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, 2004


( )  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          732-409-0113
                                                              ------------

   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 14, 2004


<PAGE>

                     SURETY HOLDINGS CORP. AND SUBSIDIARIES

                                      INDEX

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

           Item 1 - Condensed Consolidated Financial Statements

                Balance Sheet as of March 31, 2004                                                         2

                Statements of Income for the Three Months Ended March 31, 2004 and 2003                    3

                Statements of Cash Flows for the Three Months Ended March 31, 2004 and 2003                4

                Notes to the Financial Statements                                                        5-9

           Item 2 - Management's Discussion and Analysis of Financial Condition and Results of
                    Operations                                                                         10-19

           Item 3 - Evaluation of Disclosure Controls and Procedures                                      20

 Part II - Other Information

           Item 1 - Legal Proceedings                                                                     20

           Item 2 - Change in Securities                                                                  20

           Item 3 - Defaults Upon Senior Securities                                                       20

           Item 4 - Submission of Matters to a Vote of Security Holders                                   20

           Item 5 - Other Information                                                                     20

           Item 6 - Exhibits and Reports on Form 8-K                                                      20

           SIGNATURE                                                                                      21

           CERTIFICATIONS
</TABLE>


<PAGE>

                     SURETY HOLDINGS CORP. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEET
                                 MARCH 31, 2004
                                   (UNAUDITED)

                                     ASSETS

CURRENT ASSETS
  Cash                                                            $  13,118,000
  Real estate held for sale, current                                  3,807,000
  Prepaid income taxes                                                1,514,000
  Other current assets                                                  417,000
                                                                  -------------
      Total current assets                                           18,856,000

NOTES RECEIVABLE, less current maturities                             2,348,000

NOTES RECEIVABLE, officer                                               550,000

REAL ESTATE HELD FOR SALE                                            25,297,000

NOTES RECEIVABLE AND ACCRUED INTEREST,
   Marine Forest Resort, Inc., net of an
    approximate $11.2 million allowance for loan losses                      --

REAL ESTATE DEVELOPMENT COSTS                                        42,992,000

PROPERTY AND EQUIPMENT, net                                           2,439,000

DEFERRED TAX ASSET                                                    4,381,000

OTHER ASSETS                                                          1,866,000
                                                                  -------------
                                                                  $  98,729,000
                                                                  =============

                          LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Notes payable, current maturity                                 $      26,000
  Accounts payable                                                      280,000
  Accrued expenses and other current liabilities                      1,885,000
                                                                  -------------
      Total current liabilities                                       2,191,000
                                                                  -------------

LONG-TERM LIABILITIES
  Notes payable, less current maturity                                  364,000
  Obligation pursuant to notes receivable
    financing, less current maturity                                    106,000
                                                                  -------------
                                                                        470,000
                                                                  -------------

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                                    101,709,000
  Accumulated deficit                                                (5,648,000)
                                                                  -------------
      Total stockholders' equity                                     96,068,000
                                                                  -------------
                                                                  $  98,729,000
                                                                  =============

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
                                                                               2
<PAGE>

                     SURETY HOLDINGS CORP. AND SUBSIDIARIES

                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                   THREE MONTHS ENDED MARCH 31, 2004 AND 2003
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                                2004                       2003
                                                                                             -----------                -----------
<S>                                                                                          <C>                        <C>
REVENUES                                                                                     $ 1,752,000                $ 3,078,000

COST OF REVENUES                                                                                 659,000                  1,167,000
                                                                                             -----------                -----------

GROSS PROFIT                                                                                   1,093,000                  1,911,000

GENERAL AND ADMINISTRATIVE
EXPENSES                                                                                         881,000                    617,000
                                                                                             -----------                -----------

INCOME FROM OPERATIONS                                                                           212,000                  1,294,000
                                                                                             -----------                -----------

OTHER INCOME (EXPENSE)
  Interest income                                                                                 90,000                     61,000
  Interest expense                                                                                (5,000)                    (7,000)
  Impairment charge, Marine Forest Resorts, Inc.                                                (200,000)
                                                                                             -----------                -----------

                                                                                                (115,000)                    54,000
                                                                                             -----------                -----------

INCOME BEFORE INCOME TAXES                                                                        97,000                  1,348,000

INCOME TAXES                                                                                     (36,000)                  (513,000)
                                                                                             -----------                -----------

NET INCOME                                                                                   $    61,000                $   835,000
                                                                                             ===========                ===========

NET INCOME PER COMMON
SHARE, basic and diluted                                                                     $      0.01                $      0.12
                                                                                             ===========                ===========

WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING, basic and diluted                                                                 6,753,000                  6,745,000
                                                                                             ===========                ===========
</TABLE>

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
                                                                               3
<PAGE>

                     SURETY HOLDINGS CORP. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                   THREE MONTHS ENDED MARCH 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                                                 2004                      2003
                                                                                             ------------              ------------
<S>                                                                                          <C>                       <C>
CASH FLOWS FROM OPERATING ACTIVITIES
 Net income                                                                                  $     61,000              $    835,000
 Adjustments to reconcile net income
 to net cash used in operating activities:
  Depreciation and amortization                                                                    33,000                    36,000
  Deferred income taxes                                                                           (12,000)                    8,000
  Impairment charge, Marine Forest Resorts, Inc.                                                  200,000
  Gain on sales of property                                                                    (1,082,000)               (2,109,000)
  Stock compensation charge                                                                                                  32,000
  Increase (decrease) in cash
  attributable to changes in operating
  assets and liabilities:
    Prepaid income taxes                                                                           48,000
    Other current assets                                                                         (247,000)                  123,000
    Other assets                                                                                 (305,000)                 (115,000)
    Accounts payable                                                                              (17,000)                 (269,000)
    Accrued expenses and other
    current liabilities                                                                            25,000                    58,000
    Income taxes payable                                                                                                    245,000
                                                                                             ------------              ------------

NET CASH USED IN OPERATING ACTIVITIES                                                          (1,296,000)               (1,156,000)
                                                                                             ------------              ------------

CASH FLOWS FROM INVESTING ACTIVITIES
 Purchases of property and equipment                                                               (7,000)                  (10,000)
 Purchases of securities                                                                         (108,000)
 Proceeds from sales of property                                                                1,453,000                 2,868,000
 Real estate development expenditures                                                            (116,000)                 (294,000)
 Proceeds from repayments of notes receivable                                                     686,000                     4,000
 Proceeds from repayments of notes receivable, officer                                              3,000                     4,000
 Advances to Marine Forest Resort, Inc.                                                          (200,000)
                                                                                             ------------              ------------

NET CASH PROVIDED BY INVESTING ACTIVITIES                                                       1,711,000                 2,572,000
                                                                                             ------------              ------------

NET CASH USED IN FINANCING ACTIVITY, principal
 payments on mortgage note payable                                                                (10,000)                   (8,000)
                                                                                             ------------              ------------


NET INCREASE IN CASH                                                                              405,000                 1,408,000

CASH
 Beginning of period                                                                           12,713,000                 9,746,000
                                                                                             ------------              ------------
 End of period                                                                               $ 13,118,000              $ 11,154,000
                                                                                             ============              ============


SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION, cash paid during the period for interest                                        $      5,000              $      7,000
                                                                                             ============              ============
</TABLE>

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
                                                                               4
<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 642
acres of property in the North Kohala  district of Hawaii Island in the state of
Hawaii. This development, referred to as the Kohala Preserve development project
(see Real  Estate  Development  Costs - Note 3),  was  initially  slated to be a
hotel,   18-hole  golf  course  and  resort  homes.  The  Company  is  currently
considering modifying the project`s inclusion of a "hotel concept".  The Company
is working with  consultants to study various options for structuring  this real
estate project along with the necessary  financial and funding  strategy.  There
has been no finalization of the components of the development project.

The current  Hawaiian  operations  of the Company  also  include the sale of its
non-Kohala  Preserve   development  project  real  estate  and  other  ancillary
activities.

In 2004,  the Company  segregated  $1.2 million of funds in  connection  with an
Asian business venture which is intended to encourage Asian businesses to invest
and/or  operate in the Pittsburgh  area. The Company has utilized  approximately
$200,000 for costs primarily  related to the facilitation of a marketing site in
Hong Kong.  It is  anticipated  that  within the next six months the Company may
purchase land in the Pittsburgh area for this project. Additionally, the Company
may be required to advance more monies  depending upon the success of developing
other business partners for this venture.  No future  commitment,  however,  has
been made to increase these designated funds.

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, 2004 and for the  three-month  periods
ended March 31, 2004 and 2003 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, 2003.  The results of  operations  for the  three-month
period ended March 31, 2004 are not  necessarily  indicative of the results that
may occur for the year ending December 31, 2004.

INCOME PER COMMON SHARE

The Company complies with Statement of Financial  Accounting  Standards ("SFAS")
No. 128,  "Earnings  Per Share" which  requires dual  presentation  of basic and
diluted  earnings per share.  Basic earnings per share excludes  dilution and is
computed  by  dividing   income   available  to  common   stockholders   by  the
weighted-average  common shares  outstanding for the year.  Diluted earnings per
share  reflects the  potential  dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the
entity.  Since the Company has no securities or other  contracts to issue common
stock, basic and diluted net income per common share for the three-month periods
ended March 31, 2004 and 2003 were the same.

                                       5
<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 December 2003, the Financial  Accounting  Standards  Board ("FASB")  issued a
revision to FASB  Interpretation  No. 46,  "Consolidation  of Variable  Interest
Entities" ("FIN 46R"). FIN 46R requires certain variable interest entities to be
consolidated by the primary beneficiary of the entity if the equity investors in
the equity do not have the  characteristics of a controlling  financial interest
or do not  have  sufficient  equity  at  risk  for the  entity  to  finance  its
activities without additional subordinated financial support from other parties.
FIN 46R is effective for reporting  periods  ending after December 15, 2004. The
Company  is  currently  assessing  the  impact,  if any,  the  adoption  of this
interpretation  will  have on the  Company's  condensed  consolidated  financial
statements.

3.       REAL ESTATE DEVELOPMENT COSTS

At March 31, 2004, real estate  development  costs,  attributed to the Company's
Kohala Preserve development project, consist of the following:

 Land and land acquisition costs                              $28,698,000
 Planning and studies                                           2,689,000
 Engineering and architectural                                    565,000
 Infrastructure                                                 6,958,000
 Professional and consulting fees                               2,414,000
 Other                                                          1,668,000
                                                        -----------------
                                                              $42,992,000
                                                        =================

4.   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  project
development and other services.  Generally, these agreements are on a project by
project  basis  requiring  payments as services  are  performed.  The Company is
currently involved in development projects which are expected to be incurred and
completed within the next twelve months for a total of approximately $349,000.

                                       6
<PAGE>

                     SURETY HOLDINGS CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


4. COMMITMENTS AND CONTINGENCIES (CONTINUED)

An action was commenced against Surety Kohala  Corporation (SKC), a wholly owned
subsidiary of the Company,  in August 2003 in US District Court for the District
of Hawaii by a consultant to the Company  primarily  alleging breach of contract
in  connection  with services to be rendered for the  development  of the Kohala
Preserve  Project.  The consulting firm claimed it was owed  approximately  $5.5
million and potential  other  amounts.  Subsequent to SKC filing a counter claim
against  the  consulting  firm,  SKC' s law  firm,  in  which  the  consultant's
Chairman/CEO  was of  counsel,  filed a claim for unpaid  fees of  approximately
$361,000.  On April 1, 2004,  the Company  entered  into an  agreement  with all
parties  settling the  litigation  by agreeing to pay a total of $1.4 million to
certain parties by June 30, 2004. On April 30, 2004, a definitive  agreement was
signed.

The Company is involved in certain  other legal actions that arise in the normal
course of  business.  In the  opinion of  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.   RELATED PARTY TRANSACTIONS

FORMER PRESIDENT, PRINCIPAL STOCKHOLDER, AND CONSULTANT

The Company paid the principal  stockholder of the Company  $75,000 in salary as
the former  President  of the Company for the three  months ended March 31, 2003
and $75,000 in consulting fees for the three months ended March 31, 2004.

On  December 1, 2003,  the Company  entered  into a monthly  $25,000  consulting
agreement with the former President of the Company.

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 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 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, 2004, 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.

In February 2004, the Company executed a one-year promissory note, which carries
interest at 5% per annum,  for an additional  $200,000 of monies advanced by the
Company to Marine Forest to pay real estate taxes. For reasons  discussed above,
the Company recorded a simultaneous impairment charge of $200,000.

                                       7
<PAGE>

                     SURETY HOLDINGS CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


5. RELATED PARTY TRANSACTIONS (CONTINUED)

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, 2004, the balance
on this note receivable was approximately $550,000.

OTHER

In each of the quarters  ended March 31, 2004 and 2003, the Company paid rent of
approximately $2,300 to an officer of the Kohala operation.

In January 2004, an officer of the Kohala operation  entered into a contract for
the  purchase  of 31 acres  of land for  approximately  $465,000.  The  purchase
transaction is expected to be closed during the second quarter of 2004.

6.   SEGMENT REPORTING

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, 2004 and
2003 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED MARCH 31, 2004

                                                Real Estate        Rental        Cattle
                                                    Sales         Activity        Sales         Other         Corporate      Total
                                               -------------------------------------------------------------------------------------
<S>                                               <C>            <C>            <C>           <C>            <C>           <C>
Revenues                                          $  1,453       $    123       $    116      $     60       $     --      $  1,752
Cost of revenues                                       502             34             58            65                          659
                                               -------------------------------------------------------------------------------------

Segment profit (loss)                                  951             89             58            (5)                       1,093
General and administrative expenses                                                                              (881)         (881)
Interest income, net                                                                                               85            85
Impairment charge                                                                                                (200)         (200)
Income taxes                                                                                                      (36)          (36)
                                               -------------------------------------------------------------------------------------

Net income (loss)                                 $    951       $     89       $     58      $     (5)      $ (1,032)     $     61
                                               =====================================================================================

Total assets                                      $ 33,503       $  1,243       $    114      $    266       $ 63,603      $ 98,729
                                               =====================================================================================

Capital expenditures                              $     --       $     --       $     --      $     --       $    123      $    123
                                               =====================================================================================

Depreciation and amortization                     $     --       $      1       $      4      $      9       $     19      $     33
                                               =====================================================================================
</TABLE>

                                       8
<PAGE>

                     SURETY HOLDINGS CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6.       SEGMENT REPORTING (CONTINUED)

<TABLE>
<CAPTION>
                                               THREE MONTHS ENDED MARCH 31, 2003

                                                Real Estate        Rental        Cattle
                                                    Sales         Activity        Sales         Other         Corporate      Total
                                               -------------------------------------------------------------------------------------
<S>                                               <C>            <C>            <C>           <C>            <C>           <C>
Revenues                                          $  2,868       $     83       $     72      $     55       $     --      $  3,078
Cost of revenues                                     1,020             31             60            56                       1,167
                                               -------------------------------------------------------------------------------------
Segment 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>

                                       9
<PAGE>

5/11/04 10:02 PM
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. ("Surety"),  through its wholly-owned  subsidiary,  Surety
Kohala Corporation ("Surety Kohala") (collectively, with other subsidiaries "the
Company"), continues to study its proposed development plans of the 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.  The
Company is  considering  modifying  the  project for its  inclusion  of a "hotel
concept".  There has been no finalization  of the component of this  development
project.  The Company is working with  consultants to study the various  options
for  structuring  the project  along with the  necessary  financial  and funding
strategy.  The timing of its  negotiations  with joint venture  partners  and/or
avenues of development for the 642 acres are a function of many risks. There can
be no assurances  that the Company will be  successful in overcoming  all of the
risks of  development  of the proposed  resort  property.  (See KOHALA  PRESERVE
DEVELOPMENT in Liquidity and Capital Resources)

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.

On January 8, 2004,  the Company  entered into a letter of intent with Intermost
Corp.  ("Intermost")  whereby  Intermost  would  acquire  100% of the issued and
outstanding  stock of a wholly owned subsidiary of Surety.  Intermost  primarily
focuses on the private  equity  exchange  business,  through which  equities and
other assets of privately  held  companies can be traded  over-the-counter  with
authorized exchanges in China. (see OTHER BUSINESS VENTURES)

                                       10
<PAGE>

CRITICAL ACCOUNTING POLICIES

The Company has  identified  the following  critical  accounting  policies which
effect the Company's condensed consolidated financial statements as of March 31,
2004 and for the three months ended March 31, 2004 and 2003:

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  obtained a raw land  appraisal  and a revised cash flow  projection
report in February 2004 to supplement  and compare to its 2003-2002  reports for
the various  options  being  considered  for  development  of the real estate in
Hawaii.

 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 amounts 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.

                                       11
<PAGE>

RESULTS OF OPERATIONS

The  following  table sets forth the  statements of income (loss) of the Company
for the three months ended March 31, 2004 and 2003:

                                                    2004                2003

Real estate sales                                $ 1,453,000        $ 2,868,000
Rentals                                              123,000             83,000
Cattle sales                                         116,000             72,000
Other                                                 60,000             55,000
                                                 -----------        -----------
   Total revenues                                  1,752,000          3,078,000
                                                 -----------        -----------

Cost of real estate sales                            502,000          1,020,000
Cost of rentals                                       34,000             31,000
Cost of cattle sales                                  58,000             60,000
Cost of other                                         65,000             56,000
                                                 -----------        -----------
   Total cost of revenues                            659,000          1,167,000
                                                 -----------        -----------
Gross profit                                       1,093,000          1,911,000

General and administrative expenses                  881,000            617,000
                                                 -----------        -----------
Income from operations                               212,000          1,294,000
                                                 -----------        -----------



Impairment charge                                   (200,000)
Interest income                                       90,000             61,000
Interest expense                                      (5,000)            (7,000)
Income taxes                                         (36,000)          (513,000)
                                                 -----------        -----------
                                                    (151,000)          (459,000)
                                                 -----------        -----------
Net income                                       $    61,000        $   835,000
                                                 ===========        ===========


REAL ESTATE SALES -

For the three months ended March 31, 2004, the Company sold three properties for
proceeds of  approximately  $1.5  million as compared to the three  months ended
March  31,  2003  where  the  Company  sold  four  properties  for  proceeds  of
approximately $2.9 million, an approximate $1.4 million decrease.

The  Company  anticipates  closing  real  estate  transactions  for a  total  of
approximately $12 million in 2004, which is comparable to the $11.7 million from
2003.  There can be no assurances  that the Company will be able to close on the
balance  of  these   contracts  in  2004,  nor  on  the  balance  of  additional
transactions anticipated to yield a total of $5 million in 2005.

Real estate sales expense for the three months ended March 31, 2004 and 2003 was
approximately 35% and 36%, respectively, of real estate sales.

                                       12
<PAGE>

RENTAL REVENUES -

Rental revenues for the three months ended March 31, 2004 are  approximately 48%
higher than the rental  revenues  realized  for the three months ended March 31,
2003. The Company  believes total rental revenues in 2004 could be comparable to
total rental revenues realized in 2003.

CATTLE SALES -

The  approximate 61% increase in cattle sales in 2004 is attributable to the 15%
or $52.27  increase  in the  average  price per head of cattle and a 33%,  or 93
increase in the head of cattle  sold.  Specifically,  for the three months ended
March 31, 2004, the Company sold 374 heads at an average price of  approximately
$308.98  per head versus the same  period in 2003,  where the  Company  sold 281
heads at an average price of approximately $257 per head.

OTHER REVENUES -

Total other revenues for the three months ended March 31, 2004 was approximately
$60,000 and $55,000 for the three months ended March 31, 2003. This  represented
an increase of approximately 9%, as compared to the three months ended March 31,
2003.

GENERAL AND ADMINISTRATIVE EXPENSES -

On an overall basis, general and administrative expenses increased approximately
$264,000,  or 43% for three  months ended March 31, 2004 as compared to the same
period in 2003.  The components of general and  administrative  expenses for the
three  months  ended  March 31,  2004  include  salaries  and  related  costs of
approximately  $180,000;  professional fees (legal,  auditing and consulting) of
approximately  $390,000;  franchise  and other taxes of  approximately  $40,000;
depreciation  of  approximately  $33,000;  insurance of  approximately  $68,000;
travel  and  entertainment  of  approximately   $110,000;   and  other  expenses
aggregating  approximately $60,000. 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.

                                       13
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS

For the three months ended March 31, 2004 and 2003,  the Company's net cash used
in  operating   activities   of   approximately   $1,296,000   and   $1,156,000,
respectively, is comprised of the following:

                                                    2004               2003

Net income                                       $    61,000        $   835,000

Impairement charge - Marine Forest                   200,000

Depreciation and amortization                         33,000             36,000

Deferred income taxes (benefit)                      (12,000)             8,000

Stock compensation charge                                                32,000

Gain on sales of property                         (1,082,000)        (2,109,000)

Changes in operating assets
and liabilities                                     (496,000)            42,000
                                                 -----------        -----------

                                                 $(1,296,000)       $(1,156,000)
                                                 ===========        ===========


For the three  months  ended March 31,  2004 and 2003,  the  Company's  net cash
provided by investing  activities of  approximately  $1,711,000 and  $2,568,000,
respectively, is comprised of the following:

                                                    2003                2002

Capital expenditures including
  real estate development                       $  (123,000)        $  (304,000)

Proceeds from sales of property                   1,453,000           2,868,000

Purchases of securites                             (108,000)

Advances to Marine Forest                          (200,000)

Proceeds from notes receivable                      689,000               8,000
                                                -----------         -----------

                                                $ 1,711,000         $ 2,572,000
                                                ===========         ===========


Approximately  $116,000 of the  $123,000 of the 2004  capital  expenditures  and
approximately $294,000 of the $304,000 of the 2003 capital expenditures was made
to  progress  the  Company's  Kohala  Preserve  development   endeavors.   These
expenditures  include  approximately  $97,000 and $114,000,  in the three months
ended March 31, 2004 and 2003,  respectively,  for land  clearing,  leveling and
grading and  approximately  $9,000 and $180,000 for the three months ended March
31, 2004 and 2003, respectively, for design, planning, engineering and surveying
and other costs.

                                       14
<PAGE>

For the three months ended March 31, 2004 and 2003,  the Company's net cash used
in financing activities of approximately  $10,000 and $8,000,  respectively,  is
comprised  of debt  repayments.

As of March 31,  2004,  the Company has total  current  assets of  approximately
$18,856,000  and total  current  liabilities  of  approximately  $2,191,000 or a
working capital of approximately  $16,665,000.  At March 31, 2004, the Company's
cash balance was  approximately  $13.1  million.  As previously  discussed,  the
Company  anticipates  2004 revenue  levels to be higher than levels  experienced
during 2003,  however  there can be no  assurances  that this will be able to be
accomplished.  However,  given the Company's  anticipated  cash  requirements to
develop and construct the revised Kohala  Preserve  project  (discussed  below),
future capital raising or debt financing  activities may be required.  There can
be no  assurances  the Company will be  successful  in resolving  its  financing
requirements.

KOHALA PRESERVE 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 plans
for this parcel of land were the development of a hotel, 18-hole golf course and
resort homes.  This plan,  however,  was revised to exclude the hotel-concept in
late 2003.  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 was to
provide the Company  guidance in determining an effective  development  strategy
that will optimize the property's economic  potential.  Throughout 2002 and 2003
the Company  continued  to analyze its business and  development  options.  As a
result of conflicts with a real estate/legal  consultant (see litigation below),
the Company commenced a business relationship with a legal/financial  consultant
based  in  Texas  in the  fall of 2003  to  improve  its  efforts  for the  deal
structuring of the resort project.  The  Texas-based  consulting firm is working
with studies and market analysis and the status of permits and other development
documents to determine  critical  components,  opportunities and restrictions of
the real property.  The Company  continues to believe the  entitlements  on this
site are very valuable.  The  Texas-based  consulting firm has been advising the
Company of various  options for  structuring the business deal and the financial
and  funding  strategy.  To  date,  no  finalization  of the  components  of the
development  plans has been made. The project continues to be subject to further
Company and consultant  review and analysis.  The Company believes that the real
estate  market  (second  homes) on the  island  remains  good and that there are
limited  opportunities  for new  resort  development  on the  west  coast of the
island.  The  financial  structuring  report is expected to be  completed by the
summer of 2004.

In  December of 2003,  the Company  entered  into a monthly  $25,000  consultant
agreement with its principal stockholder and former President for this project.

                                       15
<PAGE>

Some of the risks associated with the Kohala Preserve development project are:

     1.  ability to generate revenues and to have sufficient cash to meet all of
         its obligations in a timely fashion,

     2.  changes in costs of  construction  and  development not foreseen in the
         cash budgeting process,

     3.  ability to obtain financing on favorable terms,

     4.  adverse changes in national economic conditions,

     5.  unanticipated environmental matters,

     6.  changes in real estate tax rates and laws,

     7.  the  need to  obtain  or  sustain  agreements/permits  from  regulatory
         authorities  or other third parties in connection  with  development of
         the property,

     8.  competition with other developers, and

     9.  other factors which are beyond the control of the Company.

There can be no assurances that the Company will be successful in overcoming any
one of these potential risks.

Other  developers in the area have  experienced  lawsuits whereby their projects
have been  suspended  because of  agricultural  related  issues.  The  Company's
awareness of the competition's  issues, along with their own litigation with the
former  consultants,  has  hampered the  Company's  progress in this real estate
project.  Despite this slowdown,  the Company's timing of its negotiations  with
potential  joint  venture  partners  has also been  affected  by other  economic
conditions.  The  Company,  however,  believes it will be in position to chose a
necessary  financial partner within the next six months. The Company anticipates
that any potential  joint  venture  partner  would be  responsible  for not only
assisting in obtaining the necessary construction  financing,  but also be asked
to assist in the large upfront cash investment  required to develop this project
to the next phase.  It is  anticipated  that there would be a 120 to 180 day due
diligence period by any potential joint venture partner.

In February  2004,  the  Company  received a cash flow  projection  report for a
proposed  resort  development,  exclusive of a hotel.  In late 2002, the Company
received a  projected  cash flow for the resort  development  including a hotel.
Management is considering both reports in determining its future development and
funding  strategies.  Assuming a development  project  including a hotel,  condo
units  (fractional  and whole  ownership),  house lot and home  sales and a club
(golf, spa and ranch),  the projections  reflect that the total net undiscounted
cash  flows  over 10  years  could be  approximately  $258  million  (discounted
approximately  $70  million).  The  breakdown of this net cash flow would be $60
million for the condos,  $132 million for the house lots and homes,  $26 million
for the golf/club,  and $40 million for the hotel.  The net cash outflow for the
first year could be  approximately  $40 million,  second year $43  million,  and
thereafter  each year it is  anticipated  that it could be a positive cash flow.
Without a hotel, the net undiscounted  cash flow shows $230 million  (discounted
approximately $100 million).  First year's cash outflow could be $21 million and
could be positive each year thereafter.

                                       16
<PAGE>

In connection with the condominium  development,  the Company  projects that the
total  sources and uses of funds for the next ten years  could be  approximately
$81  million  and  $21  million,  respectively,  or a  total  net  cash  flow of
approximately  $60  million.  The first three years of the  condominium  project
could utilize a cumulative  cash outflow of  approximately  $27 million prior to
generating a possible positive cash flow of approximately $52 million in year 4.

The anticipated  sources and uses of funds for the homesite  development project
over the next ten years is projected to be a total of approximately $189 million
and $57 million,  respectively,  or a total net cash flow of approximately  $132
million.  The first year of the homesite  project  could utilize $5.2 million of
cash prior to  generating a possible  positive  cash flow of  approximately  $26
million in year 2.

The golf  development  project is  forecasted  in the  February  2004  report to
generate a total of $51 million  and to utilize a total of $24 million  over the
next ten years,  for a total net cash flow of  approximately  $27  million.  The
first two years of this  project  could  utilize  $23  million  of cash prior to
generating a possible positive cash flow of $12 million in year 3.

The report indicates  estimated total operating costs for the resort development
of  approximately  $15.9 million.  This could be offset by a total for the seven
years of anticipated  recreational  dues the Company may collect of $2.9 million
commencing in year three, yielding a net project operating cost of approximately
$13 million for the ten years.  The  anticipated  operating  costs for the first
three-year's are projected to be approximately $3 million.

The reports also estimate that the total  additional  project-wide  and off-site
costs could be approximately  $19.7 million and could all be incurred within the
next two years. The anticipated  additional on site costs could be approximately
$139  million  and will be  incurred  within  the next ten  years.  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.  The  Company may not be  successful  in
overcoming all or some of the risks associated with real estate development

OTHER BUSINESS VENTURES

INTERMOST CORPORATION ("INTERMOST")

On January 8, 2004,  the Company  entered into a letter of intent with Intermost
whereby  Intermost would acquire 100% of the issued and  outstanding  stock of a
wholly owned subsidiary of Surety.  The consideration to be paid by Intermost to
the Company is 40 million shares of Intermost restricted common stock. Intermost
primarily  focuses  on the  private  equity  exchange  business,  through  which
equities  and  other  assets  of  privately   held   companies   can  be  traded
over-the-counter with authorized exchanges in China. The subsidiary  corporation
of  Surety  is the  owner  of real  property  in  Hawaii,  whereby  the  Company
guarantees  that the  property  to be  designated  will  realize no less than $8
million  proceeds for Intermost in the sixty-month  period following the closing
of the transaction. This transaction is subject to the execution of a definitive
agreement and various other  conditions.  A due diligence review is currently in
process  and by the end of

                                       17
<PAGE>

June  2004,  it is  anticipated  a decision  will be reached as to whether  this
proposed transaction will be consummated.

ASIAN BUSINESS DEVELOPMENT

In January and  February of 2004,  the Company  segregated  for its newly formed
subsidiary  a total  of  $1,200,000  to  pursue  an Asian  business  development
opportunity in Pittsburgh,  Pennsylvania. The Company has utilized approximately
$200,000  for  development  costs  primarily  related to the  facilitation  of a
marketing site in Hong Kong. It is  anticipated  that within the next six months
the Company will possibly enter into land  purchases in the Pittsburgh  area for
this  project.  The Company  plans on entering  into a formal  agreement in 2004
whereby  additional  monies may be invested in this project  dependent  upon the
success of developing  other  business  partners for this project,  however,  no
future commitment has made.

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, 2004 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.

In February 2004,  the Company loaned Marine Forest  $200,000 to pay real estate
taxes  on the  property.  Although  the  Company  received  a  one-year  secured
promissory  note,  with interest of 5% per annum due March 1, 2005,  the Company
recorded an impairment  charge of $200,000 in March 2004, for reasons  discussed
above.

                                       18
<PAGE>

LITIGATION

An action was commenced against Surety Kohala  Corporation (SKC), a wholly owned
subsidiary of the Company,  in August 2003 in US District Court for the District
of Hawaii by a consultant to the Company  primarily  alleging breach of contract
in  connection  with services to be rendered for the  development  of the Kohala
Preserve  Project.  The consulting firm claimed it was owed  approximately  $5.5
million and potential  other  amounts.  Subsequent to SKC filing a counter claim
against  the  consulting  firm,  SKC' s law  firm,  in  which  the  consultant's
Chairman/CEO  was of  counsel,  filed a claim for unpaid  fees of  approximately
$361,000.  On April 1, 2004,  the Company  entered  into an  agreement  with all
parties  settling the  litigation  by agreeing to pay a total of $1.4 million to
certain  parties by June 30, 2004. On April 30, 2004 a definitive  agreement was
signed.

In the  opinion of  management,  the  resolution  of this matter does not have a
material  adverse  effect on the  consolidated  financial  position,  results of
operations or cash flows of the Company.

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,
2003:

                                                                     GREATER
                                           1 YEAR     1 -3 YEARS  THAN 3 YEARS

Notes payable (a)                         $ 31,000     $ 37,000     $332,000
Development projects                       349,000
                                          --------     --------     --------
                                          $380,000     $ 37,000     $332,000
                                          ========     ========     ========

(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.

                                       19
<PAGE>

Item 3.           Evaluation of Disclosure Controls and Procedures

(a) Evaluation of disclosure  controls and  procedures.  Our president and chief
executive   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, 2003.

Item 2.           Change in Securities

                  None

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

                  SIGNATURES

                  CERTIFICATIONS

                                       20
<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)

Dated: May 14, 2004

                                           By:  /s/  Howard R. Knapp
                                           --------------------------------
                                           Howard R. Knapp
                                           President and Chief Executive Officer

                                           By:  /s/  Linda O'Donnell
                                           --------------------------------
                                           Linda O'Donnell
                                           Chief Financial Officer

                                       21