---

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION** Washington, D.C. 20549

FORM 10-QSB

As filed with the Securities and Exchange Commission on August
  19, 2003

(Mark One)

x QUARTERLY REPORT
  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the quarter ended June 30, 2003

OR

 ̈ 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 000-30095

CTI DIVERSIFIED HOLDINGS, INC.





|Delaware                       | 33-0921967         
|------------------------------ | -------------------
|State or other jurisdiction of | (I.R.S. Employer   
|incorporation or organization  | Identification No.)

8709  50 Avenue, Edmonton AB., Canada T6E 5H4(Address of principal executive offices) (Zip Code)

Registrants telephone number, including area code (877)
  644-6638

Securities registered pursuant to Section 12(b) of the Act:

|Title of each class | Name of each exchange on which registered
|------------------- | -----------------------------------------
|None                | None                                     

Securities registered pursuant to Section 12(g) of the Act:
  Common Stock, par value $.0001 per share(Title of class)

Indicate by check mark whether
  the registrant (1) has 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  ̈

Number of shares outstanding of the registrants class
  of common stock as of August 14, 2003: 21,817,121.

Authorized share capital of the registrant: 50,000,000 common
  shares , par value of $0.0001

The Company recorded $nil revenue for the quarter ended
  June 30, 2003.

---

FORWARD-LOOKING STATEMENTS

THIS QUARTERLY REPORT ON FORM 10-QSB CONTAINS PREDICTIONS,
  PROJECTIONS AND OTHER STATEMENTS ABOUT THE FUTURE THAT ARE INTENDED TO BE FORWARD-LOOKING
  STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE
  ACT OF 1934, AS AMENDED (COLLECTIVELY, FORWARD-LOOKING STATEMENTS).
  FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES. A NUMBER OF IMPORTANT
  FACTORS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING
  STATEMENTS. IN ASSESSING FORWARD-LOOKING STATEMENTS CONTAINED IN THIS QUARTERLY
  REPORT ON FORM 10-QSB, READERS ARE URGED TO READ CAREFULLY ALL CAUTIONARY STATEMENTS
   INCLUDING THOSE CONTAINED IN OTHER SECTIONS OF THIS QUARTERLY REPORT
  ON FORM 10-QSB. AMONG SAID RISKS AND UNCERTAINTIES IS THE RISK THAT THE COMPANY
  WILL NOT COMPLETE ITS PROPOSED ACQUISITIONS OR ANY OTHER SUITABLE ACQUISITIONS,
  THAT ITS MANAGEMENT IS ADEQUATE TO CARRY OUT ITS BUSINESS PLAN AND THAT THERE
  WILL BE ADEQUATE CAPITAL; IN ADDITION, IF SAID ACQUISITIONS ARE COMPLETED THEY
  MAY BE UNSUCCESSFUL FOR TECHNICAL, ECONOMIC OR OTHER REASONS.

CURRENCIES

All amounts expressed herein are in US dollars unless otherwise indicated.

PART I - FINANCIAL INFORMATION

ITEM 1.      FINANCIAL STATEMENTS

Index

Consolidated Statements of Operations and Deficit for the
  six months ended June 30, 2003 and 2002

Consolidated Balance Sheet at June 30, 2003 and December
  31, 2002

Consolidated Statement of Stockholders' Deficiency

Consolidated Statement of Cash Flows for the six months ended
  June 30, 2003 and 2002

Notes to Consolidated Financial Statements

2

---

CTI DIVERSIFIED HOLDINGS, INC. 
  (Formerly Unique Bagel Co., Inc.) 
  (A Development Stage Enterprise)
  (Unaudited) 
  Consolidated Statements of Operations and Deficit 
  (Expressed in U.S. Dollars)

|                                                        |                 |   |   |                  |   |   |                  |  
|------------------------------------------------------- | --------------- | - | - | ---------------- | - | - | ---------------- | -
|                                                        | August 31, 1998 |   |   |                  |   |   |                  |  
|                                                        | (inception) to  |   |   | Six months ended |   |   | Six months ended |  
|                                                        | June 30, 2003   |   |   |                  |   |   |                  |  
|                                                        | (cumulative)    |   |   | June 30, 2003    |   |   | June 30, 2002    |  
|                                                        |                 |   |   |                  |   |   |                  |  
|Expenses                                                |                 |   |   |                  |   |   |                  |  
|Advertising and
      promotion                         | 4,122           |   |   | -                |   |   | 2,190            |  
|Automotive                                              | 2,391           |   |   | -                |   |   | -                |  
|Consulting                                              | 363,756         |   |   | 56,359           |   |   | 89,723           |  
|Depreciation                                            | 24,159          |   |   | 1,176            |   |   | 6,202            |  
|Insurance                                               | 706             |   |   | -                |   |   | 1,413            |  
|Amortization of
      deferred charges                  | 2,526           |   |   | 2,526            |   |   | -                |  
|Interest and bank
      charges                         | 82,282          |   |   | 15,203           |   |   | 10,728           |  
|Interest paid to
      shareholders and related parties | 254,070         |   |   | 96,061           |   |   | 28,547           |  
|Investor relations
      and reporting costs            | 216,304         |   |   | 53,206           |   |   | 53,647           |  
|Legal and accounting                                    | 242,529         |   |   | 94,017           |   |   | 64,284           |  
|Licenses, dues and
      subscriptions                  | 2,829           |   |   | -                |   |   | 233              |  
|Office                                                  | 73,394          |   |   | 3,180            |   |   | 46,631           |  
|Rent                                                    | 39,894          |   |   | -                |   |   | 10,225           |  
|Telephone                                               | 14,518          |   |   | -                |   |   | 1,759            |  
|Travel                                                  | 147,509         |   |   | 3,368            |   |   | 48,141           |  
|Utilities                                               | 1,975           |   |   | -                |   |   | 1,671            |  
|Stock based compensation                                | 58,000          |   |   | 25,000           |   |   | -                |  
|Wages and benefits                                      | 184,393         |   |   | 6,813            |   |   | 101,477          |  
|                                                        |                 |   |   |                  |   |   |                  |  
|                                                        |                 |   |   |                  |   |   |                  |  
|Loss from operations                                    | (1,715,150      | ) |   | (356,702         | ) |   | (466,871         | )
|                                                        |                 |   |   |                  |   |   |                  |  
|Other items                                             |                 |   |   |                  |   |   |                  |  
|Impairment of goodwill                                  | (3,290,217      | ) |   | -                |   |   | (934,197         | )
|Impairment of intangible
      assets                   | (472            | ) |   | -                |   |   | -                |  
|Impairment of investments                               | (560,850        | ) |   | -                |   |   | -                |  
|Loss on disposition
      of assets                     | (40,283         | ) |   | -                |   |   | -                |  
|Interest and other
      items                          | 36,099          |   |   | 17,357           |   |   | 256              |  
|Forgiveness of debt                                     | 15,617          |   |   | -                |   |   | -                |  
|Loss on disposition
      of foreign subsidiaries       | (1,323,180      | ) |   | -                |   |   | -                |  
|                                                        |                 |   |   |                  |   |   |                  |  
|                                                        | (5,163,286      | ) |   | 17,357           |   |   | (933,941         | )
|                                                        |                 |   |   |                  |   |   |                  |  
|                                                        |                 |   |   |                  |   |   |                  |  
|Net loss for the period                                 | (6,878,436      | ) |   | (339,345         | ) |   | (1,400,812       | )
|                                                        |                 |   |   |                  |   |   |                  |  
|Deficit, beginning of period                            |                 |   |   | (6,539,091       | ) |   | (4,836,052       | )
|                                                        |                 |   |   |                  |   |   |                  |  
|                                                        |                 |   |   |                  |   |   |                  |  
|Deficit, end of period                                  |                 |   | $ | (6,877,436       | ) | $ | (6,236,864       | )
|                                                        |                 |   |   |                  |   |   |                  |  
|                                                        |                 |   |   |                  |   |   |                  |  
|Loss per share (Basic and diluted)                      |                 |   | $ | (0.02            | ) | $ | (0.34            | )
|                                                        |                 |   |   |                  |   |   |                  |  
|Weighted average number of common shares outstanding    |                 |   |   | 21,817,121       |   |   | 18,397,051       |  
|                                                        |                 |   |   |                  |   |   |                  |  

3

---

CTI DIVERSIFIED HOLDINGS, INC. 
  (Formerly Unique Bagel Co., Inc.)
  (A Development Stage Enterprise)
  (Unaudited)
  Consolidated Balance Sheets
  (Expressed in U.S. Dollars)

|                                                            |   |               |   |   |                   |  
|----------------------------------------------------------- | - | ------------- | - | - | ----------------- | -
|                                                            |   | June 30, 2003 |   |   | December 31, 2002 |  
|                                                            |   |               |   |   |                   |  
|                                                            |   |               |   |   |                   |  
|ASSETS                                                      |   |               |   |   |                   |  
|                                                            |   |               |   |   |                   |  
|Current                                                     |   |               |   |   |                   |  
|Cash and cash equivalents                                   | $ | 13,595        |   | $ | 1,422             |  
|                                                            |   |               |   |   |                   |  
|                                                            |   |               |   |   |                   |  
|Total current assets                                        |   | 13,595        |   |   | 1,422             |  
|Notes receivable                                            |   | 1,215,279     |   |   | -                 |  
|Discount on long term debt, net of accumulated amortization |   | 86,500        |   |   | -                 |  
|Deposit on Synenco Energy Inc. share purchase               |   | 173,048       |   |   | -                 |  
|Fixed assets                                                |   | 6,017         |   |   | 7,193             |  
|                                                            |   |               |   |   |                   |  
|                                                            |   |               |   |   |                   |  
|Total assets                                                | $ | 1,494,439     |   | $ | 8,615             |  
|                                                            |   |               |   |   |                   |  
|                                                            |   |               |   |   |                   |  
|LIABILITIES                                                 |   |               |   |   |                   |  
|                                                            |   |               |   |   |                   |  
|Current                                                     |   |               |   |   |                   |  
|Accounts
      payable and accrued liabilities              | $ | 167,213       |   | $ | 574,194           |  
|Notes payable                                               |   | -             |   |   | 330,541           |  
|Due
      to shareholders                                   |   | 173,048       |   |   | 204,347           |  
|                                                            |   |               |   |   |                   |  
|                                                            |   |               |   |   |                   |  
|Total current liabilities                                   |   | 340,261       |   |   | 1,109,082         |  
|                                                            |   |               |   |   |                   |  
|Long term debt                                              |   | 1,413,680     |   |   | -                 |  
|                                                            |   |               |   |   |                   |  
|                                                            |   |               |   |   |                   |  
|Total liabilities                                           |   | 1,753,941     |   |   | 1,109,082         |  
|                                                            |   |               |   |   |                   |  
|                                                            |   |               |   |   |                   |  
|STOCKHOLDER'S EQUITY (DEFICIENCY)                           |   |               |   |   |                   |  
|                                                            |   |               |   |   |                   |  
|Capital stock                                               |   | 2,182         |   |   | 1,962             |  
|Additional paid-in capital                                  |   | 6,594,717     |   |   | 5,414,303         |  
|Accumulated other comprehensive income (loss)               |   | 150,971       |   |   | 22,359            |  
|Deficit accumulated during development stage                |   | (7,007,372    | ) |   | (6,539,091        | )
|                                                            |   |               |   |   |                   |  
|Total shareholders' deficiency                              |   | (259,502      | ) |   | (1,100,467        | )
|                                                            |   |               |   |   |                   |  
|Total liabilities and shareholders' deficiency              | $ | 1,494,439     |   | $ | 8,615             |  
|                                                            |   |               |   |   |                   |  
|Commitments                                                 |   |               |   |   |                   |  

APPROVED ON BEHALF OF THE BOARD: ____________________, Director   ____________________,
  Director

4

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CTI DIVERSIFIED HOLDINGS, INC.
  (Formerly Unique Bagel Co., Inc.)
  (A Development Stage Enterprise)
  (Unaudited)
  Statement of Stockholders' Deficiency
  From August 11, 1998 (Date of Inception) to June 30, 2003

|                                                                                                                                                                      |             |   |   |        |   |   |            |   |   |           |   |   |             |   |   |             |  |  |               |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | - | - | ------ | - | - | ---------- | - | - | --------- | - | - | ----------- | - | - | ----------- |  |  | ------------- | -
|                                                                                                                                                                      |             |   |   |        |   |   |            |   |   |           |   |   |             |   |   | Accumulated |  |  |               |  
|                                                                                                                                                                      |             |   |   |        |   |   |            |   |   |           |   |   |             |   |   | other       |  |  |               |  
|                                                                                                                                                                      |             |   |   |        |   |   |            |   |   | Compre-   |   |   |             |   |   | compre-     |  |  | Total         |  
|                                                                                                                                                                      |             |   |   |        |   |   | Additional |   |   | hensive   |   |   | Accumulated |   |   | hensive     |  |  | stockholders' |  
|                                                                                                                                                                      | Common      |   |   | Stock  |   |   | paid-in    |   |   | income    |   |   | earnings    |   |   | income      |  |  | equity        |  
|                                                                                                                                                                      | Shares      |   |   | Amount |   |   | capital    |   |   | (loss)    |   |   | (deficit)   |   |   | (loss)      |  |  | (deficiency)  |  
|                                                                                                                                                                      |             |   |   |        |   |   |            |   |   |           |   |   |             |   |   |             |  |  |               |  
|                                                                                                                                                                      |             |   |   |        |   |   |            |   |   |           |   |   |             |   |   |             |  |  |               |  
|                                                                                                                                                                      |             |   |   |        |   |   |            |   |   |           |   |   |             |   |   |             |  |  |               |  
|Shares issued to acquire 19% of New York Bagel Co.,
      Inc. and to pay organization cost of $125 on August 11, 1998 valued at par
      value of $0.0001 per share | 5,000,000   |   | $ | 500    |   | $ | 5,591      |   | $ | -         |   | $ | -           |   | $ | -           |  |  | 6,091         |  
|Issuance of 500,000 common shares in August 1998 at $0.01 per share                                                                                                   | 500,000     |   |   | 50     |   |   | 4,950      |   |   | -         |   |   | -           |   |   | -           |  |  | 5,000         |  
|                                                                                                                                                                      |             |   |   |        |   |   |            |   |   |           |   |   |             |   |   |             |  |  |               |  
|Balance, December 31, 1998                                                                                                                                            | 5,500,000   |   |   | 550    |   |   | 10,541     |   |   | -         |   |   | -           |   |   | -           |  |  | 11,091        |  
|Two for one stock split on March 31, 1999                                                                                                                             | 5,500,000   |   |   | 550    |   |   | (550       | ) |   | -         |   |   | -           |   |   | -           |  |  | -             |  
|Components of comprehensive income                                                                                                                                    |             |   |   |        |   |   |            |   |   |           |   |   |             |   |   |             |  |  |               |  
|- Net loss for the period                                                                                                                                             | -           |   |   | -      |   |   | -          |   |   | (2,994    | ) |   | (2,994      | ) |   | -           |  |  | (2,994        | )
|                                                                                                                                                                      |             |   |   |        |   |   |            |   |   |           |   |   |             |   |   |             |  |  |               |  
|Total comprehensive income (loss)                                                                                                                                     |             |   |   |        |   |   |            |   |   | (2,994    | ) |   |             |   |   |             |  |  |               |  
|                                                                                                                                                                      |             |   |   |        |   |   |            |   |   |           |   |   |             |   |   |             |  |  |               |  
|Balance, December 31, 1999                                                                                                                                            | 11,000,000  |   |   | 1,100  |   |   | 9,991      |   |   |           |   |   | (2,994      | ) |   | -           |  |  | 8,097         |  
|Two for one stock split on March 17, 2000                                                                                                                             | 11,000,000  |   |   | 1,100  |   |   | (1,100     | ) |   | -         |   |   | -           |   |   | -           |  |  | -             |  
|Cancellation of shares March 2000                                                                                                                                     | (15,000,000 | ) |   | (1,500 | ) |   | 1,500      |   |   | -         |   |   | -           |   |   | -           |  |  | -             |  
|Issuance of 20,000 common shares on August 11, 2000
      in consideration of directors                                                                               | 20,000      |   |   | 2      |   |   | -          |   |   | -         |   |   | -           |   |   | -           |  |  | 2             |  
|Stock dividend on December 12, 2000: 5.25 for one                                                                                                                     | 29,835,000  |   |   | 2,983  |   |   | (2,983     | ) |   | -         |   |   | -           |   |   | -           |  |  | -             |  
|Components of comprehensive income (loss)                                                                                                                             |             |   |   |        |   |   |            |   |   |           |   |   |             |   |   |             |  |  |               |  
|- Net loss for the period                                                                                                                                             | -           |   |   | -      |   |   | -          |   |   | (9,474    | ) |   | (9,474      | ) |   | -           |  |  | (9,474        | )
|                                                                                                                                                                      |             |   |   |        |   |   |            |   |   |           |   |   |             |   |   |             |  |  |               |  
|Total comprehensive income (loss)                                                                                                                                     |             |   |   |        |   |   |            |   |   | (9,474    | ) |   |             |   |   |             |  |  |               |  
|                                                                                                                                                                      |             |   |   |        |   |   |            |   |   |           |   |   |             |   |   |             |  |  |               |  
|Balance, December 31, 2000                                                                                                                                            | 36,855,000  |   |   | 3,685  |   |   | 7,408      |   |   |           |   |   | (12,468     | ) |   | -           |  |  | (1,375        | )
|Issuance of shares in consideration of legal services performed                                                                                                       | 5,000       |   |   | 1      |   |   | 9,999      |   |   | -         |   |   | -           |   |   | -           |  |  | 10,000        |  
|Cancellation of shares                                                                                                                                                | (26,355,000 | ) |   | (2,635 | ) |   | 2,635      |   |   | -         |   |   | -           |   |   | -           |  |  | -             |  
|Issuance of shares in exchange for 11,413,700 shares of common stock of
      Cobratech Industries Inc.                                                               | 5,999,591   |   |   | 600    |   |   | 1,686,297  |   |   | -         |   |   | -           |   |   | -           |  |  | 1,686,897     |  
|Conversion of promissory notes into common stock, effective June 29, 2001                                                                                             | 1,304,153   |   |   | 130    |   |   | 2,006,792  |   |   | -         |   |   | -           |   |   | -           |  |  | 2,006,922     |  
|Components of comprehensive income (loss)                                                                                                                             |             |   |   |        |   |   |            |   |   |           |   |   |             |   |   |             |  |  |               |  
|- Net loss for the period                                                                                                                                             | -           |   |   | -      |   |   | -          |   |   | (4,823,58 | ) |   | (4,823,584  | ) |   | -           |  |  | (4,823,584    | )
|                                                                                                                                                                      |             |   |   |        |   |   |            |   |   |           |   |   |             |   |   |             |  |  |               |  
|Total comprehensive income (loss)                                                                                                                                     |             |   |   |        |   |   |            |   |   | (4,823,58 | ) |   |             |   |   |             |  |  |               |  
|                                                                                                                                                                      |             |   |   |        |   |   |            |   |   |           |   |   |             |   |   |             |  |  |               |  
|Balance, December 31, 2001                                                                                                                                            | 17,808,744  |   |   | 1,781  |   |   | 3,713,131  |   |   |           |   |   | (4,836,052  | ) |   | -           |  |  | (1,121,140    | )

5

---

CTI DIVERSIFIED HOLDINGS, INC.
  (Formerly Unique Bagel Co., Inc.)
  (A Development Stage Enterprise)
  (Unaudited)
  Statement of Stockholders' Deficiency
  From August 11, 1998 (Date of Inception) to June 30, 2003

|                                                                           |            |  |        |  |            |  |            |   |             |   |             |   |               |  
|-------------------------------------------------------------------------- | ---------- |  | ------ |  | ---------- |  | ---------- | - | ----------- | - | ----------- | - | ------------- | -
|                                                                           |            |  |        |  |            |  |            |   |             |   | Accumulated |   |               |  
|                                                                           |            |  |        |  |            |  |            |   |             |   | other       |   |               |  
|                                                                           |            |  |        |  |            |  | Compre-    |   |             |   | compre-     |   | Total         |  
|                                                                           |            |  |        |  | Additional |  | hensive    |   | Accumulated |   | hensive     |   | stockholders' |  
|                                                                           | Common     |  | Stock  |  | paid-in    |  | income     |   | earnings    |   | income      |   | equity        |  
|                                                                           | Shares     |  | Amount |  | capital    |  | (loss)     |   | (deficit)   |   | (loss)      |   | (deficiency)  |  
|                                                                           |            |  |        |  |            |  |            |   |             |   |             |   |               |  
|Balance, December 31, 2001                                                 | 17,808,744 |  | 1,781  |  | 3,713,131  |  |            |   | (4,836,052  | ) | -           |   | (1,121,140    | )
|Stock based compensation                                                   | -          |  | -      |  | 33,000     |  | -          |   | -           |   | -           |   | 33,000        |  
|Shares issued on conversion of debt                                        | 1,020,879  |  | 102    |  | 257,715    |  | -          |   | -           |   | -           |   | 257,817       |  
|Shares allotted pursuant to the debt settlement agreement in December      | -          |  | -      |  | 1,016,872  |  | -          |   | -           |   | -           |   | 1,016,872     |  
|Shares issued in exchange for shares of Sentry                             | 500,000    |  | 50     |  | 109,950    |  | -          |   | -           |   | -           |   | 110,000       |  
|Shares issued in exchange for consulting services                          | 100,000    |  | 10     |  | 22,990     |  | -          |   | -           |   | -           |   | 23,000        |  
|Shares issued as the contingent consideration in connection with Cobratech | 181,397    |  | 19     |  | 48,591     |  | -          |   | -           |   | -           |   | 48,610        |  
|Forgiveness of debt                                                        | -          |  | -      |  | 212,054    |  | -          |   | -           |   | -           |   | 212,054       |  
|Components of comprehensive income (loss)                                  |            |  |        |  |            |  |            |   |             |   |             |   |               |  
|- Net Loss for the period                                                  | -          |  | -      |  | -          |  | (1,703,039 | ) | (1,703,039  | ) | -           |   | (1,703,039    | )
|- Foreign currency adjustment                                              | -          |  | -      |  | -          |  | 22,359     |   | -           |   | 22,359      |   | 22,359        |  
|Total comprehensive income (loss)                                          |            |  |        |  |            |  | (1,680,680 | ) |             |   |             |   |               |  
|Balance, December 31, 2002                                                 | 19,611,020 |  | 1,962  |  | 5,414,303  |  |            |   | (6,539,091  | ) | 22,359      |   | (1,100,467    | )
|Shares issued pursuant to debt settlement agreement                        | 172,355    |  | 17     |  | 34,508     |  |            |   | -           |   | -           |   | 34,525        |  
|Stock based compensation                                                   | -          |  | -      |  | 25,000     |  |            |   | -           |   | -           |   | 25,000        |  
|Warrants issued in conjunction with promissory notes                       | -          |  | -      |  | 104,236    |  | -          |   | -           |   | -           |   | 104,236       |  
|Components of comprehensive income (loss)                                  |            |  |        |  |            |  |            |   |             |   |             |   |               |  
|-Net Loss for the period                                                   | -          |  | -      |  | -          |  | (128,936   | ) | (128,936    | ) | -           |   | (128,936      | )
|-Foreign currency adjustment                                               | -          |  | -      |  | -          |  | (33,221    | ) | -           |   | (33,221     | ) | (33,221       | )
|Total comprehensive income (loss)                                          |            |  |        |  |            |  | (162,157   | ) |             |   |             |   |               |  
|Balance March 31, 2003                                                     | 19,783,375 |  | 1,979  |  | 5,578,047  |  |            |   | (6,668,027  | ) | (10,862     | ) | (1,098,863    | )

6

---

CTI DIVERSIFIED HOLDINGS, INC.
  (Formerly Unique Bagel Co., Inc.)
  (A Development Stage Enterprise)
  (Unaudited)
  Statement of Stockholders' Deficiency
  From August 11, 1998 (Date of Inception) to June 30, 2003

|                                                     |            |  |        |  |            |  |          |   |             |   | Accumulated |   |               |  
|---------------------------------------------------- | ---------- |  | ------ |  | ---------- |  | -------- | - | ----------- | - | ----------- | - | ------------- | -
|                                                     |            |  |        |  |            |  |          |   |             |   | other       |   |               |  
|                                                     |            |  |        |  |            |  | Compre-  |   |             |   | compre-     |   | Total         |  
|                                                     |            |  |        |  | Additional |  | hensive  |   | Accumulated |   | hensive     |   | stockholders' |  
|                                                     | Common     |  | Stock  |  | paid-in    |  | income   |   | earnings    |   | income      |   | equity        |  
|                                                     | Shares     |  | Amount |  | capital    |  | (loss)   |   | (deficit)   |   | (loss)      |   | (deficiency)  |  
|                                                     |            |  |        |  |            |  |          |   |             |   |             |   |               |  
|Balance, March 31, 2003                              | 19,783,375 |  | 1,979  |  | 5,578,047  |  |          |   | (6,668,027  | ) | (10,862     | ) | (1,098,863    | )
|Shares issued pursuant to debt settlement agreements | 2,033,746  |  | 203    |  | 1,016,670  |  | -        |   | -           |   | -           |   | 1,016,873     |  
|Components of comprehensive income (loss)            |            |  |        |  |            |  |          |   |             |   |             |   |               |  
|-Net Loss for the period                             | -          |  | -      |  | -          |  | (339,345 | ) | (339,345    | ) | -           |   | (339,345      | )
|-Foreign currency adjustment                         | -          |  | -      |  | -          |  | 161,833  |   | -           |   | 161,833     |   | 161,833       |  
|Total comprehensive income (loss)                    |            |  |        |  |            |  | (177,512 | ) |             |   |             |   |               |  
|Balance June 30, 2003                                | 21,817,121 |  | 2,182  |  | 6,594,717  |  |          |   | (7,007,372  | ) | 150,971     |   | (259,502      | )

7

---

CTI DIVERSIFIED HOLDINGS, INC. 
  (Formerly Unique Bagel Co., Inc.)
  (A Development Stage Enterprise)
  (Unaudited) 
  Consolidated statement of cash flows
  (Expressed in U.S. Dollars)

|                                                                    |   |                 |   |   |                  |   |   |                  |  
|------------------------------------------------------------------- | - | --------------- | - | - | ---------------- | - | - | ---------------- | -
|                                                                    |   | August 31, 1998 |   |   |                  |   |   |                  |  
|                                                                    |   | (inception) to  |   |   |                  |   |   |                  |  
|                                                                    |   | June 30, 2003   |   |   | Six Months ended |   |   | Six Months ended |  
|                                                                    |   | (cumulative)    |   |   | June 30, 2003    |   |   | June 30, 2002    |  
|                                                                    |   |                 |   |   |                  |   |   |                  |  
|Cash flows from operating activities                                |   |                 |   |   |                  |   |   |                  |  
|Net loss                                                            | $ | (6,878,436      | ) | $ | (339,345         | ) | $ | (1,400,812       | )
|Adjustments to reconcile
      net income to net cash provided by   |   |                 |   |   |                  |   |   |                  |  
|operating
      activities:                                         |   |                 |   |   |                  |   |   |                  |  
|Depreciation                                                        |   | 24,159          |   |   | 1,176            |   |   | 6,202            |  
|Stock-based
      compensation                                      |   | 58,000          |   |   | 25,000           |   |   | -                |  
|Impairment
      of goodwill                                        |   | 3,290,217       |   |   | -                |   |   | 934,197          |  
|Amortization
      of deferred charges and discount on promissory   |   |                 |   |   |                  |   |   |                  |  
|notes                                                               |   | 2,998           |   |   | 2,526            |   |   | -                |  
|Impairment
      of investments                                     |   | 560,850         |   |   | -                |   |   | -                |  
|Loss
      on disposition of assets                                 |   | 40,183          |   |   | -                |   |   | -                |  
|Loss
      on disposition of subsidiaries                           |   | 1,323,180       |   |   | -                |   |   | -                |  
|Forgiveness
      of debt                                           |   | (15,617         | ) |   | -                |   |   | -                |  
|Shares
      issued for service                                     |   | 33,000          |   |   | -                |   |   | -                |  
|                                                                    |   |                 |   |   |                  |   |   |                  |  
|                                                                    |   | (1,561,466      | ) |   | (310,643         | ) |   | (460,413         | )
|Change in assets and
      liabilities:                             |   |                 |   |   |                  |   |   |                  |  
|Decrease
      (increase) in prepaid expenses                       |   | -               |   |   | -                |   |   | 173              |  
|Increase
      (decrease) in accounts payable & accrued liabilities |   | 1,191,439       |   |   | 617,191          |   |   | (13,027          | )
|Net
      liabilities acquired on acquisition of subsidiary         |   | (779,625        | ) |   | -                |   |   | -                |  
|                                                                    |   |                 |   |   |                  |   |   |                  |  
|                                                                    |   | (1,149,652      | ) |   | 306,548          |   |   | (225,455         | )
|                                                                    |   |                 |   |   |                  |   |   |                  |  
|Cash flows from (used in) financing activities                      |   |                 |   |   |                  |   |   |                  |  
|Issuance of promissory
      notes                                  |   | 3,626,960       |   |   | 1,413,680        |   |   | -                |  
|Increase (decrease) in
      notes payable                          |   | 87,800          |   |   | (330,541         | ) |   | 323,511          |  
|Increase (decrease) in
      due to shareholders                    |   | 712,057         |   |   | (31,299          | ) |   | 55,864           |  
|                                                                    |   |                 |   |   |                  |   |   |                  |  
|                                                                    |   | 4,426,817       |   |   | 1,051,840        |   |   | 379,375          |  
|                                                                    |   |                 |   |   |                  |   |   |                  |  
|Cash flows (used in) investing activities                           |   |                 |   |   |                  |   |   |                  |  
|Capital expenditures                                                |   | (74,161         | ) |   | -                |   |   | (4,473           | )
|Proceeds on sale of New
      York Bagel Inc.                       |   | 6,066           |   |   | -                |   |   | -                |  
|Investment in or advances
      to foreign subsidiaries             |   | (1,329,057      | ) |   | -                |   |   | -                |  
|Investment in or advances
      to Sentry Telecom Systems Inc.      |   | (567,449        | ) |   | -                |   |   | (33,226          | )
|Investment in notes receivable                                      |   | (1,301,779      | ) |   | (1,301,779       | ) |   | -                |  
|Deposit on Synenco Energy
      Inc. share purchase                 |   | (173,048        | ) |   | (173,048         | ) |   | -                |  
|Proceeds on sales of assets                                         |   | 24,886          |   |   | -                |   |   | -                |  
|                                                                    |   |                 |   |   |                  |   |   |                  |  
|                                                                    |   | (3,414,542      | ) |   | (1,474,827       | ) |   | (37,699          | )
|                                                                    |   |                 |   |   |                  |   |   |                  |  
|Effect of exchange rate changes                                     |   | 150,972         |   |   | 128,612          |   |   | -                |  
|Increase in cash and cash equivalents                               |   | 13,595          |   |   | 12,173           |   |   | 116,221          |  
|Cash and cash equivalents, beginning of period                      |   | -               |   |   | 1,422            |   |   | 949              |  
|                                                                    |   |                 |   |   |                  |   |   |                  |  
|Cash and cash equivalents, end of period                            |   | 13,595          |   | $ | 13,595           |   | $ | 117,170          |  
|                                                                    |   |                 |   |   |                  |   |   |                  |  
|Supplementary disclosure - non-cash transactions                    |   |                 |   |   |                  |   |   |                  |  
|Cash flows from (used in) financing activities                      |   |                 |   |   |                  |   |   |                  |  
|Forgiveness of debt -
      related party                           | $ | (212,054        | ) | $ | -                |   | $ | -                |  
|Conversion of notes payable,
      amounts due to shareholders and  |   |                 |   |   |                  |   |   |                  |  
|account payable to common
      stock                               |   | 4,333,009       |   |   | 1,051,398        |   |   | -                |  
|Shares allotted for debt
      settlement                           |   | 1,016,872       |   |   | -                |   |   | -                |  
|Issuance of shares on
      acquisition of Subsidiary               |   | 1,851,598       |   |   | -                |   |   | -                |  
|                                                                    |   |                 |   |   |                  |   |   |                  |  
|                                                                    |   | 5,972,552       |   |   | 1,051,398        |   |   | -                |  
|                                                                    |   |                 |   |   |                  |   |   |                  |  
|Cash flows (used in) investing activities                           |   |                 |   |   |                  |   |   |                  |  
|Investment in subsidiary                                            |   | (1,851,598      | ) |   | -                |   |   | -                |  
|                                                                    |   |                 |   |   |                  |   |   |                  |  

8

---

CTI DIVERSIFIED HOLDINGS, INC. 
  (Formerly Unique Bagel Co., Inc.)
  (A Development Stage Enterprise)
  (Unaudited) 
  Notes to the Consolidated Financial Statements 
  June 30, 2003
  (Expressed in U.S. Dollars)

---

|1. | Basis of Presentation
        The accompanying unaudited consolidated financial statements have
          been prepared in accordance with generally accepted accounting principles
          for interim financial information and with the instructions to Form
          10-QSB and Article 10 of Regulation S-X. Accordingly, they do not include
          all of the information and notes required by generally accepted accounting
          principles for complete financial statements. The preparation of financial
          statements in conformity with accounting principles generally accepted
          in the United States requires the Company's management to make estimates
          and assumptions that affect the reported amounts of assets and liabilities
          and disclosure of contingent assets and liabilities at the date of the
          financial statements as well as the reported amounts of revenues and
          expenses during the reporting period. In the opinion of management,
          the accompanying financial statements includes all adjustments which
          are normal, recurring and necessary in order to make the interim financial
          statements not misleading. Operating results for interim periods are
          not necessarily indicative of the results that may be expected for the
          year.
        For further information, refer to the audited financial statements
          and notes thereto included in the CTI annual report on Form 10-KSB for
          the fiscal year ended December 31, 2002.
        The accompanying unaudited consolidated financial statements have
          been prepared on a going concern basis, which contemplates the realization
          of assets and the discharge of liabilities in the normal course of business
          for the foreseeable future. The Company has no current source of revenue.
          The future of the Company as a "going concern" is highly dependent upon
          the Company's ability to attract new equity or debt financing. The Company
          currently has no revenue from operations, is in a start-up phase with
          its existing assets and has no significant assets, tangible or intangible.
          There can be no assurance that the Company will generate revenues in
          the future, or that it will be able to operate profitably in the future,
          if at all. The Company has incurred significant net losses in each fiscal
          year since inception of operations. In order to continue with it's revised
          business plan, the Company will require additional equity or debt financing
          to fund its continued operations. There can be no assurance the Company
          will be successful in obtaining additional financing on favorable terms,
          it at all.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|2. | Summary of significant accounting policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

9

---

|CTI DIVERSIFIED HOLDINGS, INC.                
|----------------------------------------------
|(Formerly Unique Bagel Co., Inc.)             
|(A Development Stage Enterprise)              
|(Unaudited)                                   
|Notes to the Consolidated Financial Statements
|June 30, 2003                                 
|(Expressed in U.S. Dollars)                   
|                                              

|2. | Summary of significant accounting policies,
      continued
|-- | -----------------------------------------------------------
|   |                                                            
|   | (c)                                                        
|   |                                                            
|   | (d)                                                        
|   |                                                            
|   | (e)                                                        
|   |                                                            
|   | (f)                                                        
|   |                                                            
|   | (g)                                                        

10

---

|CTI DIVERSIFIED HOLDINGS, INC.                
|----------------------------------------------
|(Formerly Unique Bagel Co., Inc.)             
|(A Development Stage Enterprise)              
|(Unaudited)                                   
|Notes to the Consolidated Financial Statements
|June 30, 2003                                 
|(Expressed in U.S. Dollars)                   
|                                              

|2. | Summary of significant accounting policies,
      continued
|-- | -----------------------------------------------------------
|   |                                                            
|   | (h)                                                        
|   |                                                            
|   | (i)                                                        
|   |                                                            
|   | (j)                                                        
|   |                                                            
|   | (k)                                                        
|   |                                                            
|   | (l)                                                        
|   |                                                            
|   | (m)                                                        

11

---

|CTI DIVERSIFIED HOLDINGS, INC.                
|----------------------------------------------
|(Formerly Unique Bagel Co., Inc.)             
|(A Development Stage Enterprise)              
|(Unaudited)                                   
|Notes to the Consolidated Financial Statements
|June 30, 2003                                 
|(Expressed in U.S. Dollars)                   
|                                              

|3. | Notes receivable
      On June 9, 2003, the Company signed a Share Purchase
        and Subscription Agreement (the Agreement) (that formalized
        a February 6, 2003 letter of intent) to purchase a 51% interest in Flowstar
        Technologies Inc. ("Flowstar") and Flowray Inc. ("Flowray"), two companies
        located in Alberta, Canada in exchange for 750,000 shares of common stock
        of the Company, a cash payment of CDN$1,750,000, advances by way of promissory
        notes bearing interest at 5% per annum and secured by a general security
        agreement totaling $1,500,000 CDN, and such number of additional common
        shares of the Company equal in value to CDN$500,000 calculated at the
        prior two months average market price after a discount of 20%. The acquisition
        will complete in stages, with each stage being subject to fulfillment
        of certain closing conditions. The first closing of the transactions contemplated
        by the Agreement will not occur until all closing conditions have been
        fulfilled or waived by the parties. As of August 14, 2003, not all conditions
        have been met and so the parties have extended the deadlines of some of
        the closing conditions in the Agreement to September 15, 2003.
      The notes receivable consist of advances and accrued
        interest made to Flowray and Flowstar of $1,218,663 and acquisition related
        expenses of $10,489. The advances bear interest at 5% per annum, and are
        secured by a general security agreement covering the assets of Flowstar
        and Flowray. 25% of the advances are due on each of March 30, 2004, September
        30, 2004, and March 30, 2005, with the balance plus accrued interest due
        on September 30, 2005.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|4. | Fixed assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

| |                    |   |          |  |   |               |  |   |          |  |   |                   | 
| | ------------------ | - | -------- |  | - | ------------- |  | - | -------- |  | - | ----------------- | 
| |                    |   |          |  |   | June 30, 2003 |  |   |          |  |   | December 31, 2002 | 
| |                    |   |          |  |   |               |  |   |          |  |   |                   | 
| |                    |   |          |  |   | Accumulated   |  |   | Net book |  |   |                   | 
| |                    |   | **Cost** |  |   | depreciation  |  |   | value    |  |   | Net book value    | 
| |                    |   |          |  |   |               |  |   |          |  |   |                   | 
| | Computer equipment | $ | 16,720   |  | $ | 10,565        |  | $ | 6,155    |  | $ | 7,193             | 
| |                    |   |          |  |   |               |  |   |          |  |   |                   | 
| |                    | $ | 16,720   |  | $ | 10,565        |  | $ | 6,155    |  |   | 7,193             | 
| |                    |   |          |  |   |               |  |   |          |  |   |                   | 
| |                    |   |          |  |   |               |  |   |          |  |   |                   | 

|5. | Notes payable
      The notes payable bears interest at the Bank of Montreal
        prime rate plus 5% per annum, compounded monthly. The note is secured
        by certain assets of Sentry. On January 15, 2003, two shareholders of
        the Company personally guaranteed payment of $100,000 of the note. As
        of May 2003, the Company is in default of the repayment agreement. As
        at June 30, 2003, the Bank of Montreal prime rate was 4.75%.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|6. | Due to shareholders
      The amounts due to shareholders consist of notes payable,
        which bear interest at rates ranging from 7% to prime plus 5% and expenses
        paid by shareholders on behalf of the Company.                                                                                                                                                                                                                                            

12

---

|CTI DIVERSIFIED HOLDINGS, INC.                
|----------------------------------------------
|(Formerly Unique Bagel Co., Inc.)             
|(A Development Stage Enterprise)              
|(Unaudited)                                   
|Notes to the Consolidated Financial Statements
|June 30, 2003                                 
|(Expressed in U.S. Dollars)                   
|                                              

|7. | Long term debt
      The notes payable are due to AHC Holdings Inc., ("AHC")
        a private company beneficially owned and controlled by a Director of the
        Company. The loan has been structured as a borrowing facility, is unsecured
        and bears interest at 15% per annum. All advances are due on December
        31, 2005. The Company granted AHC warrants to purchase 1,000,000 shares
        of common stock at a price of $0.15 per share in connection with the loan
        (see note 8(b)).
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|8. | Stockholders' Equity (Deficiency)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

| |  | Number of warrants | Exercise price | Expiry date  
| |  | ------------------ | -------------- | -------------
| |  |                    |                |              
| |  | 1,000,000          | $ 0.15         | May 2005     
| |  | 1,500,000          | $ 0.15         | March 2006   
| |  | 300,000            | $ 0.25         | December 2006
| |  |                    |                |              
| |  | 2,800,000          |                |              
| |  |                    |                |              

13

---

|CTI DIVERSIFIED HOLDINGS, INC.                
|----------------------------------------------
|(Formerly Unique Bagel Co., Inc.)             
|(A Development Stage Enterprise)              
|(Unaudited)                                   
|Notes to the Consolidated Financial Statements
|June 30, 2003                                 
|(Expressed in U.S. Dollars)                   
|                                              

|**9.** | Commitments
      On January 27, 2003, the Company entered into an agreement
        with PGN Holdings Inc., under which PGN would lend CTI up to $250,000
        US dollars. The loan has been structured as a borrowing facility, is unsecured
        and all advances bear interest at 8% per annum. PGN has the right to convert
        all or any portion of the principal sum and accrued and unpaid interest
        outstanding into fully paid and non-assessable common shares of CTI on
        the basis of one share for each US $0.50 of principal and interest outstanding.
        All advances, regardless of the date advanced, are due on January 1, 2004.
        As of May 9, 2003, the Company has not borrowed any funds under this facility.
      On March 28, 2003, the Company entered into an agreement
        with the Howard Group under which the Howard Group would provide an investor
        and financial relations program. In consideration for the full and adequate
        provision of these services, the Company had agreed to pay the Howard
        Group $5,000 in Canadian Funds per month to February 2004, and had agreed
        to grant an option to acquire 200,000 shares of the Company at an exercise
        price of $0.20 US dollars per share expiring three years from the date
        of issue. As of June 30, 2003 this option has not been granted.
      On June 9, 2003, the Company signed an option agreement
        allowing the Company to purchase one million common shares of Synenco
        Energy Inc. (Synenco), a company involved in the potential
        development of an oil sands lease in the Athabasca Oil Sands area of northern
        Alberta, Canada. Under the terms of the option, the Company can acquire
        the Synenco shares upon payment in stages of five million Canadian dollars
        (approximately $3,550,000) by way of $3,800,000 Canadian ($2,698,000)
        in cash and $1,200,000 Canadian ($852,000) in Company stock at a price
        of $0.40 Canadian per share (approximately $0.284 per share) commencing
        March 31, 2004. To date, the Company has paid $254,000 Canadian dollars
        ($180,340) as a non-refundable deposit toward the purchase of the Synenco
        shares.
      On July 8, 2003, the Company entered into a one year
        agreement with Business Consulting Group Unlimited (BCG) under
        which BCG would assist in strategic planning, developing a comprehensive
        shareholder management program, and identify and evaluate potential joint
        venture or strategic alliance targets. In consideration for these services,
        BCG is to be paid $6,000 per month.
      On May __, 2003, the Company entered into consulting
        agreements with three companies, each controlled by or affiliated with
        a Company director, whereby the consulting companies will provide ongoing
        business and advisory services to the Company effective from April 1,
        2003. In exchange, the Company will pay the companies monthly consulting
        fees of $5,000, $5,000 and $2,500 plus sales tax. These consulting fees
        will be paid in common shares of the Company. These shares to be issued
        in settlement will be valued at $0.20 per share, being the market price
        of the common stock at the time the consulting contracts were agreed upon.
        As of June 30, 2003, no shares have yet been issued on these consulting
        contracts.
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

14

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|CTI DIVERSIFIED HOLDINGS, INC.                
|----------------------------------------------
|(Formerly Unique Bagel Co., Inc.)             
|(A Development Stage Enterprise)              
|(Unaudited)                                   
|Notes to the Consolidated Financial Statements
|June 30, 2003                                 
|(Expressed in U.S. Dollars)                   
|                                              

|10. | Subsequent Events
      On July 8, 2003, the company entered into a consulting
        agreement with Business Consulting Group Unlimited, as described in Note
        9.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                           
|11. | Related Party Transactions                                                                                                                                                
|    |                                                                                                                                                                           
|    | (a)                                                                                                                                                                       
|    |                                                                                                                                                                           

| |                                                                                                                                                                          |                                                                   |               |  |                  | 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------- | ------------- |  | ---------------- | 
| |                                                                                                                                                                          |                                                                   | Six month     |  | Six month period | 
| |                                                                                                                                                                          |                                                                   | period ended  |  | ended,           | 
| |                                                                                                                                                                          |                                                                   | June 30, 2003 |  | June 30, 2002    | 
| |                                                                                                                                                                          |                                                                   |               |  |                  | 
| |                                                                                                                                                                          |                                                                   |               |  |                  | 
| |                                                                                                                                                                          | Consulting fees paid or accrued to directors of the
      Company | 56,359        |  | 25,056           | 
| |                                                                                                                                                                          | (see Note 9 above)                                                |               |  |                  | 
| |                                                                                                                                                                          | Interest paid to shareholders and related parties                 | 96,061        |  | 28,547           | 
| |                                                                                                                                                                          |                                                                   |               |  |                  | 
| |                                                                                                                                                                          |                                                                   |               |  |                  | 
| | (b)                                                                                                                                                                      | See notes 7 and 8(b).                                            
| |                                                                                                                                                                          |                                                                  
| | Management is of the opinion that the
        terms and conditions of the above noted related party transactions are
        consistent with standard business practice.

15

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ITEM 2.       MANAGEMENTS
  PLAN OF OPERATIONS

CTI Diversified Holdings, Inc. (formerly Unique Bagel Co.,
  Inc.) was incorporated under the laws of the state of Delaware on August 11,
  1998. On January 10, 2001 we changed our name to CTI Diversified Holdings, Inc.
  (referred to herein as we, CTI, the Company
  or our Company).

Subsequent to ceasing our primary operations in the third
  quarter of 2002, which we conducted through our 90% controlled subsidiary Sentry
  Telecom Systems Inc., we undertook a process of analyzing our future strategic
  direction and business plan for our Company. It became apparent that capital
  markets were no longer receptive to emerging high technology, telecommunications
  companies such as Sentry, and we began to revise our business plan to better
  position our company to take advantage of positive trends in the oil and gas
  industry.

Prior to the end of January 2003, we were successful in converting
  approximately $1,309,000 of our outstanding debt to equity, secured new financing
  of approximately $1,400,000 through an unsecured loan (See Part II Item II),
  and adopted a new business plan. Our new mandate is to realize enhanced capital
  appreciation for our stockholders, by providing our expertise to emerging companies
  offering timely product solutions and/or strategic investment opportunities
  in the petroleum production and service industries.

Although there can be no assurance of future success, we intend
  to carry out our new mandate by:

| | 1. | Investing primarily in companies
        or products where early stage product development has been completed.
        Early stage product development generally means any basic research surrounding
        a potential product or service and the development of working prototypes.
        This will enable us to minimize risks associated with early stage start
        ups, reduce both the time frame and amount of capital required for commercialization
        of proposed products, and thus maximize any potential return to our stockholders.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | 2. | Generally acquire a controlling
        or majority equity position to fully participate in the target companys
        strategic business plan and corporate governance.                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | 3. | Contribute our business
        expertise to assist in the further development of the target companys
        business and operations. We believe that a combination of our skills in
        conjunction with the targets skills will maximize the probability
        of potential success.                                                                                                                                                                                                                                                               

We currently have no revenue from operations, we are in a
  start-up phase with our existing assets and we have no significant assets, tangible
  or intangible. There can be no assurance that we will generate revenues in the
  future, or that we will be able to operate profitably in the future, if at all.
  We have incurred significant net losses in each fiscal year since inception
  of our operations.

In order to continue with our revised business plan, we will
  require additional equity or debt funding within approximately six months if
  we do not complete any acquisitions, and we may require funding sooner if we
  identify and complete an acquisition or investment. There can be no assurance
  we will be successful in obtaining additional financing on favorable terms,
  if at all. We have limited funds to maintain our own ongoing expenses, and we
  currently have significant current liabilities that will need to be paid in
  the ordinary course of business. Without an infusion of new capital, the Company
  will not be able to maintain current operations beyond these periods.

We are also continuing to experience negative cash flows from
  operations. We will likely be required to place additional securities in new
  financings to make up for such negative cash flow. Such transactions may have
  a negative or depressing effect on the trading prices for our publicly-traded
  common stock.

Rapid growth often places considerable operational, managerial
  and financial strain on a company. To ensure the success of our new business
  plan, we must proactively adhere to the following:

16

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|1 | . | Improve, upgrade and expand our business infrastructure                                                                                                     
|- | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |   |                                                                                                                                                             
|2 | . | Hire, train and retain key management for our
      company and ensure any target company does the same                                                     
|  |   |                                                                                                                                                             
|3 | . | Advance the commercialization
        development programs for target companies so they become cash flow positive
        as soon as is practically possible
|  |   |                                                                                                                                                             
|4 | . | Maintain adequate financial resources                                                                                                                       

Our Company's future opportunities for success greatly depends
  on the continued employment of and performance by senior management, including
  the successful hiring of a permanent Chief Executive Officer experienced in
  the oil and gas industry, and any applicable key personnel employed by potential
  target companies. We would be materially adversely affected if one or more of
  the senior management team do not continue to perform in their present positions,
  if we are unable to hire an experienced President and CEO, or if we or potential
  targets are unable to hire and train a sufficient number of qualified management,
  professional, technical and regulatory personnel.

Management Changes

On February 28, 2003, Mr. Donald E. Farnell resigned as our
  acting Chief Financial Officer. On March 5, 2003, Mr. Alfred Comeau and Mr.
  Terry Mereniuk were appointed to our Board of Directors. On March 31, 2003,
  Mr. Farnell resigned his positions as Director, Chairman, President and CEO.
  On April 9, 2003, Mr. John Anderson, a Director of our Company, was appointed
  interim President and CEO, replacing Mr. Farnell. Mr. Terry Mereniuk was appointed
  Chief Financial Officer. On April 24, 2003, Mr. Anderson was appointed Secretary/Treasurer.

Proposed Acquisition

For purposes of this foregoing discussion regarding a proposed
  acquisition, we are assuming a currency conversion rate of 1 Canadian Dollar
  being equivalent to 0.71 US Dollar. This is the approximate exchange rate as
  of the date of this report.

On March 27, 2003 we announced our intention to proceed with
  our first acquisition. We entered into a Memorandum of Agreement dated March
  27, 2003 with Flowray Inc. ("Flowray") and Flowstar Technologies Inc. ("Flowstar")
  under which we have advanced $1,790,000 Canadian dollars or approximately $1,270,000
  by way of a loan to Flowray and Flowstar for operating purposes. Flowray and
  Flowstar, as borrowers, have provided our Company with a promissory note for
  each advance. The borrowers have agreed to pay us interest on the promissory
  notes at the rate of 5% per annum, calculated monthly on the last day of each
  month, not in advance, from the date of each promissory note on the outstanding
  balance. The promissory notes are due as follows: 25% of the outstanding balance
  of the promissory notes on March 30, 2004, a further 25% on September 30, 2004,
  a further 25% on March 30, 2005, and the balance together with all accrued interest
  on September 30, 2005.

As security for the repayment of the promissory notes, Flowray
  and Flowstar have granted us a security interest in all of their present and
  after-acquired personal property. The President, director and a shareholder
  of each of Flowray and Flowstar, has agreed to postpone his rights as holder
  of security interests and security agreements on the personal property of the
  borrowers to all rights and security interests of the Company. Notwithstanding
  the postponement, he is entitled to repayment of shareholders loans up to $65,032.70
  Canadian dollars (approximately $46,000) advanced previously to the borrowers,
  and reimbursement from the borrowers of expenses incurred in the ordinary course
  of business.

If we close this intended acquisition, $682,000 of the existing
  $1,270,000 loan to Flowray and Flowstar will remain as a loan. The balance of
  the loan, or $588,000, will be applied to the purchase price for the acquisition
  of Flowray shares. In addition to the loan of $682,000, we have agreed to increase
  the loan by an additional $383,000, for a total loan of $1,065,000 or $1,500,000
  Canadian dollars. The loan will be secured by the general security agreement
  already signed by the borrowers and will bear interest at 5% per annum. The
  loan may be repaid depending upon the cash flow of Flowray and Flowstar and
  at the discretion of the boards of directors of the borrowers.

17

---

Business of Flowstar and Flowray.

Flowray and Flowstar are private companies incorporated in
  Alberta, Canada. Since inception, Flowray has been developing a new system for
  measuring the flow of gas in upstream petroleum production applications. This
  system is known as the Digital Chart Recorder or DCR-900. The DCR-900
  system consists of a turbine based flow measurement signal generating device,
  temperature and pressure probes and a flow computer, which performs all of the
  flow calculations. This system has recently received approval from the Canadian
  Standards Association (CSA) and has received independent verification of accuracy
  from Southwest Research Institute in Houston Texas.

The companies are currently in the process of field-testing
  the product. 25 DCR-900 units have recently been installed in customer applications
  for testing in western Canada. 12 additional installations are planned in the
  United States by June 30, 2003. There have been no commercial sales of the product
  as of the date hereof. The companies anticipate that they will be in a position
  to generate commercial sales in the next several months. Flowstar has secured
  the right to manufacture, market and distribute the products that have been
  developed by Flowray, in exchange for a 10% royalty on sales. Flowstar also
  represents and distributes independent third party products, and is positioning
  itself to be a leading supplier of flow measurement equipment to the petroleum
  industry.

Flowray and Flowstar currently have no significant tangible
  assets. The intellectual property assets of Flowray include a US provisional
  patent application filed on or about March 3, 2003 for the technology used in
  the DCR-900 system. Flowray also has an exclusive worldwide marketing agreement
  with an unrelated party for a gas turbine under a private label arrangement
  with Flowstar. Flowray also holds the intellectual property for liquid based
  totalizers, burner igniters, and windows based gas flow calculation software,
  all of which Flowstar markets. Flowstar also markets a line of liquid turbines
  for which there is no intellectual property. The patents expired long ago.

Flowray has given Cal-Scan Services Ltd. ("Cal-Scan"), a private
  Canadian company, a right of first refusal to engineer, supply or manufacture
  the DCR-900 product according to Flowray's specifications. One of the shareholders
  of Flowray and Flowstar is also a principal of Cal-Scan. Cal-Scan is also the
  owner of a trade secret, which is incorporated in the design of Flowray's DCR-900
  system. For each DCR-900 unit purchased from Cal-Scan, Flowray has agreed to
  pay Cal-Scan a $200 Canadian dollar (approximately $140) fee for use of the
  trade secret. Details of Cal-Scan's trade secret will be provided to a mutually
  agreeable trust agent, to be held in escrow and not disclosed to Flowray, except
  if any of the following events occur:

| | a) | Cal-Scan is declared bankrupt;                                                                                                                                                                                                                                                           
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) | Cal-Scan refuses to perform
        any manufacturing or engineering of the DCR-900 product and refuses to
        allow a third party or Flowray to manufacture the produce or refuses to
        supervise a third party or Flowray to continue the engineering of the
        product.

Flowray has also granted Cal-Scan an irrevocable, exclusive
  license to use Flowray's technology related to differential pressure orifice
  plate system flow measurement, in oil field production well testing. Cal-Scan's
  license will permit it to manufacture, market, and sell flow measurement products,
  or sub-license or assign these rights, in markets other than turbine based flow
  measurement. The term of Cal-Scan's license will continue for the life of Flowrays
  patent. If Flowray fails to purchase at least 100 units within the first two
  years from January 1, 2003, 200 units in year three and 300 per year thereafter,
  then Cal-Scan's license to use Flowray's technology will be extended to its
  entire subject matter without any restriction on the market. If Flowray is declared
  bankrupt, Flowray has agreed to assign to Cal-Scan all its rights to the flow
  measurement technology, including patents and patent applications. Flowray also
  granted Cal-Scan a distributorship for the DCR-900 product. Any cost savings
  resulting from revisions to the product will be split equally between Flowray
  and Cal-Scan.

Details of intended acquisition of up to 51% of Flowray
  and Flowstar.

Under a letter of intent dated February 6, 2003, and a formal
  purchase agreement dated June 9, 2003, we have agreed to acquire up to 51% of
  the issued and outstanding share capital of both Flowray and Flowstar. It is
  intended this will be accomplished by way of transfer of previously issued shares
  from the current shareholders of the companies and by the purchase of shares
  from treasury of Flowray. The consideration we are to pay pursuant to the acquisition
  includes:

18

---

|1 | . | the issuance to the shareholders of Flowstar
      of an aggregate of 750,000 shares of our common stock at a deemed price
      of $0.13 per share in exchange for the transfer of 51% of the issued shares
      of Flowstar;                                                                                                
|- | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |   |                                                                                                                                                                                                                                                                                                                                
|2 | . | the payment of an aggregate
        of $750,000 Canadian dollars or approximately $532,000, to Flowray in
        consideration of the issuance of treasury shares to the Company;                                                                                                                                             
|  |   |                                                                                                                                                                                                                                                                                                                                
|3 | . | the payment of an aggregate
        of $1,000,000 Canadian dollars or approximately $710,000 to the shareholders
        of Flowray in consideration of the transfer of certain of their shares
        of Flowray; and                                                                                                        
|  |   |                                                                                                                                                                                                                                                                                                                                
|4 | . | the issuance to the shareholders
        of Flowray and Flowstar of such number of additional shares of common
        stock of the Company equal in value to $500,000 Canadian dollars or $355,000,
        calculated at the average market price for two months prior to the date
        of issuance and discounted by 20%.

Two shareholders each hold 50% of the current issued share
  capital of Flowray and Flowstar. The acquisition of 51% of Flowray and Flowstar
  may complete in stages. The first closing of the transactions contemplated by
  the purchase agreement will not occur until all closing conditions to that date
  have been fulfilled or waived by the parties. We will make the cash payments
  in instalments that are required to be paid on or before certain deadlines over
  the period ending January 15, 2004. The parties have agreed to extend the deadlines
  for the instalments called for in the original purchase agreement. We will also
  issue the first allotment of 750,000 shares on the first closing date. The second
  allotment of shares worth $355,000 is due on or before January 15, 2004. See
  Liquidity and Capital Resources in this Section for our planned
  payments for this acquisition.

We have agreed that all of our common stock to be issued to
  the shareholders of Flowray and Flowstar are to be registered or qualified for
  sale under applicable securities laws within 120 days of the date of issuance.

On the first closing date, the board of directors of each
  of Flowray and Flowstar will be comprised of three directors, two of whom will
  be nominated by our Company and one of whom will be nominated by the two existing
  shareholders.

Upon our acquisition of 51% of the issued shares of Flowray
  and Flowstar, we will have the option to purchase the remaining 49% of the issued
  shares of Flowray or Flowstar, or both, at the fair market value based on a
  valuation prepared by an independent business valuator. Our option to purchase
  the remaining 49% may be exercised at any time between August 6, 2005 and February
  6, 2006. If the existing shareholders of Flowstar and Flowray receive an offer
  from a third party to purchase their remaining 49% interest, we will have the
  right of first refusal to purchase the interest on the same terms as the third
  party offer.

Plan of Operation Overview

The following discussion of the plan of operation, financial
  condition, results of operations, cash flows and changes in financial position
  of our Company should be read in conjunction with our most recent financial
  statements and notes appearing elsewhere in this Form 10-QSB; and our 10-KSB
  filed on May 16, 2003.

We have not generated any revenues from products, services
  or operations since the inception of our company. As such, we are including
  herein a discussion of our plan of operation for the next 12 months for our
  revised business plan.

In addition, though not required for regulatory purposes,
  we are also including some additional summary analysis and information regarding
  our financial condition, liquidity and capital resources. This analysis should
  be read jointly with the financial statements, related notes, and the cautionary
  statement regarding forward-looking statements, which appear elsewhere in this
  filing.

Plan of Operation for the Next Twelve Months

Our future operations are dependent upon the identification
  and successful completion of additional long-term or permanent equity financing,
  the continued support of creditors and shareholders, and, ultimately, the achievement
  of profitable operations. There can be no assurances that we will be successful
  which would significantly affect our ability to roll out our revised business
  plan. If not, we will likely be required to reduce operations or liquidate assets.
  We will continue to evaluate our projected expenditures relative to its available
  cash and to seek additional means of financing in order to satisfy its working
  capital and other cash requirements.

19

---

Our plan over the next several months is to complete the Flowstar and Flowray
  acquisition on terms described previously. If we do complete, our company will
  require additional cash of $1,460,000 Canadian Dollars, or approximately $1,037,000
  to fully complete the transaction. Cash payments are scheduled as follows:

| | $ | 860,000 by September 15, 2003
| | - | -----------------------------
| | $ | 177,000by January 1, 2004    
| | $ | 1,037,000                    

Additionally, we are currently experiencing a working capital
  deficiency of approximately $350,000.Our current cash on hand is $13,595
  and we have no remaining credit under the loan from AHC (See Part II, Item 2).
  Our shortfall prior to operating requirements is therefore approximately $1,400,000.
  We also anticipate that we will require $30,000 monthly for corporate costs
  or $360,000 annually, for all of which we will need to raise additional funding.

These estimates may differ significantly after our needs are
  more fully developed. Our operations have been funded to date by debt and equity
  financing. We are relying on these sources of funding in order to provide our
  company with sufficient capital to continue our development and operational
  plans. There can be no assurance that the past trend will continue, which would
  significantly affect the financial condition of our Company and our ability
  to close the Flowstar and Flowray transaction.

Over the next 12 months, we also plan to closely monitor and
  implement solutions to successfully manage our proposed future growth. This
  will include:

|1 | . | Improve, upgrade and expand our business infrastructure.
      Identify a permanent office and acquire all necessary office equipment to
      ensure smooth operations and minimize ongoing corporate operating costs
|- | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |   |                                                                                                                                                                                                                       
|2 | . | Ensure that all target acquisitions hire, train
      and retain key management to ensure future success and maximize cash flows                                                                                      
|  |   |                                                                                                                                                                                                                       
|3 | . | Promote the advancement
        of commercialization development programs for target companies so they
        become cash flow positive as soon as is practically possible                                           

Cash on hand is currently our only source of liquidity. We
  do not have any lending arrangements in place with banking or financial institutions
  and we do not anticipate that we will be able to secure these funding arrangements
  in the near future. To the extent that we require additional funds to support
  our operations or the expansion of our business, we may sell additional equity
  or issue debt. Any sale of additional equity securities will result in dilution
  to our stockholders. There can be no assurance that additional financing, if
  required, will be available to our company or on acceptable terms.

We do not anticipate making any major purchases of capital
  assets in the next 12 months, or conducting any research and development. Our
  current corporate employee count is expected to remain the same for the next
  12 months. Given the change in our business plan, we anticipate that any change
  in capital assets, research and development and employees would be subject to
  change in any targeted operating business we may acquire, including that of
  Flowstar and Flowray, should we complete the purchase.

Results from Operations  2003 Compared to 2002

We incurred a net loss for the first two quarters ended June
  30, 2003 of $339,345 compared to a net loss of $1,400,812for the comparable
  period. This loss includes general and administrative costs totaling$356,702
  compared to $466,871 for the first two quarters ended June 30, 2002. In May
  2003, the Company approved the issuance of 1,000,000 share purchase warrants
  to John Anderson, a current Company director and CEO, in consideration for loans
  and other services provided to the Company at a time prior to becoming a director
  or employee of the Company.

On May 16, 2003, the Company entered into consulting agreements
  with three companies, each controlled by a Company director, whereby the consulting
  companies will provide ongoing business and advisory services to the Company
  effective from April 1, 2003. In exchange, the Company will pay the companies
  monthly consulting fees of $5,000, $5,000 and $2,500 plus sales tax. These consulting
  fees will be paid in common

20

---

shares of the Company. These shares to be issued in settlement will be valued
  at $0.20 per share, being the market price of the common stock at the time the
  consulting contracts were agreed upon.

The Companys remaining operating costs for the period
  consisted primarily of legal and accounting fees relating to the preparation
  of the Companys 10KSB, interest charges on its debt, the above noted consulting
  fees, and investor relations costs.

The Company had income from other items of $17,357 for the
  first half of 2003 compared to a net loss of $933,941 for same period in fiscal
  2002. The income from other items for the first and second quarters of 2003
  consisted of interest earned on promissory notes. The loss of $933,941 in the
  same period of fiscal 2002 was a result of a recorded impairment in the Companys
  investments of $934,197 offset by interest income of $256.

Liquidity and Capital Resources  2003 Compared to
  2002

Since inception, we have been dependent on investment capital
  and debt financing from our shareholders as our primary source of liquidity.
  We have not generated any revenue or income from our operations. We had an accumulated
  deficit at June 30, 2003 of $6,877,436.

During the first half of 2003, our cash position increased
  to $13,595 from $1,422. We earned $310,643 of cash from operations in the first
  half of fiscal 2003 compared to a deficit of $225,455 in the same period of
  fiscal 2002. We also used $1,474,827 in investing activities in the first half
  of 2003, which consisted of advances made and accrued interest charged to Flowstar
  for the period, as well as the deposit on the purchase of shares of Synenco
  Energy Inc. The net cash used in operating and investing activities was financed
  by $1,051,840 from financing activities, resulting in a net increase in our
  cash position for the period of $12,173. The cashflow from financing activities
  is primarily a result of loan advances made to the Company by AHC (See Part
  II, Item 2).

During the first half of this year we issued stock valued
  at $203 in settlement of accounts payable, notes payable and shareholders loans
  of $1,016,873.

The Company had $1,753,941 in total liabilities at June 30,
  2003 compared to $1,109,082 at the end of fiscal 2002. The increase is a result
  of loan advances made by AHC to the Company during the first quarter of 2003.
  The loan advances from AHC were used to fund working capital requirements of
  the Company as well as to advance approximately $1,270,000 to Flowstar, and
  make a deposit on the purchase of Synenco shares of $173,048.

ITEM 3.      CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management,
  including our principal executive officer and principal financial officer, we
  have evaluated the effectiveness of the design and operation of our disclosure
  controls and procedures within 90 days of the filing date of this quarterly
  report, and, based on their evaluation, our principal executive officer and
  principal financial officer have concluded that these controls and procedures
  are effective. There were no significant changes in our internal controls or
  in other factors that could significantly affect these controls subsequent to
  the date of their evaluation.

Disclosure controls and procedures are our controls and other
  procedures that are designed to ensure that information required to be disclosed
  by us in the reports that we file or submit under the Exchange Act is recorded,
  processed, summarized and reported, within the time periods specified in the
  Securities and Exchange Commissions rules and forms. Disclosure controls
  and procedures include, without limitation, controls and procedures designed
  to ensure that information required to be disclosed by us in the reports that
  we file under the Exchange Act is accumulated and communicated to our management,
  including our principal executive office and principal officer, as appropriate
  to allow timely decisions regarding required disclosure.

21

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PART II  OTHER INFORMATION

ITEM 1.       LEGAL PROCEEDINGS

CTI and Cobratech, a subsidiary of our Company, have been
  sued by Rajesh Taneja in the Supreme Court of British Columbia, Canada. Mr.
  Taneja is a past contractor of Cobratech. The action was commenced on December
  20, 2001. Mr. Taneja is suing the company for unspecified damages for wrongful
  dismissal. The Company disputes the claim and has filed a Statement of Defence
  denying the allegations of wrongful dismissal. We intend to vigorously defend
  the claim. No trial date has been set, and no Examinations for Discovery have
  been conducted.

ITEM 2.       CHANGES IN SECURITIES AND USE
  OF PROCEEDS

Effective December 2, 2002, we had agreed to issue 2,033,493
  shares of our common stock at an agreed price of $0.50 per share, for an aggregate
  total of $1,016,746, for the settlement of debts owed by our Company. The price
  of $0.50 was significantly in excess of the trading price of our stock at the
  time of the transaction, and was an agreed price between the parties. This debt
  conversion occurred in the second quarter of 2003. 608,394 shares was issued
  to a company beneficially holding 12.76% of our common stock, including the
  exercise of certain warrants. Mr. John Anderson, our President, CEO and Director,
  received 215,484 shares.

On May 12, 2003 our Board of Directors recinded the issuance
  of 1,000,000 common shares to each of Mr. Donald Farnell and Mr. John Anderson,
  previously approved on October 31, 2002. The decision to recind the proposed
  issuance was approved by Mr. Farnell and Mr. Anderson. Mr. Farnell was our President,
  CEO and Chairman until his resignation on March 31, 2003. Mr Anderson is our
  Interim President and CEO, and a Director. The Board also recinded the issuance
  of 80,000 common shares to a consultant, previously approved on February 28,
  2003. None of these shares were issued as of August 14, 2003. The original transactions
  on October 31, 2002 and February 28, 2003 were previously described in our Form
  10 KSB filed on April 30, 2003. Mr Farnell is now proposing that certain debts
  of Sentry Telecom Systems, Inc. owed to him or a company under his control totaling
  $427,810 that were forgiven in prior periods are now due and payable. He is
  also contending that he may charge the Company for his time spent on Company
  business to the date of his March 31, 2003 resignation (which he estimates at
  $3,362), plus reimburseable expenses totaling $805. No other action has been
  taken on this.

ITEM 3.      DEFAULTS UPON SENIOR SECURITIES

On January 15, 2003, $100,000 was due under a loan agreement
  dated July 3, 2001 with Sentry, our 90.7% controlled subsidiary. The loan was
  from an unrelated party and is secured by certain property of Sentry. The amount
  remains unpaid as of the date hereof. The lender has not yet issued a demand
  for payment. Two significant shareholders of our Company have personally guaranteed
  payment of the $100,000.

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF
  SECURITY HOLDERS

We submitted no matters to a vote of security holders during
  the quarter ended March 31, 2003.

ITEM 5.      OTHER INFORMATION

On February 28, 2003, Mr. Donald E. Farnell resigned as our
  acting Chief Financial Officer. On March 5, 2003, Mr. Alfred Comeau and Mr.
  Terry Mereniuk were appointed to our Board of Directors. On March 31, 2003,
  Mr. Farnell resigned his positions as Director, Chairman, President and CEO.
  On April 9, 2003, Mr. John Anderson, a Director of our Company, was appointed
  interim President and CEO, replacing Mr. Farnell. Mr. Terry Mereniuk was appointed
  Chief Financial Officer. On April 24, 2003, Mr. Anderson was appointed Secretary/Treasurer.

22

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On May 12, 2003, weappointed Mr. Brad Belke as our
  Chief Technical Advisor to our Board of Directors. Mr. Belke is a Vice President
  for Flowstar.

ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K.

(a) Pursuant to Rule 601 of Regulation SB, the following exhibits are
  included herein or incorporated by reference.

|Exhibit |                                                                                                                                                                                                                                                                                                                                                                                     
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  | Description                                                                                                                                                                                                                                                                                                                                                                         
|2.0*    | Share Purchase Agreement
        dated, for reference, December 20, 2000, between the persons defined as
        Vendors and as listed in Schedule "A" to the agreement, Cobratech Industries
        Inc., and Unique Bagel Co., Inc. (Incorporated by reference to Exhibit
        2.0 to the Companys Form 10-KSB filed on April 17, 2001)                                      
|        |                                                                                                                                                                                                                                                                                                                                                                                     
|2.1*    | Share Purchase Agreement
        dated, for reference, January 18, 2002, between the Company, Neil Cox
        and Leila Lolua, for the purchase of 7,160,000 shares of Sentry Telecom
        Systems Inc. in exchange for 500,000 shares of the Company                                                                                                                           
|        |                                                                                                                                                                                                                                                                                                                                                                                     
|2.2*    | Financial Statements of
        Cobratech for the period ending October 15, 2000, and year ending December
        31, 1999. (Incorporated by reference to Form 8-K filed on March 27, 2001)                                                                                                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                     
|2.3.1*  | Loan Agreement dated January
        28, 2003 between the Company and AHC Holdings Ltd. Addendum to the Loan
        Agreement dated February 6, 2003 providing AHC a warrant to purchase 1,000,000
        shares of the Companys common stock at $0.15 per share as a bonus
        for providing the Loan. (Incorporated by reference to Form 8-K filed April
        28, 2003).
|        |                                                                                                                                                                                                                                                                                                                                                                                     
|2.3.2*  | Finders Fee Agreement
        dated January 28, 2003 between the Company and Terry Mereniuk, under which
        Mr. Mereniuk was granted a warrant to purchase 500,000 shares of the Companys
        common stock for $0.15 per share. (Incorporated by reference to Form 8-K
        filed April 28, 2003).                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                                                     
|2.3.3*  | Share Purchase Warrants
        dated March 6, 2003 issued to Terry Mereniuk and AHC Holdings Ltd. (Incorporated
        by reference to Form 8-K filed April 28, 2003).                                                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                     
|2.3.4*  | Letter of Intent to purchase
        a 51% equity interest in Flowstar and Flowray dated February 6, 2003 (Incorporated
        by reference to Form 8-K filed on April 28, 2003).                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                                                     
|2.3.5*  | Amendment to the Letter
        of Intent dated April 9, 2003 extending deadlines for certain cash payments
        (Incorporated by reference to Form 8-k filed on April 28, 2003).                                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                     
|3.1.1*  | Articles of Incorporation
        of Unique Bagel Co., Inc. a Delaware corporation (now CTI Diversified
        Holdings, Inc.) dated August 11, 1998. (Incorporated by reference to Exhibit
        2.2 of the Companys Form 10SB12G, filed with the SEC on March 24,
        2000.)                                                                                              
|        |                                                                                                                                                                                                                                                                                                                                                                                     
|3.1.2*  | Certificate of Amendment
        of the Certificate of Incorporation of Unique Bagel Co., Inc., a Delaware
        corporation dated January 10, 2001, changing the name Unique Bagel to
        CTI Diversified Holdings, Inc. ((incorporated by reference to Exhibit
        3.1.2 to the Companys Form 10-KSB filed on April 17, 2001)                                          
|        |                                                                                                                                                                                                                                                                                                                                                                                     
|3.1.3*  | Memorandum of Incorporation
        of Cobra Energy Ltd., a British Columbia corporation, dated October 24,
        1997. (Incorporated by reference to Exhibit 3.1.3 to the Companys
        Form 10-KSB filed on April 17, 2001)                                                                                                                                                 

23

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|3.1.4* | Altered Memorandum of Cobra
        Energy Ltd., a British Columbia corporation, dated September 7, 1999,
        changing the name Cobra Energy Ltd., to Cobratech Industries Inc. ((incorporated
        by reference to Exhibit 3.1.4 to the Companys Form 10-KSB filed
        on April 17, 2001)
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                       
|3.2*   | Bylaws of Unique Bagel Co.,
        Inc. (now CTI Diversified Holdings, Inc., a Delaware corporation), dated
        August 11, 1998. (Incorporated by reference to Exhibit 3.1of the companys
        Form 10SB12G, filed with the SEC on March 24, 2000)                                           
|       |                                                                                                                                                                                                                                                                                                       
|3.2.1* | Bylaws/Articles of Cobra
        Energy Ltd., a British Columbia corporation, dated October 24, 1997. (Incorporated
        by reference to Exhibit 2.0 to the Companys Form 10-KSB filed on
        April 17, 2001)                                                                                 
|       |                                                                                                                                                                                                                                                                                                       
|10.1*  | Audit committee charter
        (incorporated by reference to the Companys Form 10-KSB filed on
        April 29, 2003).                                                                                                                                                                             
|       |                                                                                                                                                                                                                                                                                                       
|10.2*  | Audit committee terms of
        reference (Incorporated by reference to the Companys Form 10-KSB
        filed on April 29, 2003).                                                                                                                                                                  
|       |                                                                                                                                                                                                                                                                                                       
|16.0*  | David J. Maxwell Ltd - Letter
        re: Change in Certifying Accountant (incorporated by reference to the
        Companys Form 10-KSB filed on April 17, 2001)                                                                                                                                    
|       |                                                                                                                                                                                                                                                                                                       
|21.1*  | Schedule of Subsidiaries
        of CTI Diversified Holdings, Inc. (incorporated by reference to Exhibit
        21.1 to the Companys Form 10-KSB filed on April 17, 2001)                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                       
|23.1*  | Consent of Moore Stephens
        Ellis Foster Ltd. Chartered Accountants (incorporated by reference to
        the Companys Form 10-KSB filed on April 17, 2001)                                                                                                                                    
|       |                                                                                                                                                                                                                                                                                                       
|31.1   | Certification of Chief Executive Officer pursuant to Section
      302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                              
|       |                                                                                                                                                                                                                                                                                                       
|31.2   | Certification of Chief Financial Officer pursuant to Section
      302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                              
|       |                                                                                                                                                                                                                                                                                                       
|32     | Certification of Chief Executive Officer and Chief Financial
      Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002                                                                                                             

* Previously filed

Reports on Form 8-K

April 29, 2003reporting the loan from AHC, the loan
  to Flowstar and Flowray, the proposed transaction to acquire an interest in
  Flowstar and Flowray, the resignation of Mr. Donald Farnell, the appointment
  of Mr. John Anderson as President & CEO, and the appointment of Mr. Terry
  Mereniuk as CFO.

24

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, on
  this 15 day of August, 2003.

|                      | CTI DIVERSIFIED HOLDINGS INC.                       
|--------------------- | ----------------------------------------------------
|                      |                                                     
|Date: August 15, 2003 | By: /s/ John Anderson                               
|                      |                                                     
|                      | John Anderson, Chief Executive Officer and Director 
|                      |                                                     
|                      | By: /s/ Terry Mereniuk                              
|                      |                                                     
|                      | Terry Mereniuk, Chief Financial Officer and Director

25

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