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 June 30, 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 -- August 14, 2002





<PAGE>


                      SURETY HOLDINGS CORP. AND SUBSIDIARY

                                      INDEX

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

          Item 1 - Condensed Consolidated Financial Statements (unaudited)

               Balance Sheet as of June 30, 2002                                            1

               Statements of Income for the Six and Three Months
                 Ended June 30, 2002 and 2001                                               2

               Statements of Cash Flows for Six Months Ended June 30, 2002 and 2001         3

               Notes to the Financial Statements                                          4-8

          Item 2 - Management's Discussion and Analysis or Plan of Operation             9-16

Part II - Other Information

          Item 1 - Legal Proceedings                                                       17

          Item 2 - Change in Securities                                                    17

          Item 3 - Defaults Upon Senior Securities                                         17

          Item 4 - Submission of Matters to a Vote of Security Holders                     17

          Item 5 - Other Information                                                       17

          Item 6 - Exhibits and Reports on Form 8-K                                        17

          SIGNATURE                                                                        18
</TABLE>


<PAGE>


                      SURETY HOLDINGS CORP. AND SUBSIDIARY

                      CONDENSED CONSOLIDATED BALANCE SHEET
                                 June 30, 2002
                                  (unaudited)

                                     ASSETS

Current assets
  Cash                                                           $   9,870,000
  Real estate held for sale, current                                 2,452,000
  Other current assets                                                 143,000
                                                                 -------------
      Total current assets                                          12,465,000

Notes receivable, less current maturities                            1,531,000

Note receivable, officer                                               573,000

Real estate held for sale                                           36,611,000

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                                       36,734,000

Property and equipment, net of accumulated depreciation
  and amortization of $1,923,000                                     2,636,000

Deferred tax asset                                                   3,512,000
                                                                 -------------
                                                                 $  97,876,000
                                                                 =============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
  Notes payable, current maturity                                $      30,000
  Notes payable, president, including accrued
    interest of $6,000                                                 121,000
  Accounts payable                                                     167,000
  Accrued expenses and other current liabilities                       145,000
  Income taxes payable                                                 154,000
                                                                 -------------
      Total current liabilities                                        617,000
                                                                 -------------
Long-term liabilities,
  Notes payable, less current maturity                                 421,000
                                                                 -------------

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                                               (4,847,000)
                                                                 -------------
      Total stockholders' equity                                    96,838,000
                                                                 -------------
                                                                 $  97,876,000
                                                                 =============


See accompanying notes to condensed consolidated financial statements.


                                       1

<PAGE>


                      SURETY HOLDINGS CORP. AND SUBSIDIARY

                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                Six and Three Months Ended June 30, 2002 and 2001
                                   (unaudited)

<TABLE>
<CAPTION>
                                   Six Months Ended June 30,      Three Months Ended June 30,
                                     2002           2001             2002           2001
                                  -----------    -----------      -----------    -----------
<S>                               <C>            <C>              <C>            <C>
Revenues                          $ 1,793,000    $ 1,339,000      $   848,000    $ 1,064,000

Cost of Revenues                      649,000        548,000          309,000        389,000
                                  -----------    -----------      -----------    -----------

Gross profit                        1,144,000        791,000          539,000        675,000

General and administrative
 expenses                             775,000        741,000          382,000        350,000
                                  -----------    -----------      -----------    -----------

Income from operations                369,000         50,000          157,000        325,000
                                  -----------    -----------      -----------    -----------

Other income (expense)
  Interest income                     137,000        654,000           63,000        326,000
  Interest expense                    (98,000)       (28,000)         (10,000)       (15,000)
                                  -----------    -----------      -----------    -----------

                                       39,000        626,000           53,000        311,000
                                  -----------    -----------      -----------    -----------

Income before income taxes            408,000        676,000          210,000        636,000

Income taxes                         (165,000)      (274,000)        (116,000)      (258,000)
                                  -----------    -----------      -----------    -----------

Net income                        $   243,000    $   402,000      $    94,000    $   378,000
                                  ===========    ===========      ===========    ===========
Net income per common
 share, basic and diluted         $      0.04    $      0.06      $      0.01    $      0.06
                                  ===========    ===========      ===========    ===========
Weighted average common shares
 outstanding, basic and diluted     6,738,000      6,738,000        6,738,000      6,738,000
                                  ===========    ===========      ===========    ===========
</TABLE>



See accompanying notes to condensed consolidated financial statements.


                                       2

<PAGE>


                      SURETY HOLDINGS CORP. AND SUBSIDIARY

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Six Months Ended June 30, 2002 and 2001
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                      2002            2001
                                                                  ------------    ------------
<S>                                                               <C>             <C>
Cash flows from operating activities
  Net income                                                      $    243,000    $    402,000
  Adjustments to reconcile net income
   to net cash used in operating activities:
     Depreciation and amortization                                      73,000          73,000
     Deferred income taxes                                               8,000         266,000
     Accrued interest receivable, Marine Forest Resorts, Inc.                         (475,000)
     Gain on sales of property                                      (1,125,000)       (638,000)
     Loss on sale of property and improvements                          15,000          12,000
     Loss on sale of notes receivable                                   75,000
     Increase (decrease) in cash
      attributable to changes in operating
      assets and liabilities:
       Other current assets                                              5,000        (200,000)
       Accounts payable                                               (271,000)         89,000
       Accrued expenses and other current liabilities                   20,000           2,000
       Income taxes payable                                            154,000          14,000
                                                                  ------------    ------------
Net cash used in operating activities                                 (803,000)       (455,000)
                                                                  ------------    ------------
Cash flows from investing activities
 Purchases of property and equipment                                   (93,000)       (162,000)
 Proceeds from sales of property                                     1,318,000         788,000
 Real estate development expenditures                                 (957,000)     (1,397,000)
 Proceeds from repayments of notes receivable                          769,000         956,000
 Advances to Marine Forest Resort, Inc.                                             (1,950,000)
 Proceeds from repayments of note receivable, officer                    2,000
                                                                  ------------    ------------
Net cash provided by (used in) investing activities                  1,039,000      (1,765,000)
                                                                  ------------    ------------
Cash flows from financing activities
 Principal payments on notes payable                                   (14,000)         (5,000)
 Proceeds from notes payable, president                                                155,000
 Repayments of notes payable, president                               (260,000)
                                                                  ------------    ------------
Net cash provided by (used in) financing activities                   (274,000)        150,000
                                                                  ------------    ------------
Net decrease in cash                                                   (38,000)     (2,070,000)

Cash
 Beginning of period                                                 9,908,000      10,147,000
                                                                  ------------    ------------
 End of period                                                    $  9,870,000    $  8,077,000
                                                                  ============    ============
Supplemental disclosures of noncash investing and
 financing activity, issuance of notes receivable to officer
 upon sale of property and improvements                           $    575,000    $         --
                                                                  ============    ============
</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 June 30, 2002 and for the six and three-month periods
ended June 30, 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 six and
three-month  periods ended June 30, 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 six and three-month
periods ended June 30, 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 June 30, 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                             2,226,000
    Engineering and architectural                      548,000
    Infrastructure                                   6,192,000
    Professional and consulting fees                 2,395,000
    Other                                            1,477,000
                                                 -------------
                                                  $ 36,734,000
                                                 =============

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 June 30,  2002,  the amount owed to the
Company's President pursuant to such notes was approximately  $121,000.  Related
interest   expense  for  the  six  months  ended  June  30,  2002  and  2001  is
approximately  $6,000 and $8,000,  respectively  and $2,000 and $5,000,  for the
three months ended June 30, 2002 and 2001, 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.  However,  the notes were
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. Current discussions,  which are ongoing, are based upon
a recently completed study (Concept Development and Economic Projections Report)
prepared by a consultant for the Mahukona  development  plan.  Related  interest
income for the six months ended June 30, 2002 and 2001 is approximately  nil and
$475,000, respectively.  Related interest income for the three months ended June
30, 2002 and 2001 is approximately nil and $226,000,  respectively. In 2002, the
Company  discontinued  accruing interest income on the promissory notes in light
of its 2001 impairment  charge (see next  paragraph).  Through June 30, 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.

Note receivable, officer

In April 2002,  an officer of the Company  purchased  property and  improvements
thereon for  $575,000.  The officer  entered into 30-year note  agreement  which
requires  monthly  payments of principal  and interest  through  2032.  The note
receivable  bears  interest at the rate of 2.66%.  The sale of the  property and
improvements to the officer resulted in a loss of approximately $15,000.

Other

During  the six  months  ended  June  30,  2002 and  2001,  the  Company  rented
properties to related  individuals for aggregate rentals of $10,000 and $30,000,
respectively.  The aggregate rentals to related individuals for the three months
ended June 30, 2002 and 2001 was nil and $12,000, respectively.

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 six and three months ended June 30, 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>
                                      Six months ended June 30, 2002

                                      Real Estate    Rental    Cattle
                                         Sales      Activity    Sales     Other    Corporate      Total
                                      ------------------------------------------------------------------
<S>                                     <C>          <C>        <C>       <C>       <C>           <C>
Total revenues                        $  1,318       $ 139       $ 211     $  125    $    --    $  1,793
Total cost of revenues                     384          57          88        120                    649
                                      ------------------------------------------------------------------
Segment profit                             934          82         123          5                  1,144
General and administrative expenses                                                     (775)       (775)
Interest income and other, net                                                            39          39
Income taxes                                                                            (165)       (165)
                                      ------------------------------------------------------------------
Net income (loss)                     $    934       $  82       $ 123     $    5    $  (901)   $    243
                                      ==================================================================
Total assets                          $ 40,614          40         105     $  599    $56,518    $ 97,876
                                      ===================================================================
Capital expenditures                  $     --       $  --       $   4     $   51    $   995    $  1,050
                                      ==================================================================
Depreciation and amortization         $     --       $   2       $   8     $   31    $    32    $     73
                                      ==================================================================


<CAPTION>
                                      Six months ended June 30, 2001

                                      Real Estate    Rental    Cattle
                                         Sales      Activity    Sales     Other    Corporate      Total
                                      ------------------------------------------------------------------
<S>                                     <C>          <C>        <C>       <C>       <C>           <C>
Total revenues                        $    789      $  202       $ 234     $  114    $    --    $  1,339

Total cost of revenues                     258          77         106        107                    548
                                      ------------------------------------------------------------------
Segment profit                             531         125         128          7                    791
General and administrative expenses                                                     (741)       (741)
Interest income, net                                                                     626         626
Income taxes                                                                            (274)       (274)
                                      ------------------------------------------------------------------
  Net income (loss)                   $    531      $  125       $ 128     $    7    $  (389)        402
                                      ==================================================================
   Total assets                       $ 42,478      $2,040       $ 842     $  204    $55,150    $100,714
                                      ==================================================================
  Capital expenditures                $     --      $    7       $  76     $   74    $ 1,402    $  1,559
                                      ==================================================================
   Depreciation and amortization      $     --      $    4       $   6     $   33    $    30    $     73
                                      ==================================================================
</TABLE>




                                       7

<PAGE>


                      SURETY HOLDINGS CORP. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


7. Segment reporting (continued)

<TABLE>
<CAPTION>
                                      Three months ended June 30, 2002

                                      Real Estate    Rental    Cattle
                                         Sales      Activity    Sales     Other    Corporate      Total
                                      ------------------------------------------------------------------
<S>                                     <C>          <C>        <C>       <C>       <C>           <C>
Total revenues                        $    608       $  40       $ 130     $   70    $    --    $    848
Total cost of revenues                     189          29          40         51                    309
                                      ------------------------------------------------------------------
Segment profit                             419          11          90         19                    539
General and administrative expenses                                                     (382)       (382)
Interest income, net                                                                      53          53
Income taxes                                                                            (116)       (116)
                                      ------------------------------------------------------------------
Net income (loss)                     $    419       $  11       $  90     $   19    $  (445)   $     94
                                      ==================================================================
Capital expenditures                  $     --       $  --       $   4     $   24    $   608    $    636
                                      ==================================================================
Depreciation and amortization         $     --       $   1       $   4     $   13    $    17    $     35
                                      ==================================================================


<CAPTION>
                                      Three months ended June 30, 2001

                                      Real Estate    Rental    Cattle
                                         Sales      Activity    Sales     Other    Corporate      Total
                                      ------------------------------------------------------------------
<S>                                     <C>          <C>        <C>       <C>       <C>           <C>
Total revenues                        $    789      $   71       $ 146     $   58    $    --    $  1,064
Total cost of revenues                     244          36          61         48                    389
                                      ------------------------------------------------------------------
Segment profit                             545          35          85         10                    675
General and administrative expenses                                                     (350)       (350)
Interest income, net                                                                     311         311
Income taxes                                                                            (258)       (258)
                                      ------------------------------------------------------------------
  Net income (loss)                   $    545      $   35       $  85     $   10    $  (297)        378
                                      ==================================================================
   Capital expenditures               $     --      $   --       $  76     $    5    $   782    $    863
                                      ==================================================================
   Depreciation and amortization      $     --      $    2       $   4     $   16    $    15    $     37
                                      ==================================================================
</TABLE>




                                       8
<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.



                                       9

<PAGE>


Results of Operations

The following  table sets forth the  statements of income of the Company for the
six months ended June 30, 2002 and 2001:

                                              2002              2001

Real estate sales                        $ 1,318,000       $   789,000
Rentals                                      139,000           202,000
Cattle sales                                 211,000           234,000
Other                                        125,000           114,000
                                         -----------       -----------
     Total revenues                        1,793,000         1,339,000
                                         -----------       -----------

Cost of real estate sales                    384,000           258,000
Cost of rentals                               57,000            77,000
Cost of cattle sales                          88,000           106,000
Cost of other                                120,000           107,000
                                         -----------       -----------
     Total cost of revenues                  649,000           548,000
                                         -----------       -----------

Gross profit                               1,144,000           791,000

General and administrative expenses          775,000           741,000
                                         -----------       -----------

Income from operations                       369,000            50,000
                                         -----------       -----------
Interest income                              137,000           654,000
Interest expense                             (98,000)          (28,000)
Income taxes                                (165,000)         (274,000)
                                         -----------       -----------
                                            (126,000)          352,000
                                         -----------       -----------

Net income                               $   243,000       $   402,000
                                         ===========       ===========


Real estate sales -

During the six months  ended June 30,  2002,  the  Company  sold six parcels for
proceeds  of  $1,318,000.  During  the same  period of the prior year there were
sales of only 2 parcels 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  and survey  work is  beginning  to be
completed in a timely manner.  The Company is expecting 23 closings in the third
and fourth quarter of 2002 which will bring additional proceeds of approximately
$11 million.  However, in light of the aforementioned  among other unanticipated
circumstances,  no  assurances  can be made  that  the  Company  will  meet  its
expectations in this regard.



                                       10
<PAGE>


Real estate sales margin increased  approximately four percentage points because
of favorable market conditions.  Included in 2002 real estate costs is a $15,000
loss  brought  about as the  result  of the  sale of the  Sandalwood  house  and
property to Surety Kohala's president.

Rental revenues -

The approximate 31% decrease in rental revenue is primarily  attributable to the
sale of real estate  formerly  leased by the Company.  The Company  expects this
trend to  continue  throughout  2002.  During the first six months of 2002,  the
Company's rental revenue was also negatively  impacted by its contingent  rental
of  livestock.  The  downturn  was  brought  about  by dry  climatic  conditions
hindering the growth of livestock.

Cattle sales -

The   approximate   10%   decrease  in  cattle  sales  is   attributable   to  a
difficult-to-predict  beef market. Cattle sales declined to 741 heads in the six
months ended June 30, 2002,  down from 839 heads in the same period of the prior
year.  During  the six months  ended June 30,  2002,  cattle  margins  increased
approximately  three  percentage  points,  due to  decreased  spending  on fence
repairs  over the same period of last year.  The Company  anticipates  that 2002
annual  cattle  revenues  and costs will  continue  to  decrease  as the Company
continues its sale of pasture lands.

Other revenues -

Other revenues  increased  approximately 10% during the first six months of 2002
as  Eco-tourism  activity  rebounded  strongly from the  September  11th induced
downturn. However, margins for other revenues fell during 2002 as a result of an
increase  in repairs and  maintenance  of  buildings  and  grounds.  The Company
anticipates  that other revenues will continue to increase over the next four to
six quarters.

General and administrative expenses -

General  and  administrative  expenses  for the six months  ended June 30,  2002
increased  approximately  5% as  compared  with the  same  period  of 2001.  The
components of general and administrative  expenses for 2002 include salaries and
related costs of approximately $260,000;  professional fees (legal, auditing and
consulting)   of   approximately   $135,000;   franchise   and  other  taxes  of
approximately  $101,000;  depreciation of  approximately  $31,000;  insurance of
approximately $60,000; rent expense of approximately $48,000;  travel, meals and
entertainment   of   approximately   $72,000  and  other  expenses   aggregating
approximately $68,000. The components of general and administrative expenses for
the same period of 2001  include  salaries  and related  costs of  approximately
$293,000;  professional  fees (legal,  auditing and consulting) of approximately
$168,000;  franchise and other taxes of approximately  $90,000;  depreciation of
approximately  $32,000  insurance  of  approximately  $28,000;  rent  expense of
approximately  $21,000;  travel, meals and entertainment of approximately $9,000
and other expenses aggregating approximately $100,000.

Other income and expense -

Decreased  interest income during the six months ended June 30, 2002 is directly
attributable to the Company  discontinuing its accrual of interest income on the
Marine Forest notes in light of its 2001  impairment  charge and compliance with
the  requirements of Statements of Financial  Accounting  Standards  ("SFAS") No
114.  Included in interest  expense for the six months ended June 30, 2002 is an
approximate  $75,000 loss (a finance cost) resulting upon the sale of 5 mortgage
notes  to  financial   institutions   at  a  discount  which  provided  cash  of
approximately $759,000.



                                       11
<PAGE>


Results of Operations

The following  table sets forth the  statements of income of the Company for the
three months ended June 30, 2002 and 2001:

                                              2002              2001

Real estate sales                        $   608,000       $   789,000
Rentals                                       40,000            71,000
Cattle sales                                 130,000           146,000
Other                                         70,000            58,000
                                         -----------       -----------
     Total revenues                          848,000         1,064,000
                                         -----------       -----------

Cost of real estate sales                    189,000           244,000
Cost of rentals                               29,000            36,000
Cost of cattle sales                          40,000            61,000
Cost of other                                 51,000            48,000
                                         -----------       -----------
     Total cost of revenues                  309,000           389,000
                                         -----------       -----------

Gross profit                                 539,000           675,000

General and administrative expenses          382,000           350,000
                                         -----------       -----------

Income from operations                       157,000           325,000
                                         -----------       -----------
Interest income                               63,000           326,000
Interest expense                             (10,000)          (15,000)
Income taxes                                (116,000)         (258,000)
                                         -----------       -----------
                                             (63,000)           53,000
                                         -----------       -----------

Net income                               $    94,000       $   378,000
                                         ===========       ===========


Real estate sales -

During the three months  ended June 30, 2002,  the Company sold four parcels for
proceeds  of  $608,000.  During the same period of the prior year there were two
sales of parcels.  See  management's  discussion and analysis for the six months
ended June 30, 2002 and 2001 for discussion of delays and future expectations.

Rental revenues -

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

Cattle sales -

Cattle sales declined approximately 16% for the three months ended June 30, 2002
as 460 heads of cattle were sold compared to 560 heads of cattle during the same
period of the prior year.  The Company  believes that cattle sales will continue
to decrease for the  foreseeable  future due to the  continuing  sale of pasture
lands.



                                       12
<PAGE>


Other revenues -

Other revenues  increased  approximately  12% during the three months ended June
30,  2002 as  compared  to the same  period of the  prior  year.  As  previously
discussed,   eco-tourism  activity  continued  to  steadily  increase  from  the
September 11th induced downturn.

General and administrative expenses -

General and  administrative  expenses  for the three  months ended June 30, 2002
increased  9% with the same  period  of 2001.  The  components  of  general  and
administrative  expenses  for the  three  months  ended  June 30,  2002  include
salaries and related costs of approximately $124,000;  professional fees (legal,
auditing and consulting) of approximately $76,000;  franchise and other taxes of
approximately  $54,000;  depreciation  of  approximately  $16,000;  insurance of
approximately $24,000; rent expense of approximately $30,000;  travel, meals and
entertainment   of   approximately   $44,000  and  other  expenses   aggregating
approximately $14,000. The components of general and administrative expenses for
the same  period  of the  prior  year  include  salaries  and  related  costs of
approximately  $149,000;  professional fees (legal,  auditing and consulting) of
approximately  $70,000;  franchise  and other  taxes of  approximately  $54,000;
depreciation of approximately $17,000;  insurance of approximately $13,000; rent
expense  of  approximately   $13,000;   travel,   meals  and   entertainment  of
approximately $4,000 and other expenses aggregating approximately $30,000.

Other income and expense -

Decreased  interest  income  during  the three  months  ended  June 30,  2002 is
directly  attributable  to the  Company  discontinuing  its  accrual of interest
income on the  Marine  Forest  note in light of its 2001  impairment  charge and
compliance with the requirements of Statements of Financial Accounting Standards
("SFAS") No 114.

Liquidity and Capital Resources

Cash flows

For the six months ended June 30, 2002 and 2001,  the Company's net cash used in
operating activities of approximately  $803,000 and $455,000,  respectively,  is
comprised of the following:

                                                    2002               2001

Net income                                      $   243,000       $   402,000

Depreciation and amortization                        73,000            73,000

Deferred income taxes                                 8,000           266,000

Accrued interest receivable, Marine Forest                           (475,000)

Net gain on sales of property
  and notes receivable                           (1,035,000)         (626,000)

Changes in operating assets
 and liabilities                                    (92,000)          (95,000)
                                                -----------       -----------

                                                $  (803,000)      $  (455,000)
                                                ===========       ===========



                                       13
<PAGE>


For the six months ended June 30, 2002 and 2001, the Company's net cash provided
by (used in) investing activities of approximately  $1,039,000 and ($1,765,000),
respectively, is comprised of the following:

                                                 2002                  2001
Capital expenditures including
  real estate development                    $ (1,050,000)       $  (1,559,000)

Proceeds from sales of property                 1,318,000              788,000

Proceeds from notes receivable                    769,000              956,000

Proceeds from note receivable, officer              2,000

Advances to Marine Forest                                           (1,950,000)
                                             ------------        -------------
                                             $  1,039,000        $  (1,765,000)
                                             ============        =============

Approximately  $756,000 of the $1,050,000 2002 capital  expenditures was made to
progress  the  Company's  Mahukona  development  endeavors.  These  expenditures
include  approximately   $236,000  for  land-clearing,   leveling  and  grading,
approximately $290,000 of professional fees including consulting,  approximately
$230,000 for design,  engineering  and surveying.  As previously  discussed,  in
2002, the Company sold six properties for total proceeds of $1,318,000,  whereas
in 2001 there were only two sales of real estate for total proceeds of $788,000.
During the six months  ended June 30,  2001,  the Company  continued  to advance
Marine Forest monies  pursuant to short-term  promissory  notes.  No monies were
advanced  to Marine  Forest  during  the six  months  ended  June 30,  2002 (see
separate liquidity discussion on page 16).

For the six months ended June 30, 2002 and 2001, the Company's net cash provided
by (used in) financing  activities  of  approximately  ($274,000)  and $150,000,
respectively, is comprised of the following:

                                                2002               2001

Debt proceeds (from President)               $      --          $ 155,000

Repayment of debt (to President)              (260,000)

Debt repayments                                (14,000)            (5,000)
                                             ---------          ---------
                                             $(274,000)         $ 150,000
                                             =========          =========





                                       14

<PAGE>


As of June 30, 2002, the Company has total current assets of approximately $12.5
million and total current liabilities of approximately $0.6 million or a working
capital of  approximately  $12 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.

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.

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.  During the
quarter ended June 30, 2002, the consultants completed their review and analysis
of  the  Mahukona  property  and  issued  a  Concept  Development  and  Economic
Projections   Report.  The  "theme  book"  (a  large,   multi-page  book,  which
incorporates   representative   images  of  the   components   of  the   project
incorporating  the  written   positioning   statement)  has  been  completed  by
InterCommunications,   Inc.,  a  marketing  consulting  firm,  for  purposes  of
presentations  to  prospective  development  partners,  government  agencies and
research  groups;  the Company is in the process of choosing a project logo. The
final site plan and  development  program is underway by EDSA, a consulting firm
hired by the  Company  to  perform  a  master  plan  audit,  which  will  convey
recommendations  with regards to the  modification  of the existing master plan.
The  Company  is  continuing   discussions  with  its  consultants  and  hopeful
formalized plans will be completed later in 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):



                                       15

<PAGE>


                                                     Year 1    Year 2    Year 3

Initial Infrastructure and Development Costs
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
                                                    =======   =======   =======

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.  No assurances  can be made that the Company will be able to
finance or complete the Mahukona development as outlined above.

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.

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. Current discussions, which are
ongoing,  are based upon a completed  study  (Concept  Development  and Economic
Projections Report) prepared by a consultant for the Mahukona development plan.

Through  June 30,  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.



                                       16
<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 10-QSB 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






                                       17

<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:  August 14, 2002





                                       18