  known and
unknown,  and actual  results  may  differ  materially  from any future  results
expressed or implied by such forward-looking  statements. The Company undertakes
no  obligation  to  publicly  update or revise  any  forward-looking  statements
whether as a result of new information, future events or otherwise.

OVERVIEW

Surety  Holdings Corp. (the  "Company"),  through its  wholly-owned  subsidiary,
Surety Kohala Corporation  ("Surety Kohala")  (formerly Chalon  International of
Hawaii,  Inc.), is engaged in the development of a property on 642 acres of land
in the North  Kohala  district  of Hawaii  Island in the state of  Hawaii.  This
development,  referred to as the Mahukona  development  project,  was  initially
slated to be a hotel, 18-hole golf course and resort homes. However, the Company
is exploring  other avenues of  development  for the 642 acres most notably,  an
all-inclusive  fractional  interest club community (see MAHUKONA  DEVELOPMENT in
Liquidity and Capital Resources).

The current  operations of the Company (discussed below) include the sale of its
non-Mahukona  development  project real estate and other  ancillary  activities,
many of which are not deemed to be the future of the Company's business.

RESULTS OF OPERATIONS

The following  table sets forth the  statements of income of the Company for the
years ended March 31, 2002 and 2001:


                                       8
<PAGE>

                                                    2002              2001

Real estate sales                              $    710,000       $         -
Rentals                                              99,000           131,000
Cattle sales                                         81,000            88,000
Other                                                55,000            56,000
                                               -------------      ------------
    Total revenues                                  945,000           275,000
                                               -------------      ------------

Cost of real estate sales                           270,000            14,000
Cost of rentals                                      28,000            41,000
Cost of cattle sales                                 48,000            45,000
Cost of other                                        69,000            59,000
                                               -------------      ------------
    Total cost of revenues                          415,000           159,000
                                               -------------      ------------

Gross profit                                        530,000           116,000

General and administrative expenses                 394,000           391,000
                                               -------------      ------------

Income (loss)  from operations                      136,000          (275,000)
                                               -------------      ------------

Interest income                                      74,000           328,000
Interest expense                                    (13,000)          (13,000)
Income taxes                                        (49,000)          (16,000)
                                               -------------      ------------

                                                     12,000           299,000
                                               -------------      ------------

Net income                                     $    148,000       $    24,000
                                               =============      ============


REAL ESTATE SALES -

During the three months ended March 31,  2002,  the Company sold two  properties
for proceeds of $710,000. During the same period of the prior year there were no
sales of real estate due to survey  delays.  Real estate  sales for both periods
have been  impacted due to delays caused by the Company's  survey  company,  the
largest  survey company on the Big Island of Hawaii and probably the only survey
company  large  enough  to  handle  the  Company's  PCRS  (Parcel  Consolidation
Re-Subdivision)  parcels and  subdivisions,  being  backlogged  with work.  This
surveying backlog is a result of increasing demand of the Company's North Kohala
property in a favorable  economic  time.  Further,  many of the  properties  the
Company is selling have never been surveyed and the  topography  and terrain are
very  difficult  for  surveyors.  To address the backlog,  the Company  recently
switched  surveyors  on several  projects.  Once the  surveyors  have  finished,
certain  parcels  that are subject to the land court  system go through the land
court process (generally three months).

The events of September 11, 2001,  ("September 11th") contributed to a slow down
in the tourism and second home  markets.  However,  the Company  believes  these
markets  are  gradually  recovering  and at March  31,  2002,  the  Company  has
approximately  fifty-seven  contracts to sell land  consisting of  approximately
3,000 acres for proceeds of approximately  $31 million.  As of date hereof,  the
obstacles  discussed in the preceding  paragraph  bottleneck a majority of these
contracts.  Further, the Company is awaiting the results of the Company's appeal
of the County's new Planning  Director's  initiative  to condition  certain PCRS
with  additional  requirements.  A draft  settlement  has been  submitted to the
Planning Director and he should have a decision by late May 2002.


                                       9
<PAGE>


RENTAL REVENUES -

The decrease in rental revenue and related  margins is  attributable to the sale
of real estate  formerly  leased by the Company.  Throughout  2002,  the Company
expects this trend to continue.

CATTLE SALES -

The   approximate   8%  decrease   in  cattle   sales  is   attributable   to  a
difficult-to-predict  beef  market.  Cattle  sales  declined to 281 heads in the
three months ended March 31, 2002, down from 333 heads in the three months ended
March 31, 2001.  The  deteriorated  cattle sales margin is  attributable  to the
fixed cost nature of the cattle sales  operations.  Processes  and tasks such as
branding,  culling, moving, fence repairs, medicine and labor costs are required
regardless of sales.  The Company  anticipates  that 2002 annual cattle revenues
will approximate 2001 annual cattle revenues.

OTHER REVENUES -

Other revenues  experienced  no significant  change in 2002 as compared to 2001.
However,  margins for other revenues fell during 2002 as a result of an increase
in depreciation  expense. The Company anticipates 2002 other revenues to surpass
2001 other revenues due to recovery from September 11th induced downturn.

GENERAL AND ADMINISTRATIVE EXPENSES -

General and  administrative  expenses for the three months ending March 31, 2002
remained  relatively  consistent with the same period of 2001. The components of
general and administrative  expenses for 2002 include salaries and related costs
of approximately $108,000; professional fees (legal, auditing and consulting) of
approximately  $90,000;  franchise  and other  taxes of  approximately  $70,000;
depreciation of approximately  $15,000;  insurance of approximately  $36,000 and
other expenses aggregating  approximately $75,000. The components of general and
administrative   expenses  for  2001  include  salaries  and  related  costs  of
approximately  $145,000;  professional fees (legal,  auditing and consulting) of
approximately  $97,000;  franchise  and other  taxes of  approximately  $76,000;
depreciation of approximately  $15,000 insurance of approximately  $15,000;  and
other expenses aggregating approximately $43,000.

OTHER INCOME AND EXPENSE -

Decreased  interest  income  during  the  first  quarter  of  2002  is  directly
attributable to the Company discontinuing accrual of such income in light of its
2001  impairment  charge and compliance  with the  requirements of Statements of
Financial Accounting Standards ("SFAS") No 114.


                                       10
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Cash flows

For the three months ended March 31, 2002 and 2001,  the Company's net cash used
in operating activities of approximately $568,000 and $220,000, respectively, is
comprised of the following:

                                                     2002             2001

Net income                                       $  148,000       $   24,000

Depreciation and amortization                        38,000           36,000

Deferred income taxes                                45,000           16,000

Accrued interest receivable, Marine Forest                          (226,000)

Net gain on sales of property
  and notes receivable                             (596,000)

Changes in operating assets
 and liabilities                                   (203,000)         (70,000)
                                                 -----------      -----------

                                                 $ (568,000)      $ (220,000)
                                                 ===========      ===========


For the three  months  ended March 31,  2002 and 2001,  the  Company's  net cash
provided by (used in)  investing  activities  of  approximately  $1,134,000  and
($1,945,000), respectively, is comprised of the following:


                                              2002                2001

Capital expenditures including
  real estate development                $  (414,000)        $   (696,000)

Proceeds from sales of property              710,000

Proceeds from notes receivable               838,000              451,000

Advances to Marine Forest                                      (1,700,000)
                                         ------------        -------------

                                         $ 1,134,000         $ (1,945,000)
                                         ============        =============



                                       11
<PAGE>


Approximately $387,000 of the $414,000 of the 2002 capital expenditures was made
to progress the Company's  Mahukona  development  endeavors.  These expenditures
include   approximately   $76,000  for  land-clearing,   leveling  and  grading,
approximately $78,000 of professional fees including  consulting,  approximately
$218,000  for  design,  engineering  and  surveying  and  $15,000  of other.  As
previously  discussed,  in 2002,  the Company sold two  properties for the total
proceeds  of  $710,000,  whereas  in 2001  there  were no sales of real  estate.
Increased proceeds from notes receivable are primarily  attributable to the sale
of notes to a bank  resulting  in a loss of  $79,000 on  conversion.  During the
three  months  ended March 31, 2001,  the Company  continued  to advance  Marine
Forest monies pursuant to short-term  promissory  notes. No monies were advanced
to Marine  Forest  during the three  months  ended March 31, 2002 (see  separate
liquidity discussion on pages 13 and 14).

For the three  months  ended March 31,  2002 and 2001,  the  Company's  net cash
provided by (used in)  financing  activities  of  approximately  ($162,000)  and
$93,000, respectively, is comprised of the following:


                                            2002            2001

Debt proceeds (from President)           $        -       $ 95,000

Repayment of debt (to President)           (155,000)

Debt repayments                              (7,000)        (2,000)
                                         ----------       --------
                                         $ (162,000)      $ 93,000
                                         ==========       ========


As of March 31,  2002,  the Company has total  current  assets of  approximately
$12.9 million and total current  liabilities of approximately  $0.7 million or a
working capital of approximately  $12.2 million.  As previously  discussed,  the
Company  anticipates  2002 revenue  levels to be higher than levels  experienced
during 2001.  However,  given the Company's  anticipated  cash  requirements  to
complete  the  revised  Mahukona  development  project  and  plans to  execute a
strategic  arrangement with Marine Forest (both discussed below), future capital
raising or debt financing activities may be required

In an effort to increase the marketability of the Company's common stock,  among
other reasons,  in February 2002, the Company's board of directors  authorized a
three-for-one  stock split  effected in the form of a two hundred  percent stock
dividend which was distributed on February 15, 2002 to stockholders of record on
February 4, 2002.

MAHUKONA DEVELOPMENT

As previously  discussed,  the events of September 11th had an impact on tourism
and hence, temporarily curtailed the Company's development activities.  However,
the Company believes that the tourist market and the high-end second home market
are  gradually  recovering.   In  this  regard,  the  Company  has  resumed  its
development  strategies  however it has  focused  on a revised  plan for the 642
acres of land in the North  Kohala  district  of  Hawaii  Island in the state of
Hawaii (known as the Mahukona development project). As previously reported,  the
plan for this valuable  parcel of land was the  development of a hotel,  18-hole
golf course and resort  homes.  However,  the  Company  recently  hired  several
consultants,  with  extensive  experience  in high-end  resort  development  and
marketing,  to  reassess  its  development  strategy  with  respect to  Mahukona
property, the goal of which is to provide the Company guidance in determining an
effective  development  strategy  that will  optimize  the  property's  economic
potential.


                                       12
<PAGE>


The preliminary  assessment of the consultants for the Mahukona  property is the
development of an all-inclusive fractional interest club community structured as
an undivided  interest  ("UDI").  A UDI would allow the prospective buyer to use
the Mahukona  facility plus the  eco-ranch  lands and would provide an ownership
interest in both. A UDI would not allow the prospective  buyer to own a specific
parcel of land, but only a fraction of each square foot of property. The revised
Mahukona development project is subject to further Company and consultant review
and analysis that is expected to be completed during the second quarter of 2002.

Based on the preliminary  assessment of its  consultants,  the revised  Mahukona
development  project cost  (excluding  ongoing costs and  maintenance)  would be
approximately $93 million and completed  substantially over a three-year period.
Based on information  provided by its consultants,  the Company  anticipates the
timing and details of the $93 million to be as follows (in thousands):


<TABLE>
<CAPTION>
                                                            YEAR 1       YEAR 2       YEAR 3

INITIAL INFRASTRUCTURE AND DEVELOPMENT COSTS
<S>                                                        <C>          <C>          <C>
Infrastructure (roads, water, sewer, etc.)                 $ 10,000     $ 10,000     $ 10,000
Golf course, range, clubhouse, etc.                          10,000       10,000
Tennis complex                                                             1,000
Central lodge facility (lobby, restaurants, etc.)                         10,500
Beach club                                                                10,000
Recreational trails/improvements                                             500          500
Ranch Improvements/amenities                                    500        2,000        1,000
Club boats / marina improvements                                           1,500        1,000
Other amenities/improvements                                               2,000
Entrance/gatehouse                                                           500
Design, permits, engineering
 contingency                                                  3,075        7,200        2,012
                                                           --------     --------     --------
                                                           $ 23,575     $ 55,200     $ 14,512
                                                           ========     ========     ========
</TABLE>


The Company  recognizes  that its current  operations  will not be sufficient to
fund the cost of Mahukona's  development  and it may not be successful in future
capital  raising  or debt  financing  activities.  Accordingly,  the  Company is
exploring other financing strategies including,  but not limited to, a 50% joint
venture  with  development  partners,  including,  but not limited  to,  another
property  development  company,  a  fractional  facility  management  company or
private investors.

MARINE FOREST

As disclosed in the  Company's  prior public  filings,  the Company has advanced
funds to Marine Forest, a related Japanese  corporation that owns  approximately
400 acres of land in Okinawa,  Japan,  in which it is  developing  pursuant to a
"golf  resort"  theme.  Funding  of  $9.75  million  was used by  Marine  Forest
primarily  in the  construction  of a golf  course and  related  amenities.  The
Company anticipated interest payments to commence on or about December 31, 2001.
However,  such interest payments were contingent upon Marine Forest's ability to
start  the  sales  of its golf  memberships.  These  sales  were  postponed  and
development (construction) activity was temporarily suspended as a result of the
events of September 11th.


                                       13
<PAGE>

The Company continues to discuss the possibility of a strategic arrangement with
Marine  Forest  including,  but not  limited to, the  Company  acquiring  Marine
Forest,  which  Marine  Forest has orally  agreed to.  However,  the parties are
waiting the completion of the revised Mahukona development plan (expected in the
second quarter of 2002) to further its  discussion in this regard.  Based on its
discussion  with Marine  Forest  management,  the Company  believes  that Marine
Forest will piggyback the Company's "all-inclusive fractional ownership" concept
contemplated for Mahukona

Through  March 31,  2002,  no  interest  has been paid to the  Company,  however
management anticipates that all accrued interest receivable will be reclassified
to principal and settled in connection with the parties' contemplated  strategic
arrangement previously discussed.

At December  31, 2001,  in light of the  speculative  nature of Marine  Forest's
contemplated development projects among other reasons and in accordance with its
compliance  with the  requirements  of SFAS No. 114, the Company has recorded an
impairment  charge of approximately  $7.2 million.  The Company will continue to
review  impairment  by  applying  the  procedures  set forth in SFAS No. 114. If
there's a  significant  change in the  amount or timing of the  impaired  loan's
expected  future cash flow,  the Company will adjust  (upward or  downward)  the
valuation allowance.










                                       14
<PAGE>


PART II - OTHER INFORMATION

Item 1.      Legal Proceedings:

There have been no material changes in legal proceedings as required to be
reported on Form 10QSB from as previously reported in the Company's 10-KSB for
the fiscal year ended December 31, 2001.

Item 2.      Change in Securities

In February 2002, the Company's board of directors authorized a three-for-one
stock split effected in the form of a 200 percent stock dividend which was
distributed on February 15, 2002 to stockholders of record on February 4, 2002.

Item 3.      Defaults Upon Senior Securities:

             None

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

             None

Item 5.      Other information:

             None

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

             None







                                       15
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                              SURETY HOLDINGS CORP.
                                  (Registrant)



                              By: /s/ Howard R. Knapp
                              -----------------------
                              Howard R. Knapp
                              Chief Financial Officer



Dated: May 15, 2002














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