UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-QSB

[X]      Quarterly report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934

                           For the quarterly period ended June 30, 1998

[]       Transition report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934

                 For the transition period from _____ to _____.

                        COMMISSION FILE NUMBER: 001-23407

                                  SURREY, INC.
             (Exact name of registrant as specified in its charter)

              Texas                                              74-2138564
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

                              13110 Trails End Road
                              Leander, Texas 78641
                    (Address of principal executive offices)
                                 (512) 267-7172
              (Registrant's telephone number, including area code)

         Check whether the registrant: (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes _X_ No ___

         On August 10, 1998, the registrant had 2,472,727 outstanding shares of
common stock, no par value.

         Transitional Small Business Disclosure Format (check one);
Yes ___ No _X_



<PAGE>



                                  SURREY, INC.

                                      INDEX


PART I - FINANCIAL INFORMATION

Item 1.    Financial Statements (Unaudited)

                  Statements of Operations for the Three Months and Six Months 
                  Ended June 30, 1998 and 1997

                  Balance Sheets as of  June 30, 1998 and December 31, 1997

                  Statements of Cash Flows for the Six Months Ended June 30,
                  1998 and 1997

                  Notes to Financial Statements

Item 2.    Management's Discussion and Analysis or Plan of Operation


PART II - OTHER INFORMATION


SIGNATURES


EXHIBITS




<PAGE>


PART I:  FINANCIAL INFORMATION

ITEM 1   FINANCIAL STATEMENTS


                                  Surrey, Inc.

                            STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                                 Three Months Ended        Six Months Ended
                                                      June 30,                June 30,
                                                -------------------------------------------
                                                  1998        1997        1998        1997
                                                -------------------------------------------
<S>                                             <C>         <C>         <C>         <C>    
Net sales                                       $ 1,917     $ 1,877     $ 3,819     $ 3,724
Cost of sales                                     1,399       1,412       2,764       2,820
                                                -------------------------------------------

Gross profit                                        518         465       1,055         904

Operating expenses:
     Sales and marketing                            178          56         344         156
     General and administrative                     519         258         897         540
                                                -------------------------------------------

Total operating expenses                            697         314       1,241         696

Income (loss) from operations                      (179)        151        (186)        208

Other:
     Interest expense                               (52)        (47)        (84)       (102)
     Other income                                    13          (2)         38        --
                                                -------------------------------------------

Income (loss) before income taxes                  (218)        102        (232)        106

Income tax (benefit) provision                      (74)         41         (79)         42
                                                -------------------------------------------

Net income (loss)                               $  (144)    $    61     $  (153)    $    64
                                                ===========================================

Basic and diluted earnings (loss) per share     $ (0.06)    $  0.03     $ (0.06)    $  0.03
                                                ===========================================

Shares used in computing basic and 
     diluted earnings (loss) per share:           2,473       2,245       2,473       2,245
                                                ===========================================

</TABLE>

SEE ACCOMPANYING NOTES.


<PAGE>


                                  Surrey, Inc.

                                 BALANCE SHEETS
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>

                                                               June 30,     December 31,
                                                                 1998          1997
                                                               -------       -------
<S>                                                            <C>           <C>    
ASSETS
Current assets:
    Cash and cash equivalents                                  $   658       $ 3,066
    Accounts receivable, net                                     1,071         1,427
    Inventories, net                                             1,929         1,252
    Prepaid expenses and other current assets                      435            39
    Deferred income taxes                                           38            38
    Income taxes receivable                                        121            42
                                                               -------       -------

Total current assets                                             4,252         5,864

Property and equipment, net                                      2,627         1,510
                                                               =======       =======

Total assets                                                   $ 6,879       $ 7,374
                                                               =======       =======


LIABILITIES AND SHAREHOLDERS' EQUITY 
Current liabilities:
    Trade accounts payable                                     $   667       $   561
    Accrued expenses                                                72           308
    Notes payable                                                 --             895
    Current maturities of long-term debt                           141            96
    Current maturities of capital lease obligations                 63            66
                                                               -------       -------

Total current liabilities                                          943         1,926

Long-term debt, less current maturities                          1,833         1,153
Capital lease obligations, less current maturities                  68            85
Deferred income taxes                                               49            49

Commitments and contingencies

Shareholders' equity:
    Common stock; no par value                                   4,098         4,120
    Common stock warrants                                           65            65
    Retained deficit                                              (177)          (24)
                                                               -------       -------

Total shareholders' equity                                       3,986         4,161
                                                               =======       =======

Total liabilities and shareholders' equity                     $ 6,879       $ 7,374
                                                               =======       =======

</TABLE>

SEE ACCOMPANYING NOTES.


<PAGE>





                                  Surrey, Inc.

                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                 Six Months Ended
                                                                             June 30,           June 30,
                                                                               1998               1997
                                                                        ------------------------------------
<S>                                                                         <C>                <C>     
OPERATING ACTIVITIES
Net income (loss)                                                           $   (153)          $     64
Adjustments to reconcile net income (loss) to net cash 
  provided by (used in)
    operating activities:
       Depreciation                                                              143                118
       Changes in operating assets and liabilities:
          Accounts receivable                                                    356               (104)
          Inventories                                                           (677)              (258)
          Prepaid expenses and other current assets                             (396)                 1
          Deferred income taxes                                                    -                  7
          Trade accounts payable                                                 106                430
          Accrued expenses                                                      (236)                 3
          Income taxes receivable/payable                                        (79)                35
                                                                        ------------------------------------

Net cash provided by (used in) operating activities                             (936)               296


INVESTING ACTIVITIES
Acquisition of property and equipment                                         (1,230)              (110)
                                                                        ------------------------------------

Net cash used in investing activities                                         (1,230)              (110)


FINANCING ACTIVITIES
Payment of notes payable                                                        (895)              (121)
Payment of notes payable to shareholders                                           -                 (7)
Proceeds from issuance of long-term debt                                       1,939                  -
Payment of long-term debt                                                     (1,225)               (41)
Principal payments on capital lease obligations                                  (39)               (72)
Payment of deferred financing costs                                              (22)               (25)
                                                                        ------------------------------------

Net cash used in financing activities                                           (242)              (266)

Net change in cash                                                            (2,408)               (80)
Cash and cash equivalents, beginning of period                                 3,066                159
                                                                        ------------------------------------

Cash and cash equivalents, end of period                                    $    658           $     79
                                                                        ====================================


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION 
Cash paid during the period
for:
    Interest                                                                $     86           $    102
    Income taxes                                                            $      -           $      5

Acquisition of property and equipment via issuance of capital leases
                                                                            $     30           $     31

</TABLE>

SEE ACCOMPANYING NOTES.


<PAGE>


                                  Surrey, Inc.

                          Notes to Financial Statements

                                  June 30, 1998


1. ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three- and six-month periods ended June
30, 1998 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1998. For further information, refer to the
financial statements and footnotes thereto included in the Surrey, Inc. annual
report on Form 10-KSB for the year ended December 31, 1997.

2. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per
share (in thousands, except per share data):

<TABLE>
<CAPTION>

                                                                  Three Months Ended           Six Months Ended
                                                                       June 30,                    June 30,
                                                                  1998          1997          1998          1997
                                                                ------------------------------------------------
<S>                                                             <C>           <C>          <C>           <C>    
Numerator:
     Net income (loss)                                          $  (144)      $    61      $  (153)      $    64
                                                                ------------------------------------------------

     Numerator for basic and diluted earnings per share -
        income (loss) available to common
          stockholders                                          $  (144)      $    61      $  (153)      $    64
                                                                ================================================

Denominator:

     Denominator for basic and diluted earnings per 
        share - weighted average shares                           2,473         2,245        2,473         2,245
                                                                ------------------------------------------------

Basic and diluted earnings per share                            $ (0.06)      $  0.03      $ (0.06)      $  0.03
                                                                ================================================

</TABLE>


<PAGE>


                                  Surrey, Inc.

                    Notes to Financial Statements (continued)

                                  June 30, 1998


2. EARNINGS PER SHARE (continued)

Options to purchase 335,000 shares of common stock at $4.00 to $4.40 per share,
warrants to purchase 675,000 shares of common stock at $4.80 per share, and a
warrant to purchase 62,500 Units (consisting of two shares of common stock and
one redeemable common stock purchase warrant) at $9.75 per Unit were outstanding
during 1998 but were not included in the computation of diluted earnings per
share because the exercise prices were greater than the average market price of
the common shares; therefore, the effect would be antidilutive.

3. CONTINGENCIES

The Company is involved in certain claims arising in the normal course of
business. An estimate of the possible loss resulting from these matters cannot
be made; however, the Company believes that the ultimate resolution of these
matters will not have a material adverse effect on its financial position or
results of operations.

4. LONG-TERM DEBT

In April 1998, the Company entered into a loan agreement with a financial
institution to provide a term loan in the principal amount of $2,300,000. The
Company used approximately $1,191,000 of the available credit to refinance debt
guaranteed by the United States Small Business Association. The remainder of the
available credit is being used for plant construction and expansion. As of June
30, 1998, approximately $1,939,000 was outstanding under this agreement. Also in
April 1998, the Company entered into another agreement with a financial
institution to provide a revolving line of credit to be used for working capital
purposes in the amount of the lesser of 80% of eligible accounts receivable or
$1,000,000. As of June 30, 1998, the Company had yet to draw any funds under
this agreement. The term loan and the revolving line of credit bear interest at
either the financial institution's prime rate or a LIBOR based rate and mature
in 2000 and 2005, respectively. These loan agreements are collateralized by
accounts receivable, inventory and property and equipment. As of June 30, 1998,
the Company was not in compliance with a certain financial covenant specified in
the loan agreements. The Company has received a waiver from the lender for such
violation.

<PAGE>


PART I:  FINANCIAL INFORMATION

ITEM 2   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

         The following discussion and analysis provides information that
management believes is relevant to an assessment and understanding of the
Company's level of operation and financial condition. This discussion should be
read with the financial statements appearing in Part I, Item 1 of this report.

RESULTS OF OPERATIONS

         NET SALES. Net sales increased to $1,917,000 for the three months ended
June 30, 1998 from $1,877,000 for the three months ended June 30, 1997, an
increase of 2.1%. Net sales increased to $3,819,000 for the six months ended
June 30, 1998 from $3,724,000 for the six months ended June 30, 1997, an
increase of 2.6%. Such increases are attributed primarily to the increase in the
Company's sales force from one individual to three full-time sales personnel.
All three new hires occurred in the second half of 1997. Sales from these
increased sales efforts continued to be recognized in the second quarter 1998. A
significant sales volume increase is not expected to occur until the Company's
planned expansion is complete and operational.

         GROSS PROFIT. Gross profit increased for the three months ended June
30, 1998 to $518,000 from $465,000 for the comparable three month period in
1997. Gross profit margin for the three month period increased significantly
from 24.8% in 1997 to 27.0% in 1998. Gross profit increased for the six months
ended June 30, 1998 to $1,055,000 from $904,000 for the comparable six month
period in 1997. Gross profit margin also increased significantly for the six
month period from 24.3% in 1997 to 27.6% in 1998. These increases in gross
profit margin are attributable to the Company's continued focus on selling
higher margin products. This strategy is expected to continue for the second
half of 1998 as the new high-end candle products come on line and the Company
continues to focus on high-end contract manufacturing products.

         OPERATING EXPENSES. Operating expenses increased significantly for the
three months ended June 30, 1998 by 122.0% over the three months ended June 30,
1997, and also increased as a percentage of net sales; $697,000 (or 36.4% of net
sales) in 1998, as compared to $314,000 (or 16.7% of net sales) in 1997.
Operating expenses also increased significantly in the six months ended June 30,
1998 by 78.3% over the six months ended June 30, 1997, and also increased as a
percentage of net sales; $1,241,000 (or 32.5% of net sales) in 1998, as compared
to $696,000 (or 18.7% of net sales) in 1997.

         Operating expenses increased due to a number of factors during the last
six months: as a result of the Company's increased obligations as a publicly
reporting company and in connection with its first annual meeting of public
shareholders, the Company's legal and professional expenses increased by
$150,000; and salaries and related payroll tax increased by $125,000 due to the
hiring of three full time sales personnel, a graphic designer and an
administrative assistant. In addition, operating expenses such as insurance
expenses and bad debt expenses have increased as the Company has grown.


<PAGE>


These fixed expenses are expected to decline as a percentage of sales after the
expansion is complete and fully operational.

         INTEREST EXPENSE. Interest expense of $52,000 (2.7% of net sales) in
the three months ended June 30, 1998 was essentially unchanged as compared to
$47,000 in the three months ended June 30, 1997 (2.5% of net sales). Interest
expense of $84,000 (2.2% of net sales) for the six months ended June 30, 1998
fell moderately as compared to $102,000 (2.7% of net sales) for the six months
ended June 30, 1997. This decrease was primarily due to the payoff of all of the
Company's short term borrowings for working capital purposes in January 1998.
For the comparable periods in 1997, these short term loans were outstanding.

LIQUIDITY AND CAPITAL RESOURCES

         The Company's primary sources of liquidity, other than proceeds of the
Company's 1997 initial public offering ("IPO"), are cash flow from operations,
bank borrowings, and capital lease financing. In April 1998, the Company entered
into a loan agreement with Chase Bank of Texas, National Association ("Lender")
to provide (a) a construction/term loan in the principal amount of $2,300,000
("Term Loan") with a final maturity in April 2005, and (b) a revolving line of
credit to be used for working capital purposes in the amount of the lesser of
80% of eligible accounts receivable or $1,000,000 ("Revolving Note") which would
allow the Company to borrow, repay, and reborrow until its final maturity in
April 2000. As of August 10, 1998, approximately $1.9 million has been drawn
under the term Loan and no draws had been made under the Revolving Note.

         The interest on each of the Term Loan and the Revolving Note will, at
the Company's option, float at either the lender's Prime Rate or the LIBOR Rate
(London Interbank Offering Rate) plus the LIBOR margin, which will range from
1.75% to 2.25% depending on the Company's debt to tangible net worth ratio.
Currently, the Company has elected to pay interest at the LIBOR Rate. The
current rate of interest on the loans is equal to 7.84%. The Company and Lender
have also agreed to enter into an interest rate risk management program for the
Term Loan, pursuant to which the Company and Lender will enter into one or more
ISDA Agreements (International Swap Dealers Association) intended to hedge the
interest rate fluctuations on the Term Loan. Overdue amounts on the loans are
payable at a past due rate of interest. The loans are secured by a lien on the
Company's plant, equipment, inventory, and accounts receivable.

         Interest on each of the Revolving Note and Term Loan is payable
monthly. The Company is required to prepay the Revolving Note and maintain a
zero balance for thirty consecutive days during each year the Revolving Note is
outstanding. Principal on the Term Loan is payable in monthly installments
beginning January 8, 1999 of approximately $9,500 per month, increasing to
approximately $12,700 per month after April 2001.

         Among other requirements, the loan agreement currently contains the
following covenants, which are tested quarterly: the Company must maintain (a) a
current ratio of not less


<PAGE>


than 1.50 to 1.00; (b) a debt to tangible net worth ratio not greater than 1.50
to 1.00; and (c) a fixed charge coverage ratio of not less than 1.20 to 1.00.
The Company was not in compliance with the fixed charge coverage ratio covenant
as of June 30, 1998. The Company has received a waiver from the Lender. The loan
agreement also limits indebtedness by the Company; restricts borrowing under
certain equipment leases to $1.5 million; restricts indebtedness in connection
with acquisition of equipment to $200,000; and limits sales of assets. The loan
agreement restricts the Company from making any dividends or distributions on
its capital stock unless net income equals or exceeds $2 million, from
repurchasing or redeeming any capital stock (other than pursuant to the terms of
the Company's Warrants, provided no default would occur under the bank loans),
from paying any bonus or other non-salary compensation, from replacing its
President or Chief Financial Officer, or from entering into certain related
party transactions, without prior written consent of Lender.

         The Company used approximately $1,191,000 of the loan proceeds to repay
its outstanding loans to Norwest Bank of Texas and anticipates using
approximately $1,102,000 to finance the expansion of its plant and facility.
Disbursement of construction funds are subject to (a) compliance by the Company
and its contractor within the terms of the agreements with the Lender and (b)
the Lender receiving an appraisal of the property as improved, of approximately
$2,700,000. The Company currently anticipates that it will make periodic
payments on such loans out of future cash flows generated by the Company.

         The Company leases certain pieces of its manufacturing equipment
pursuant to capital leases. Annual payments at June 30, 1998, aggregated $63,000
under short term capital leases and $68,000 under long term capital leases. The
leases currently in effect have maturity dates ranging through 2002. Such
leases, some of which are personally guaranteed by the current and former CEOs
of the Company, provide that if no event of default exists thereunder the
Company may purchase the equipment subject to the lease at the expiration of the
lease or may renew the lease.

         The Company has received a commitment letter from Key Capital
Corporation, Inc., in which Key Capital Corporation, Inc. committed to enter
into an operating equipment lease with the Company for one traditional soap
line, two poured soap lines, one high speed wrapping machine and one candle
making line. Such lease will be for a period of seven years. The Company began
drawing on the lease line of credit in August 1998. The Company's bank loan
restricts the aggregate leases allowable under this Agreement to $1,500,000.
Annual payments under the proposed lease are expected to be approximately
$168,000. The Company currently anticipates that it will pay such annual lease
expense out of future cash flows generated by the Company.

         The Company believes that its current cash balances, cash provided by
future operations and its current bank loans will be sufficient to meet its
working capital and anticipated capital expenditure requirements at least over
the next 12 months.

         The Company experiences seasonal fluctuations in operating results,
with sales and revenues generally higher during the third and fourth calendar
quarters, reflecting primarily orders for the holiday retail season. Orders
shipped in the third and fourth quarters generally account for approximately 60%
of the Company's total net sales for the year.


<PAGE>


FORWARD LOOKING INFORMATION

         Statements contained in this report regarding the Company's future
operations, growth strategy, future performance and results and the anticipated
liquidity are forward-looking and therefore are subject to certain risks and
uncertainties, including those discussed herein. In addition, any
forward-looking information regarding the operations of the Company will be
affected by the Company's ability to successfully complete its expansion in a
timely fashion, to efficiently manage and operate its facility as expanded, the
Company's ability to successfully increase its marketing and sales efforts in
order to take advantage of its increased production facilities, and continued
receipt of large orders from the Company's significant customers. There can be
no assurance that the Company will be successful in completing its proposed
expansion, or, if competed, that it will be successful in efficiently managing
its growth in order to maximize potential production.


PART II: OTHER INFORMATION

ITEM 1   LEGAL PROCEEDINGS

         The Company and its client Bath & Body Works are defendants in a
lawsuit filed in Los Angeles Superior Court on April 2, 1997. The plaintiff,
Seretha F. Ebraham, claimed, among other things, that a liquid potpourri product
manufactured by the Company for Bath & Body Works failed to properly warn the
plaintiff of the potential dangers of the product and that she sustained burns
from the liquid potpourri as a result of such insufficient warning. The
plaintiff seeks total damages of $5,250,000. The Company's product liability
insurer at the time of the occurrence is defending the claim and the Company
currently believes that such insurance is adequate to cover damages, if any,
resulting from such lawsuit. A new jury trial date has not yet been set.

         Other than the above lawsuit, the Company is involved in legal
proceedings arising in the normal course of business, none of which is expected
to result in any material loss to the company.

ITEM 2   CHANGES IN SECURITIES AND USE OF PROCEEDS

         The Company undertook an initial public offering ("IPO") in December
1997 (Registration Number 333-35757). The Company issued an aggregate of 675,000
Units, each Unit being comprised of two shares of Common Stock and one Warrant.
Each Warrant is convertible into one share of Common Stock. The Units were sold
by Stuart, Coleman & Co., Inc. (the "Underwriter"). The Common Stock and
Warrants trade on the Nasdaq SmallCap Market under the symbols SOAP and SOAPW,
respectively. The aggregate offering price of the Units sold to the public by
the Underwriter was $5,484,375 or $8.125 per Unit.

         The Company spent approximately $288,000 of the net proceeds on
additional land, approximately $390,000 on initial construction costs and
approximately $500,000 to finance inventory needs for the upcoming season.

         In addition, the Company repaid approximately $1.34 million of debt to
a former shareholder and approximately $895,000 of bank loans.

         The Company initially anticipated using approximately $800,000 of the
net proceeds for the expansion for the Company's plant, unless financing was
available for the plant expansion. The Company currently anticipates that the
total cost of the expansion will be approximately $1,100,000. The Company
entered into a construction agreement with


<PAGE>


Bruce Van Waes d/b/a Van & Van Austin to construct the planned additional 39,102
square foot addition at an estimated cost of approximately $940,000. The Company
currently estimates that the completion date for the building construction will
be fall 1998. After the building is complete, the new equipment to be installed
is expected to require approximately two months to be set up and made fully
operational.

         In April 1998, the Company entered into a new bank loan with Chase Bank
of Texas, National Association to refinance all of its then current bank debt
and to finance substantially all of the costs relating to the Company's
expansion of its plant. Therefore, IPO proceeds to be made available for the
expansion of the facility have been made available to the Company for working
capital.

         The Company also initially intended to use approximately $900,000 of
the net proceeds for capital equipment leasing payments, unless revenues from
operations were available to pay such capital lease payments. As of June 30,
1998, the Company had expended approximately $415,000 of the IPO proceeds for
down payment on such leases. The Company has received a commitment letter from
Key Corporate Capital, Inc. to enter into an operating equipment lease with the
Company to provide certain manufacturing equipment related to its expansion. The
proceeds of such operating equipment lease will be available to repay such down
payment amounts. The Company currently expects that it will be able to make
payments due under such lease and its loans with Chase Bank out of its future
cash flow. As a result, net proceeds originally intended to make payments on the
capital equipment lease have been made available for working capital and general
corporate purposes.

         The Company used approximately $350,000 of the net proceeds to pay
sales, marketing and new product development fees. Expenses related to sales,
marketing and new product development include the salary of a design
professional to assist with product packaging, additional salary and commission
related to hiring and promoting new personnel in the sales and marketing areas,
and travel expenses and other expenses related to the Company's increased focus
on the European and Japanese markets.

         The amounts actually expended over time for new product development and
capital expenditures may vary significantly depending upon a variety of factors,
including the ability of the Company to hire additional qualified personnel and
the resources needed to attract and retain such personnel, new product
opportunities that might become available, and the continued availability of the
Company's line of credit. 

         The Company intends, from time to time, to evaluate possible
acquisitions of or investments in business, products or technologies that are
complementary to the current product lines of the Company. The portion of the
net proceeds of the IPO which are added to the Company's working capital and
general corporate funds, as well as funds dedicated to new product development,
together with other internally generated funds, may, if appropriate, be used for
such purpose; however, such acquisitions may be subject to approval of the
Company's Lender. No such transactions are planned or being negotiated as of the
date hereof.


<PAGE>


ITEM 3   DEFAULTS UPON SENIOR SECURITIES

         [None]

ITEM 4   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         On April 1, 1998, proxy statements were mailed to the holders of record
of 2,472,727 shares of common stock to solicit proxies in connection with the
Annual Meeting of Shareholders on April 30, 1998. Two proposals were submitted
to a vote of shareholders, as follows:

         (a)      Election of Directors - the following Directors were nominated
                  for re-election for terms of one year: John B. van der Hagen
                  re-elected with 2,463,327 shares voted for, 1,000 shares
                  withheld authority, Martin J. van der Hagen re-elected with
                  2,463,327 shares voted for, 1,000 shares withheld authority,
                  Mary A. van der Hagen re-elected with 2,463,327 shares voted
                  for, 1,000 shares withheld authority, Bruce Masucci re-elected
                  with 2,463,327 shares voted for, 1,000 shares withheld
                  authority, G. Thomas MacIntosh re-elected with 2,460,927
                  shares voted for, 3,400 shares withheld authority.

         (b)      Ratification and Appointment of Independent Auditors - Ernst &
                  Young LLP were auditors for the fiscal year ended December 31,
                  1997. The Company has appointed Ernst & Young as auditors for
                  the year ending December 31, 1998. The appointment of Ernst &
                  Young as auditors for fiscal 1998 was ratified by a vote of
                  shareholders with 2,456,327 shares voting yes, 8,000 shares
                  voting no, and 0 shares abstained.

ITEM 5   OTHER INFORMATION

         Pursuant to the rules of the Securities and Exchange Commission
("SEC"), any shareholder wishing to have a proposal considered for inclusion in
the Company's proxy solicitation material for the 1999 Annual Meeting of
Shareholders must set forth such proposal in writing and file it with the
Secretary of the Company no later than December 2, 1998. Pursuant to SEC Rule
14a-4(c )(1), any shareholder wishing to have a proposal considered at the 1999
Annual Meeting of Shareholders, but not submitted for inclusion in the Company's
proxy solicitation material, must set forth such proposal in writing and file it
with the Secretary of the Company no later than February 15, 1999 and failure to
notify the Company by such date would allow the Company's proxies to use their
discretionary voting authority when the proposal is raised at the Annual meeting
(to vote for or against the proposal) without any discussion of the matter in
the proxy materials.


<PAGE>


ITEM 6   EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibit 27. - Financial Data Schedule

         (b)      The Company filed no Reports on Form 8-K during the reporting
                  period.



SIGNATURES

         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                  SURREY, INC.
                                  (Registrant)



Date: August 14, 1998             By:      /s/ Martin van der Hagen
                                      -----------------------------
                                           Martin van der Hagen
                                           President


                                  By:      /s/ Mark van der Hagen
                                      -----------------------------
                                           Mark van der Hagen
                                           Chief Financial Officer