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, 2003


( )  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.)


                               4400 Route 9 South
                           Freehold, New Jersey 07728
                    ----------------------------------------
                    (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:

                           6,753,000 - - May 15, 2003

<PAGE>


                     SURETY HOLDINGS CORP. AND SUBSIDIARIES

                                      INDEX


                                                                            Page
                                                                            ----

     Part I - Financial Information

           Item 1 - Condensed Consolidated Financial Statements

                Balance Sheet as of March 31, 2003                             1

                Statements of Income for Three Months Ended March 31, 2003
                    and 2002                                                   2

                Statements of Cash Flows for Three Months Ended March 31,
                    2003 and 2002                                              3

                Notes to the Financial Statements                            4-7

           Item 2 - Management's Discussion and Analysis or Plan of
                    Operation                                               8-16

           Item 3 - Evaluation of Disclosure Controls and Procedures          17

     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

           CERTIFICATIONS                                                  19-21


<PAGE>


                     SURETY HOLDINGS CORP. AND SUBSIDIARIES


                      CONDENSED CONSOLIDATED BALANCE SHEET
                                 March 31, 2003
                                   (unaudited)


                                     ASSETS

CURRENT ASSETS
  Cash                                                            $  11,154,000
  Real estate held for sale, current                                  1,548,000
  Other current assets                                                  343,000
  Notes receivable, officer, current                                     13,000
                                                                  -------------
    Total current assets                                             13,058,000

NOTES RECEIVABLE, less current maturities                             1,367,000

NOTES RECEIVABLE, officer, less current maturities                      550,000

REAL ESTATE HELD FOR SALE                                            31,103,000

NOTES RECEIVABLE AND ACCRUED INTEREST,
   MARINE FOREST RESORT, INC., net of an approximate
    $11 million allowance for loan losses                                    --

REAL ESTATE DEVELOPMENT COSTS                                        42,588,000

PROPERTY AND EQUIPMENT, net of accumulated depreciation
  and amortization of $1,979,000                                      2,556,000

DEFERRED TAX ASSET                                                    4,557,000

OTHER ASSETS                                                          1,864,000
                                                                  -------------
                                                                  $  97,643,000
                                                                  =============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Notes payable, current maturity                                 $      34,000
  Accounts payable                                                      429,000
  Accrued expenses and other current liabilities                        176,000
  Income taxes payable                                                  245,000
                                                                  -------------
    Total current liabilities                                           884,000
                                                                  -------------
LONG-TERM LIABILITIES
  Notes payable, less current maturity                                  393,000
  Obligations pursuant to notes receivable
    financing, less current maturity                                    451,000
                                                                  -------------
                                                                        844,000
                                                                  -------------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
  Common stock, $.001 par value,
    200,000,000 shares authorized,
    6,753,000 shares issued and
    outstanding                                                           7,000
  Capital in excess of par value                                    101,710,000
  Accumulated deficit                                                (5,802,000)
                                                                  -------------
    Total stockholders' equity                                       95,915,000
                                                                  -------------
                                                                  $  97,643,000
                                                                  =============


SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS.


                                       1
<PAGE>


                     SURETY HOLDINGS CORP. AND SUBSIDIARIES


                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                   THREE MONTHS ENDED MARCH 31, 2003 AND 2002
                                   (unaudited)


                                                     2003               2002
                                                 -----------        -----------

REVENUES                                         $ 3,078,000        $   945,000

COST OF REVENUES                                   1,167,000            415,000
                                                 -----------        -----------

GROSS PROFIT                                       1,911,000            530,000

GENERAL AND ADMINISTRATIVE
 EXPENSES                                            617,000            394,000
                                                 -----------        -----------

INCOME FROM OPERATIONS                             1,294,000            136,000
                                                 -----------        -----------

OTHER INCOME (EXPENSE)
  Interest income                                     61,000             74,000
  Interest expense                                    (7,000)           (13,000)
                                                 -----------        -----------

                                                      54,000             61,000
                                                 -----------        -----------

INCOME BEFORE INCOME TAXES                         1,348,000            197,000

INCOME TAXES                                        (513,000)           (49,000)
                                                 -----------        -----------

NET INCOME                                       $   835,000        $   148,000
                                                 ===========        ===========

NET INCOME PER COMMON
  SHARE, basic and diluted                       $      0.12        $      0.02
                                                 ===========        ===========

WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING, basic and diluted                   6,745,000          6,738,000
                                                 ===========        ===========






SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS.


                                       2
<PAGE>


                     SURETY HOLDINGS CORP. AND SUBSIDIARIES


                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                   THREE MONTHS ENDED MARCH 31, 2003 AND 2002
                                   (unaudited)

<TABLE>
<CAPTION>
                                                              2003            2002
                                                          ------------    ------------
<S>                                                       <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                              $    835,000    $    148,000
  Adjustments to reconcile net income
   to net cash used in operating activities:
    Depreciation and amortization                               36,000          38,000
    Deferred income taxes                                        8,000          45,000
    Gain on sales of property                               (2,109,000)       (675,000)
    Loss on sale of notes receivable                                            79,000
    Stock compensation charge                                   32,000
    Increase (decrease) in cash
     attributable to changes in operating
     assets and liabilities:
      Other current assets                                     123,000         (34,000)
      Other assets                                            (115,000)       (122,000)
      Accounts payable                                        (269,000)       (185,000)
      Accrued expenses and other
       current liabilities                                      58,000          16,000
      Income taxes payable                                     245,000
                                                          ------------    ------------
NET CASH USED IN OPERATING ACTIVITIES                       (1,156,000)       (690,000)
                                                          ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of property and equipment                          (10,000)        (27,000)
  Proceeds from sales of property                            2,868,000         710,000
  Real estate development expenditures                        (294,000)       (265,000)
  Proceeds from repayments of notes receivable                   4,000         838,000
                                                          ------------    ------------
NET CASH PROVIDED BY INVESTING ACTIVITIES                    2,568,000       1,256,000
                                                          ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Principal payments on notes payable                           (8,000)         (7,000)
  Proceeds from repayments of notes receivable, officer          4,000
  Repayments of notes payable, president                                      (155,000)
                                                          ------------    ------------
NET CASH USED IN FINANCING ACTIVITIES                           (4,000)       (162,000)
                                                          ------------    ------------

NET INCREASE IN CASH                                         1,408,000         404,000

CASH
  Beginning of period                                        9,746,000       9,908,000
                                                          ------------    ------------
  End of period                                           $ 11,154,000    $ 10,312,000
                                                          ============    ============
</TABLE>




SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS.


                                       3
<PAGE>


                     SURETY HOLDINGS CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



1.   NATURE OF OPERATIONS

Surety   Holdings   Corp.   ("Surety")   and   its   wholly-owned   subsidiaries
(collectively,  the  "Company")  are 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  Kohala  Preserve
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.

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

In January 2003,  the Company  acquired the assets of  Millennium  International
Sports &  Entertainment,  LLC  ("Millennium"),  which  consisted  of sports  and
entertainment  memorabilia (see Item 7, CONSOLIDATED FINANCIAL STATEMENTS - NOTE
13, in the Company's  Annual  Report on Form 10-KSB for the year ended  December
31, 2002 for further  detail).  However,  since revenues related to the sales of
the memorabilia  were below certain  thresholds  specified in the Asset Purchase
Agreement,  the Company notified Millennium of its election to rescind the Asset
Purchase Agreement, pursuant to the terms of agreement.

2.   UNAUDITED STATEMENTS, INCOME PER COMMON SHARE AND NEW ACCOUNTING
     PRONOUNCEMENTS

UNAUDITED STATEMENTS

The accompanying  condensed consolidated financial statements of Surety Holdings
Corp. and Subsidiaries as of March 31, 2003 and for the three months ended March
31, 2003 and 2002 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, 2002.  The results of  operations  for the three months
ended  March 31, 2003 are not  necessarily  indicative  of the results  that may
occur for the year ending December 31, 2003.

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 months ended
March 31, 2003 and 2002 were the same.



                                       4
<PAGE>


                     SURETY HOLDINGS CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



2.   UNAUDITED STATEMENTS, INCOME PER COMMON SHARE AND NEW ACCOUNTING
     PRONOUNCEMENTS (CONTINUED)

NEW ACCOUNTING PRONOUNCEMENTS

In 2002, the Financial  Accounting Standards Board ("FASB") issued SFAS No. 146,
"Accounting for Costs Associated with Exit of Disposal  Activities" and No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure".  SFAS No.
146,  which is effective  beginning  with fiscal year ending  December 31, 2003,
addresses  financial  accounting and reporting for costs associated with exit or
disposal  activities.  The  adoption of SFAS No. 146 did not have a  significant
impact on its consolidated  financial  position,  results of operations and cash
flows.  The  adoption  of SFAS No. 148,  which was  effective  for fiscal  years
beginning  after December 15, 2002,  addresses  stock-based  compensation.  This
pronouncement  did not have a  material  impact  on the  Company's  consolidated
financial position, result of operations and cash flows.

3.   REAL ESTATE DEVELOPMENT COSTS

At March 31, 2003, real estate  development  costs,  attributed to the Company's
Kohala Preserve development project, consist of the following:

 Land and land acquisition costs            $28,975,000
 Planning and studies                         2,490,000
 Engineering and architectural                  565,000
 Infrastructure                               6,404,000
 Professional and consulting fees             2,575,000
 Other                                        1,579,000
                                            -----------
                                            $42,588,000
                                            ===========


4.   STOCKHOLDERS' EQUITY

In January 2003,  the Company issued 15,000 shares of its common stock valued at
$32,000 pursuant to employment contracts.

5.   COMMITMENTS AND CONTINGENCIES

The prior  approvals  obtained for the Kohala Preserve  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. Generally, these agreements are
on a project by project basis requiring payments as services are performed.

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  consolidated  financial
position, results of operations or cash flows of the Company.



                                       5
<PAGE>


                     SURETY HOLDINGS CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



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,  2003,  the amount owed to the
Company's  President  pursuant  to such notes was  approximately  $nil.  Related
interest  expense  for the  three  months  ended  March  31,  2003  and  2002 is
approximately $nil and $4,000, respectively

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

Pursuant to  uncollateralized  promissory  notes,  the Company  advanced  Marine
Forest, a related Japanese corporation that controls  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.  Marine Forest's current  development  plans are based upon a recently
completed  study  prepared by a consultant for the Kohala  Preserve  development
plan. The Company believes that Marine Forest may sell its development  projects
based on the aforementioned study and repay the notes and interest thereafter.

As of March 31, 2003, the notes remain outstanding.  Further,  since issuance of
the notes,  no interest  has been paid to the Company.  Accordingly,  during the
years ended  December 31, 2002 and 2001, in light of the  speculative  nature of
Marine Forest's  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 $3.8 million and $7.2 million,  respectively,
including  approximately $1.3 million of aggregate accrued interest  receivable.
During the year ended  December  31,  2002,  the Company  discontinued  accruing
interest income on the notes in light of its impairment charge.

NOTE RECEIVABLE, OFFICER

In April 2002,  an officer of the Company  purchased  property and  improvements
thereon for $575,000.  The officer entered into a 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%.  At March 31, 2003, the balance
on this note receivable was $563,000.

OTHER

During the three  months  ended  March 31,  2003 and 2002,  the  Company  rented
properties to related  individuals for aggregate annual rentals of approximately
$nil and $10,000, respectively.

7.   SEGMENT REPORTING

As  discussed  in Note 1, the  Company's  primary  business  focus is the Kohala
Preserve  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, 2003 and
2002 are as follows (in thousands):



                                       6
<PAGE>


                     SURETY HOLDINGS CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



7.   SEGMENT REPORTING (CONTINUED)

                        THREE MONTHS ENDED MARCH 31, 2003

<TABLE>
<CAPTION>
                                        Real Estate      Rental         Cattle
                                           Sales        Activity         Sales        Other         Corporate        Total
                                        ------------------------------------------------------------------------------------

<S>                                      <C>            <C>            <C>           <C>            <C>            <C>
Total revenues                           $  2,868       $     83       $     72      $     55       $     --       $  3,078
Total cost of revenues                      1,020             31             60            56                         1,167
                                        ------------------------------------------------------------------------------------
Gross profit (loss)                         1,848             52             12            (1)                        1,911
General and administrative expenses                                                                     (617)          (617)
Interest income, net                                                                                      54             54
Income taxes                                                                                            (513)          (513)
                                        ------------------------------------------------------------------------------------

Net income (loss)                        $  1,848       $     52       $     12      $     (1)      $ (1,076)      $    835
                                        ====================================================================================

Total assets                             $ 36,571       $     61       $     99      $    563       $ 60,349       $ 97,643
                                        ====================================================================================

Capital expenditures                     $     --       $     --       $      6      $     --       $    298       $    304
                                        ====================================================================================

Depreciation and amortization            $     --       $      1       $      4      $     15       $     16       $     36
                                        ====================================================================================
</TABLE>


                        THREE MONTHS ENDED MARCH 31, 2002

<TABLE>
<CAPTION>
                                        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
                                        ------------------------------------------------------------------------------------
Gross profit (loss)                           440             71             33           (14)                          530
General and administrative expenses                                                                     (394)          (394)
Interest income, 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       $    265       $    292
                                        ====================================================================================

Depreciation and amortization            $     --       $      1       $      4      $     18       $     15       $     38
                                        ====================================================================================
</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  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",  "anticipate",
"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"),  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  Kohala  Preserve
development project (formerly known 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  KOHALA
PRESERVE DEVELOPMENT in Liquidity and Capital Resources).

The Company  maintains an  investment  in Marine Forest  Resort,  Inc.  ("Marine
Forest"), a related Japanese  corporation that controls  approximately 400 acres
of land in Okinawa,  Japan (see MARINE FOREST in Liquidity and Capital Resources
for discussion of Impairment Charge).

The current operations of the Company (discussed in Results of Operations on the
following pages) include the sale of its non-Kohala Preserve development project
real estate and other ancillary  activities,  many of which are not deemed to be
the future of the Company's business.

In January 2003,  the Company  acquired the assets of  Millennium  International
Sports &  Entertainment,  LLC,  which  consisted  of  sports  and  entertainment
memorabilia.  Subsequently,  the Company has notified Millennium of its election
to rescind on the Asset Purchase  Agreement as a result of revenues  relating to
the memorabilia being below certain specified  thresholds in the  agreement.(see
MILLENNIUM in Liquidity and Capital Resources).






                                       8
<PAGE>

CRITICAL ACCOUNTING POLICIES

The Company has  identified  the following  critical  accounting  policies which
effect the Company's  consolidated financial statements as of March 31, 2003 and
for the two quarters ended March 31, 2003 and 2002:

REAL ESTATE HELD FOR SALE AND DEVELOPMENT COSTS (INCLUDING IMPAIRMENT)
Real estate  held for sale is stated at the lower of cost or market.  All direct
and indirect costs relating to the Company's development project are capitalized
in accordance with Statement of Financial  Accounting  Standards ("SFAS") No. 67
"Accounting  for Costs and Initial Rental  Operations of Real Estate  Projects".
Such standard  requires costs associated with the  acquisition,  development and
construction of real estate and real  estate-related  projects to be capitalized
as part of that  project.  The  realization  of these costs is predicated on the
ability  of the  Company  to  successfully  open  and  operate  the  development
property.

The Company reviews its real estate held for sale, real estate development costs
and long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of the assets may not be fully recoverable. To
determine  the  recoverability  of these  assets,  the Company  employs  various
methods  to assess  fair  value  including,  but not  limited  to,  analysis  of
undiscounted  cash flows,  third party  appraisals or valuations and contractual
sales  value of  similar  properties.  Impairment  is the  amount  by which  the
carrying value of the asset exceeds its fair value.

The Company has obtained an "Opinion of Market  Value",  dated February 3, 2003,
for  a  majority  of  its  property  from  Economics  Research  Associates,   an
experienced and reputable advisor for developers and others.

MARINE FOREST - "ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN"
The Company  accounts  for the notes  receivable  from Marine  Forest  under the
provisions of SFAS No. 114,  "Accounting by Creditors for Impairment of a Loan".
Under SFAS No. 114, a loan is impaired when,  based on current  information  and
events,  it is probable  that a creditor  will be unable to collect all a mounts
due  according  to the  contractual  terms of the loan  agreement.  SFAS No. 114
requires  lenders to measure  impaired  loans based on: (i) the present value of
expected  future cash flows  discounted at the loans'  effective  interest rate;
(ii)  the  loans'  observable  market  price  or  (iii)  the  fair  value of the
collateral if the loan is collateral-dependent.  An allowance for loan losses is
maintained  if the  measure  of an  impaired  loan is  less  than  its  recorded
investment.  Adjustments to the allowance are made through corresponding charges
or credits to the provision for loan losses.






                                       9
<PAGE>

RESULTS OF OPERATIONS

The following  table sets forth the  statements of income of the Company for the
three months ended March 31, 2003 and 2002:

<TABLE>
<CAPTION>
                                                         2003          2002

<S>                                                 <C>             <C>
Real estate sales                                   $ 2,868,000     $ 710,000
Rentals                                                  83,000        99,000
Cattle sales                                             72,000        81,000
Other                                                    55,000        55,000
                                                   -------------   -----------

Total revenues                                        3,078,000       945,000
                                                   -------------   -----------

Cost of real estate sales                             1,020,000       270,000
Cost of rentals                                          31,000        28,000
Cost of cattle sales                                     60,000        48,000
Cost of other                                            56,000        69,000
                                                   -------------   -----------

Total cost of revenues                                1,167,000       415,000
                                                   -------------   -----------

Gross profit                                          1,911,000       530,000

General and administrative expenses                     617,000       394,000
                                                   -------------   -----------

Income from operations                                1,294,000       136,000
                                                   -------------   -----------

Interest income                                          61,000        74,000
Interest expense                                         (7,000)      (13,000)
Income taxes                                           (513,000)      (49,000)
                                                   -------------   -----------

                                                       (459,000)       12,000
                                                   -------------   -----------

Net income                                          $   835,000     $ 148,000
                                                   =============   ===========
</TABLE>

REAL ESTATE SALES -

For the three  months  ended March 31,  2003,  the Company  sold parcels to four
different  buyers of properties  for proceeds of  approximately  $2.9 million as
compared to the three  months  ended  March 31, 2002 where the Company  sold two
properties for proceeds of approximately  $710,000,  an approximate $2.2 million
increase.  In 2002, the Company had been  experiencing  closing 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. To address the backlog,  the Company switched surveyors on
several  projects.  Land court and county approval  processes  (generally  three
months or more),  which occur  subsequent to the  surveying,  could  contribute,
however, to a slowing in the closing process.



                                       10
<PAGE>

The Company  anticipates  closing  between 10 to 20  transactions  in the second
quarter of 2003 for approximately  $4.5 million.  As a result of the survey work
becoming quicker, the Company anticipates closing  approximately $28 million for
2003.  There  can be no  assurances  that  the  Company  will be able to close a
majority of these contracts in 2003.

Real estate sales expense  increased in 2003 as a result of the  amortization of
the survey costs being much greater in 2003 than previously for the parcels sold
in 2002.

The  Company  believes  that the  tourism  and  second  home  markets  have made
recoveries from the events of September 11, 2001  ("September  11th"),  however,
the war in the Middle East may have negative repercussions.

RENTAL REVENUES -
The approximate 16% decrease in rental revenue is primarily  attributable to the
sale of real estate formerly leased by the Company.  The Sandalwood  property, a
new home  built on the  island  during  2001,  was  rented  to  Surety  Kohala's
President  for the last eleven  months of 2001.  In 2002,  the Company  sold the
Sandalwood  property to Surety Kohala's  President for  approximately  $575,000.
Additionally, during 2002 and 2003, rental revenue was discontinued from certain
properties as these  properties  were placed in escrow for a pending  sale.  The
Company  expects  rental  income to continue to decrease in 2003 as long as land
continues to be sold.

CATTLE SALES -
The  approximate 11% decrease in cattle sales is attributable to the decrease in
the average price per head of cattle.  Specifically,  for the three months ended
March 31 2003,  the Company sold 281 heads at an average price of  approximately
$257 per head versus the same period in 2002,  where the Company  sold 281 heads
at an average price of  approximately  $288 per head.  The  deteriorated  cattle
sales margins are attributable to increased costs resulting from the increase in
rent expense  caused by the sale and lease back of former  pasturelands.  Cattle
sales will continue to decrease as the Company continues to sell pasturelands.

OTHER REVENUES -
Other revenues experienced no significant fluctuations.  The Company anticipates
other revenues to increase through the remainder of 2003.

GENERAL AND ADMINISTRATIVE EXPENSES -
On an overall basis, general and administrative expenses increased approximately
57% for the three  months ended March 31, 2003 as compared to the same period in
2002. The components of general and administrative expenses for the three months
ended  March 31,  2003  include  salaries  and  related  costs of  approximately
$102,000;  professional  fees (legal,  auditing and consulting) of approximately
$289,000;  franchise and other taxes of approximately  $29,000;  depreciation of
approximately  $16,000;  insurance of approximately  $37,000; and other expenses
aggregating approximately $144,000. The components of general and administrative
expenses for the three months ended March 31, 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


                                       11
<PAGE>

approximately  $70,000;  depreciation  of  approximately  $15,000;  insurance of
approximately $36,000; and other expenses aggregating approximately $75,000.

Salaries and related costs remained relatively  unchanged from the first quarter
2003 compared to the first quarter of 2002.  Professional fees more than tripled
in 2003 as a result of (i) higher  legal costs in  connection  with hiring legal
counsel to negotiate and address the  development  cost  activities  and (ii) an
increase in consulting fees paid to the Company's  President and Chief Executive
Officer.  Depreciation  and  insurance  expense  remained  flat in  2003.  Other
expenses  increased by approximately  $69,000 primarily as a result of increased
travel and  entertainment  by  executives to progress  development  plans and to
complete  the  Millennium  transaction,  (ii)  increased  rent  attributable  to
temporary  accommodations in San Francisco for the Company's President and (iii)
stock compensation charge incurred pursuant to employment contracts.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS
For the three months ended March 31, 2003 and 2002,  the Company's net cash used
in operating activities of approximately $1,156,000 and $690,000,  respectively,
is comprised of the following:

<TABLE>
<CAPTION>
                                                             2003                  2002

<S>                                                    <C>                    <C>
Net income                                             $    835,000           $  148,000

Depreciation and amortization                                36,000               38,000

Deferred income taxes                                         8,000               45,000

Stock compensation charge                                    32,000

Net gain on sales and disposition of property
  and assets                                             (2,109,000)            (596,000)

Changes in operating assets
 and liabilities                                             42,000             (325,000)
                                                       ------------           ----------

                                                       $ (1,156,000)          $ (690,000)
                                                       ============           ==========
</TABLE>




                                       12
<PAGE>

For the three  months  ended March 31,  2003 and 2002,  the  Company's  net cash
provided by investing  activities of  approximately  $2,568,000 and  $1,256,000,
respectively, is comprised of the following:

<TABLE>
<CAPTION>
                                                      2003            2002

<S>                                               <C>             <C>
Capital expenditures including
  real estate development                         $ (304,000)     $ (292,000)

Proceeds from sales of property                    2,868,000         710,000

Proceeds from notes receivable                         4,000         838,000
                                                -------------    ------------

                                                  $2,568,000      $1,256,000
                                                =============    ============
</TABLE>

Approximately  $294,000  of the  $304,000  of the March 2003  quarter's  capital
expenditures  and  approximately  $265,000  of the  $292,000  of the March  2002
quarter's  capital  expenditures  was  made to  progress  the  Company's  Kohala
Preserve  development   endeavors.   These  expenditures  include  approximately
$114,000 and $76,000, in the March 31, 2003 and 2002 quarters, respectively, for
land clearing,  leveling and grading and  approximately  $180,000 and $78,000 in
the  March 31,  2003 and 2002  quarters,  respectively,  for  design,  planning,
engineering and surveying and other costs.

For the three months ended March 31, 2003 and 2002,  the Company's net cash used
for financing activities of approximately $4,000 and $162,000,  respectively, is
comprised of the following:

<TABLE>
<CAPTION>
                                                           2003             2002

<S>                                                     <C>             <C>
Proceeds from repayment of officer's note               $  4,000        $       --

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

Debt repayments, net                                      (8,000)           (7,000)
                                                       ----------      ------------

                                                        $ (4,000)       $ (162,000)
                                                       ==========      ============
</TABLE>

As of March 31,  2002,  the Company has total  current  assets of  approximately
$13.1 million and total current  liabilities of  approximately  $.9 million or a
working capital of approximately  $12.2 million.  As previously  discussed,  the
Company  anticipates  2003 revenue  levels to be higher than levels  experienced
during 2002.  However,  given the Company's  anticipated  cash  requirements  to
complete the revised Kohala  Preserve  development  project  (discussed  below),
future capital raising or debt financing activities may be required.



                                       13
<PAGE>

KOHALA PRESERVE (FORMERLY MAHUKONA) DEVELOPMENT
The Company  continues to strategize its  development  plans relative to its 642
acres of land in the North  Kohala  district  of  Hawaii  Island in the state of
Hawaii (known as the Kohala Preserve development project). The original plan for
this valuable parcel of land was the development of a hotel, 18-hole golf course
and resort homes.  However,  during 2001, the Company hired several consultants,
with extensive  experience in high-end  resort  development  and  marketing,  to
reassess its development strategy with respect to Kohala Preserve 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
present  assessment of the consultants  for the Kohala Preserve  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 Kohala  Preserve  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 Kohala  Preserve  development  project is subject to further Company
and consultant  review and analysis that is expected to be completed  during the
second quarter of 2003.

Based  on  the  present  assessment  of its  consultants,  the  Kohala  Preserve
development  project cost  (excluding  ongoing costs and  maintenance)  would be
approximately  $213.7 million and completed  substantially  (approximately  80%)
over a three-year period. Based on information provided by its consultants,  the
Company  anticipates  the  timing and  details  of the  $213.7  million to be as
follows (in thousands):


<TABLE>
<CAPTION>
                                       YEAR 1         YEAR 2        YEAR 3        BEYOND
<S>                                   <C>           <C>           <C>           <C>
Infrastructure and amenities          $ 21,062      $ 31,762      $ 13,280      $ 15,586
3-Bedroom fractionals                                               15,080        15,998
2-Bedroom fractionals                                                8,918         3,546
Hales                                                                4,262         4,389
3-Bedroom condos                                                    11,310
2-Bedroom condos                                                     5,016
Lots                                                     822                       2,471
Hotel                                   16,243        43,949
                                     ----------    ----------    ----------    ----------
                                      $ 37,305      $ 76,533      $ 57,866      $ 41,990
                                     ==========    ==========    ==========    ==========
</TABLE>


The Company  recognizes  that its current  operations  will not be sufficient to
fund the cost of Kohala  Preserve'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.


                                       14
<PAGE>

MARINE FOREST
Pursuant to  uncollateralized  promissory  notes,  the Company  advanced  Marine
Forest, a related Japanese corporation that controls  approximately 400 acres of
land in Okinawa, Japan, $9.75 million. The notes bear interest at the U.S. prime
rate, at the date of issuance, plus one percent. Under their original terms, the
notes were due nine  months  after  date of  issuance.  However,  the notes were
extended and additional  nine months and  subsequently  extended to December 31,
2002, as a concession to Marine Forest to advance  Marine  Forest's  development
projects.  Marine Forest's current  development  plans are based upon a recently
completed  study  prepared by a consultant for the Kohala  Preserve  development
plan. The Company believes that Marine Forest may sell its development  projects
based on the aforementioned  study and repay the notes and interest  thereafter.
However,  this  action  has not been  initiated  at this point and when (and if)
initiated,  it would take at least a year, if not longer,  to consummate  such a
transaction.

As of March 31, 2003 and through the date hereof, the notes remain  outstanding.
Further,  since  issuance of the notes and through the date hereof,  no interest
has been paid to the Company.  Accordingly,  during the years ended December 31,
2002 and 2001, in light of the speculative nature of Marine Forest's development
projects  among other reasons and in  accordance  with its  compliance  with the
requirements  of SFAS No. 114 (see previous  discussion  of Critical  Accounting
Policies),  the Company  recorded an  impairment  charge of  approximately  $3.8
million and $7.2 million, respectively,  including approximately $1.3 million of
aggregate accrued interest receivable.  During the year ended December 31, 2002,
the Company  discontinued  accruing interest income on the notes in light of its
impairment charge.

MILLENNIUM
In January 2003, pursuant to an Asset Purchase  Agreement,  the Company acquired
the   assets  of   Millennium   International   Sports  &   Entertainment,   LLC
("Millennium"),  which  consisted of sports and  entertainment  memorabilia.  In
consideration  for the assets  received,  the Company  will issue  shares of its
common stock if certain  revenue levels related to the sales of the  memorabilia
are  attained  by  certain  dates.  If  revenues  related  to the  sales  of the
memorabilia  equal or exceed $8 million by December  31,  2003,  an aggregate of
350,000  shares of the  Company's  common  stock  would be issued to the  former
members  of  Millenium,  all of whom  executed  employment  agreements  with the
Company in  connection  with the January 2003  transaction.  Since the Company's
acquisition of Millennium and through May 15, 2003,  there has been little to no
revenues related to the sales of the  memorabilia.  Pursuant to the terms of the
Asset Purchase  Agreement,  the Company  notified  Millennium of its election to
rescind.





                                       15
<PAGE>


CONTRACTUAL COMMITMENTS

The Company is obligated  under various  contractual  commitments  over the next
several  years.  Following is a summary of those  commitments as of December 31,
2002:

                                                                 GREATER
                                     1 YEAR       1-3 YEARS    THAN 3 YEARS

Notes payable (a)                   $ 34,000      $ 46,000      $ 355,000

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

                                    $ 34,000      $ 46,000      $ 355,000

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

(a)   Excludes obligation pursuant to notes receivable  financing whereby a cash
      outlay is only required if the financial  institution requires the Company
      to repurchase a defaulted note.
















                                       16
<PAGE>






                     SURETY HOLDINGS CORP. AND SUBSIDIARIES



Item 3.   Evaluation of Disclosure Controls and Procedures

(a) Evaluation of disclosure  controls and  procedures.  Our president and chief
financial   officer,   after  evaluating  the  effectiveness  of  the  Company's
"disclosure  controls and procedures" (as defined in the Securities Exchange Act
of 1934 Rules  13a-14(c) and  15-d-14(c)) as of a date (the  "Evaluation  Date")
within 90 days before the filing date of this quarterly  report,  have concluded
that as of the  Evaluation  Date, our  disclosure  controls and procedures  were
adequate and designed to ensure that material information relating to us and our
consolidated  subsidiaries  would be made known to them by others  within  those
entities.

(b)  Changes in  internal  controls.  There were no  significant  changes in our
internal controls or to our knowledge, in other factors that could significantly
affect our disclosure controls and procedures subsequent to the Evaluation Date.

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, 2002.

Item 2.   Change in Securities:

          In January 2003,  the Company issued 15,000 shares of its common stock
          valued at $32,000 pursuant to employment contracts.

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:

          Form 8-K filed on January 16, 2003 - other events.






                                       17
<PAGE>


                     SURETY HOLDINGS CORP. AND SUBSIDIARIES



                                   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, 2003










                                       18
<PAGE>


                     SURETY HOLDINGS CORP. AND SUBSIDIARIES



                                 CERTIFICATIONS


I, Yoshihiro Kamon, certify that:

1.     I have reviewed this quarterly  report on Form 10-QSB of Surety  Holdings
       Corp. and Subsidiary;

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

3.     Based on my knowledge,  the condensed  consolidated financial statements,
       and other financial information included in this quarterly report, fairly
       present in all material  respects the consolidated  financial  condition,
       results of  operations  and cash flows of the  registrant as of, and for,
       the periods presented in this quarterly report;

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

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

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

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

5.     The registrant's other certifying officers and I have disclosed, based on
       our most recent evaluation, to the registrant's auditors:

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

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

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

Dated: May 15. 2003
                                          By: /s/ Yoshihiro Kamon
                                          -------------------------
                                          Yoshihiro Kamon
                                          President and sole Director of Surety




                                       19
<PAGE>


                     SURETY HOLDINGS CORP. AND SUBSIDIARIES



                                 CERTIFICATIONS


I, Howard R. Knapp, certify that:

1.     I have reviewed this quarterly  report on Form 10-QSB of Surety  Holdings
       Corp. and Subsidiary;

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

3.     Based on my knowledge,  the condensed  consolidated financial statements,
       and other financial information included in this quarterly report, fairly
       present in all material  respects the consolidated  financial  condition,
       results of  operations  and cash flows of the  registrant as of, and for,
       the periods presented in this quarterly report;

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

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

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

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

5.     The registrant's other certifying officers and I have disclosed, based on
       our most recent evaluation, to the registrant's auditors:

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

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

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

Dated: May 15, 2003
                                            By:   /s/ Howard R. Knapp
                                            -------------------------------
                                            Howard R. Knapp
                                            Chief Financial Officer of Surety




                                       20