As filed with the Securities and Exchange Commission on August 19, 2002

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549
                                  FORM 10-QSB/A
(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, 2002

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

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

                  8525 COMMERCE COURT, BURNABY, BC V5A 4N3
                  ----------------------------------------
           (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (604) 646-6638
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
                                             -----    -----

<PAGE>
Page 2



Number of shares outstanding of the registrant's class of common stock as of
June 30, 2002: 19,182,967.

The authorized share capital:   50,000,000 common shares, par value of
$0.0001

INDEX TO THE FORM 10-QSB

For the quarterly period ended June 30, 2002



                         PART 1 - FINANCIAL INFORMATION

                                                                            Page
                                                                            ----
Item 1.   Consolidated Financial Statements - CTI Diversified Holdings, Inc.   4
          Audited Financial Statements - Sentry Telecom Systems Inc.          15
Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operation                                            35

                         PART 11 - OTHER INFORMATION
Item 1.   Legal Proceedings                                                   38
Item 2.   Changes in Securities and Use of Proceeds                           39
Item 5.   Other Information                                                   39



<PAGE>
Page 3

                         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. These factors include the inability to successfully design, develop
and commercialize products, the reliance on third party suppliers for materials,
the inability to attract and retain qualified staff, the Company's limited
operating history and continuing operating losses, recent and potential
development strategic alliances, the outcome of pending litigation, the impact
of acquisitions, establishing and maintaining effective distribution channels,
impact and timing of large orders, pricing pressures in the market, inability to
create and protect intellectual property, inability to raise sufficient funding
to sustain negative cash flows, lack of liquidity, systems failures,
technological changes, volatility of securities markets, government regulations,
and economic conditions and competition in the geographic and the business areas
where we conduct our operations. In assessing forward-looking statement
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.

                          PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

Index
-----
Consolidated Statements of Operations and Deficit for the six months ended June
30, 2002 and 2001

Consolidated Balance Sheet at June 30, 2002 and December 31, 2001

Consolidated Statements of Stockholders' Deficiency

Consolidated Statement of Cash Flows for the six months ended June 30, 2002 and
2001

Notes to Consolidated Financial Statements

<PAGE>
Page 4

CTI DIVERSIFIED HOLDINGS, INC.
(A Development Stage Enterprise)
(Unaudited)
Consolidated Balance Sheets
(Expressed in U.S. Dollars)
================================================================================


                                              June 30, 2002   December 31, 2001
-------------------------------------------------------------------------------

ASSETS

Current
   Cash and cash equivalents                  $       117,170   $           949
   Accounts receivable                                  5,842              -
   Prepaid expenses                                     5,397               339
-------------------------------------------------------------------------------
Total current assets                                  128,409             1,288

Fixed assets                                           52,635            35,758

Goodwill                                                 -                 -
-------------------------------------------------------------------------------
Total assets                                  $       181,044   $        37,046
-------------------------------------------------------------------------------

LIABILITIES

Current

   Accounts payable and accrued liabilities   $       771,853   $       346,536
   Current portion of notes payable                   711,672            94,153
   Current portion of amounts due to
     shareholders                                     564,717            79,479
-------------------------------------------------------------------------------
Total current liabilities                           2,048,242           520,168

Long-term debt                                         23,043              -

Notes payable                                          50,158            30,030

Due to shareholders                                   276,347           607,988
-------------------------------------------------------------------------------
Total liabilities                                   2,397,790         1,158,186
-------------------------------------------------------------------------------

STOCKHOLDER'S EQUITY (DEFICIENCY)

Capital stock                                           1,918             1,781

Contributed Surplus                                 4,018,200         3,713,131

Deficit accumulated during the development
  stage                                            (6,236,864)       (4,836,052)
-------------------------------------------------------------------------------

Total shareholders' equity (deficiency)            (2,216,746)       (1,121,140)
-------------------------------------------------------------------------------
Total liabilities and shareholders'
  deficiency                                  $       181,044   $        37,046
-------------------------------------------------------------------------------
Commitments

See accompanying notes to the financial statements

<PAGE>
Page 5

CTI DIVERSIFIED HOLDINGS, INC.
(A Development Stage Enterprise)
(Unaudited)
Consolidated Statements of Operations and Deficit
(Expressed in U.S. Dollars)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                    August 11, 1998
                                                     (inception) to     Six Months     Six Months     Three Months     Three Months
                                                      June 30, 2002       ended          ended           ended             ended
                                                      (cumulative)    June 30, 2002   June 30, 2001   June 30, 2002   June 30, 2001
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>             <C>             <C>             <C>             <C>
Expenses

   Advertising and promotion                        $      4,122    $      2,190    $      2,072    $       -       $       -
   Depreciation                                           19,945           6,202           8,069           4,014           3,796
   Automotive                                              2,391            -              1,973            -              1,235
   Consulting                                            299,877          89,723         136,054          55,679          68,753
   Insurance                                               1,413           1,413             251           1,413             251
   Interest and bank charges                              24,826          10,728          26,452           5,830           3,897
   Interest paid to shareholders                         126,389          28,547          53,704          15,271          72,373
   Investor relations and reporting costs                154,393          53,647          77,576          51,726          63,194
   Legal and accounting                                  126,749          64,284          28,890          33,233          19,603
   Licences, dues and subscriptions                        2,833             233           2,525             233             210
   Office                                                 81,818          46,631          25,434          37,859          14,486
   Rent                                                   25,907          10,225          19,970          10,225          10,252
   Telephone                                              11,276           1,759           6,256             934           2,890
   Travel                                                145,171          48,141          97,972           9,773          40,920
   Miscellaneous                                           1,671           1,671            -              1,671            -
   Wages and benefits                                    101,477         101,477            -            101,477            -
-----------------------------------------------------------------------------------------------------------------------------------
                                                       1,130,258         466,871         487,198         329,338         301,860
-----------------------------------------------------------------------------------------------------------------------------------
Loss from operations                                  (1,130,258)       (466,871)       (487,198)       (329,338)       (301,860)
Other items
   Loss on investments                                (4,191,607)       (934,197)     (3,725,520)       (906,777)       (582,441)
   Interest and other revenue                             19,198             256           7,925          (6,440)          7,108
-----------------------------------------------------------------------------------------------------------------------------------
                                                      (4,172,409)       (933,941)     (3,717,595)       (913,217)       (575,333)
-----------------------------------------------------------------------------------------------------------------------------------

Net loss for the period                               (6,236,864)     (1,400,812)     (4,204,793)     (1,242,555)       (877,193)

Deficit, beginning of period                                -         (4,836,052)        (12,468)     (4,994,309)     (3,340,068)
-----------------------------------------------------------------------------------------------------------------------------------
Deficit, end of period                              $ (6,236,864)   $ (6,236,864)   $ (4,217,261)   $ (6,236,864)   $ (4,217,261)
-----------------------------------------------------------------------------------------------------------------------------------
Loss per share (Basic and diluted)                                  $      (0.34)   $      (0.21)   $     (0.072)   $      (0.04)
-----------------------------------------------------------------------------------------------------------------------------------
Weighted average number of common shares outstanding                  18,397,051      20,113,685      18,387,051      20,113,685
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to the financial statements

<PAGE>
Page 6

CTI DIVERSIFIED HOLDINGS, INC.
(A Development Stage Enterprise)
(Unaudited)
Consolidated Statements of Stockholders' Deficiency
From August 11, 1998 (Date of Inception) to June 30, 2002
(Expressed in U.S. Dollars)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                                          Deficit
                                                                                                        Accumulated
                                                                                                         During the
                                                                                        Contributed     Development
                                                    Common Shares      Stock Amount        Surplus          Stage
---------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>              <C>              <C>              <C>
Shares issued to acquire 19% of New York Bagel
   Co., Inc.                                         20,000,000      $        2,000   $        4,091   $         -

Issuance of 500,000 common shares in August 1998
   at $0.01 per share                                 2,000,000                 200            4,800             -
---------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1998                           22,000,000               2,200            8,891             -

Net loss for the year ended December 31, 1999              -                   -                -              (2,994)

Balance, December 31, 1999                           22,000,000               2,200            8,891           (2,994)
---------------------------------------------------------------------------------------------------------------------
Cancellation of shares June 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             -                -

Stock dividend on December 12, 2000:
  5.25 for one                                       29,835,000               2,983           (2,983)            -

Net loss for the year ended December 31, 2000              -                   -                -              (9,474)
---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2000                           36,855,000               3,685            7,408          (12,468)

Issuance of shares in consideration of legal
  services performed                                      5,000                   1            9,999             -

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             -

Conversion of promissory notes into common stock,
  effective June 29, 2001                             1,304,153                 130        2,006,792             -

Net loss for the year ended December 31, 2001              -                   -                -          (4,823,584)
---------------------------------------------------------------------------------------------------------------------

Balance, December 31, 2001                           17,808,744               1,781        3,713,131       (4,836,052)

Issuance of shares in consideration for services        100,000                  10           22,990             -

Issuance of bonus shares (note 7)                       181,397                  18              (18)            -

Issuance of shares in exchange for 7,160,000
  shares of Sentry Telecom Systems Inc.                 500,000                  50          109,950             -

Conversion of debt into common stock                    592,826                  59          172,147             -

Net loss for the period ended June 30, 2002                -                   -                -          (1,400,812)
---------------------------------------------------------------------------------------------------------------------
Balance, June 30, 2002                               19,182,967      $        1,918   $    4,018,200   $   (6,236,864)
---------------------------------------------------------------------------------------------------------------------
</TABLE>


See accompanying notes to the financial statements

<PAGE>
Page 7


CTI DIVERSIFIED HOLDINGS, INC.
(A Development Stage Enterprise)
(Unaudited)
Consolidated Statement of Cash Flows
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                   August 11, 1998
                                                   (inception) to
                                                    June 30, 2002       Six months ended    Six months ended
                                                    (cumulative)          June 30, 2002       June 30, 2001
------------------------------------------------------------------------------------------------------------
<S>                                             <C>                  <C>                  <C>
Cash flows from operating activities

  Net loss for the period                       $    (6,236,864)     $    (1,400,812)     $    (4,204,793)
  Adjustments to reconcile net income to
   net cash provided by operating activities:
     Depreciation                                        19,945                6,202                4,014
     Gain on sale of assets                              (2,701)                -                    -
   Loss on investments and writedown of intangibles   5,313,904              934,197            3,717,595
------------------------------------------------------------------------------------------------------------
                                                       (905,716)            (460,413)            (483,184)
Change in assets and liabilities:
   Decrease (increase) in accounts receivable           247,812              247,812               (1,321)
   Decrease (increase) in prepaid expenses                 (166)                 173                 (968)
   Increase (decrease) in accounts payable and
     accrued liabilities                                133,509              (13,027)             140,025
   Net liabilities acquired on acquisition of
     subsidiaries                                      (610,680)                -                    -
------------------------------------------------------------------------------------------------------------
                                                     (1,135,241)            (225,455)            (345,448)
------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
   Net increase in convertible notes                  2,006,922                 -                       3
   Net increase in notes payable                        447,694              323,511              110,347
   Net increase in shareholder advances
     (repayments)                                       743,331               55,864              300,751
------------------------------------------------------------------------------------------------------------
                                                      3,197,947              379,375              411,101
------------------------------------------------------------------------------------------------------------
Cash flows from (used in) investing activities
   Capital expenditures                                 (76,259)              (4,473)             (59,050)
   Proceeds on sale of New York Bagel Inc.                6,066                 -                    -
   Investment in and advances to Subsidiaries.       (1,987,561)             (33,226)                -
   Proceeds on sales of assets                           24,888                 -                    -
------------------------------------------------------------------------------------------------------------
                                                     (2,032,866)             (37,699)             (59,050)
------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes                          82,330                 -                    -

Increase in cash and cash equivalents                   112,170              116,221                6,603

Cash and cash equivalents, beginning of period            5,000                  949                 -
------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period        $       117,170      $       117,170      $         6,603
------------------------------------------------------------------------------------------------------------
Supplementary disclosure - non-cash transactions
------------------------------------------------------------------------------------------------------------
Cash flows from financing activities            $     1,829,897      $       133,000      $     1,686,897
------------------------------------------------------------------------------------------------------------
Cash flows from (used in) investing activities       (1,806,897)            (110,000)          (1,686,897)
------------------------------------------------------------------------------------------------------------
Cash flows from (used in) operating activities          (23,000)             (23,000)                -
------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to the financial statements

<PAGE>
Page 8

CTI DIVERSIFIED HOLDINGS, INC.
(A Development Stage Enterprise)
(Unaudited)
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
June 30, 2002
================================================================================

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-Q 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 include 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, 2001.

     The accompanying 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 long-term

and permanent equity financing,
     to complete the development and marketing of the Sentry products, to have
     the continued support of creditors and shareholders, and ultimately to
     reach a profitable level of operations. Accordingly, they do not give
     effect to adjustment, if any that would be necessary should the Company
     be unable to continue as a going concern and, therefore, be required to
     realize its assets and liquidate its liabilities other than in the normal
     course of business and at amounts which may differ from those shown in the
     financial statements.

2.   Summary of significant accounting policies

     (a)   Principles of Consolidation

           The consolidated financial statements include the accounts of CTI
           Diversified Holdings, Inc. and its subsidiaries (collectively the
           "Company"), Cobratech Industries Inc. ("Cobratech"), and Sentry
           Telecom Systems Inc. ("Sentry"). All significant intercompany
           accounts and transactions have been eliminated. The Company's
           investments in Cobratech Industries Limited ("CIL"), Cobratech
           Industries Japan Limited ("CIJL"), and IT Transit Limited ("IT")
           ceased operations in 2001. The company is exploring voluntary
           bankruptcy as a means under which to accommodate this. The Company
           believes its loss is limited to its investment in and advances made
           to the foreign subsidiaries.

     (b)   Loss per share

           Loss per share is computed using the weighted average number of
           common shares outstanding during the period. Potential common shares
           which could dilute earnings in the future are disclosed in (note 7).

     (c)   Use of Estimates

           The preparation of the consolidated financial statements in
           conformity with generally accepted accounting principles requires
           management to make estimates and assumptions that affect the reported
           amount of assets and liabilities and disclosure of contingent assets
           and liabilities at the date of the financial statements and the
           reported amount of revenues and expenses during the period. Actual
           results may differ from those estimates.


<PAGE>
Page 9

CTI DIVERSIFIED HOLDINGS, INC.
(A Development Stage Enterprise)
(Unaudited)
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
June 30, 2002
================================================================================

2.   Summary of significant accounting policies continued

     (d)   Impairment of Long-term Assets

           The Company re-evaluates the recoverability of long-term assets,
           including fixed assets, long term investments, advances receivable,
           and intangible assets based upon estimates using factors such as
           future asset utilization, business climate and future discounted cash
           flows expected to result form the use of the related assets or be
           realized on sale. The Company's policy is to write down assets to
           their net recoverable amount in the period when it is determined that
           the carrying amount of the asset is not likely to be recovered.

     (e)   Cash equivalents

           The Company considers all highly liquid investments with maturities
           of three months or less when purchased, to be cash equivalents. There
           were no cash equivalents at June 30, 2002 and at December 31, 2001.

     (f)   Fixed Assets

           Fixed assets are recorded at historical costs. Depreciation of fixed
           assets is calculated using the following methods and rates:

                       Computer equipment       - 30% declining balance basis
                       Furniture and fixtures   - 20% declining balance basis

     (g)   Comparative figures

           Certain of the comparative figures have been reclassified to conform
           to the current period presentation.

     (h)   Goodwill

           Goodwill arising from the acquisition of subsidiary companies is
           being amortized to income on the straight-line basis over the
           expected period of benefit, not to exceed forty years. Management
           reviews on a regular basis, the carrying amount of the goodwill for
           possible permanent impairment by evaluating undiscounted expected
           cash flows. Goodwill is written down to its estimated net recoverable
           amount when there is a permanent decline in its value.  At June 30,
           2002, the Company has written down its goodwill arising from the
           acquisition of Sentry to Nil, its estimated net recoverable amount.


<PAGE>
Page 10

CTI DIVERSIFIED HOLDINGS, INC.
(A Development Stage Enterprise)
(Unaudited)
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
June 30, 2002
================================================================================

3.   Business acquisition

     Sentry Telecom Systems Inc.
     ---------------------------

     On April 15, 2002, the Company completed the acquisition of 90.67% of the
     outstanding common shares of Sentry. The results of Sentry's operations
     have been included in the consolidated financing statements since that
     date.  Sentry is a British Columbia private company, involved in the
     designing and selling of products for the computer telecommunication
     security industry. The acquisition has been accounted for using the
     purchase method.

     The aggregate purchase price was $381,862, including $250,000 of cash,
     500,000 shares of common stock valued at $110,000 or $0.22 per share, the
     market price of the common stock at the date the share purchase agreement
     was signed, and acquisition related expenses of $21,862.

     The following table summarizes the estimated fair value of the assets
     acquired and liabilities assumed as at April 15, 2002, the date of
     acquisition:

         Current assets                                    $     271,500
         Fixed assets                                             18,606
         Goodwill                                              1,134,332
                                                           -------------
             Total assets acquired                             1,424,438
                                                           =============
         Current liabilities                                     752,480
         Long term debt                                          290,096
                                                           -------------
             Total liabilities assumed                         1,042,576
                                                           -------------
             Net assets acquired                           $     381,862
                                                           =============

4.     Fixed assets

<TABLE>
<CAPTION>
                                            Accumulated        June 30, 2002    December 31, 2001
                                 Cost       depreciation      Net book value      Net book value
     --------------------------------------------------------------------------------------------
     <S>                     <C>             <C>             <C>             <C>
     Furniture & fixtures    $      67,649   $      40,785   $      26,864   $     25,572
     Computer equipment             48,796          23,025          25,771         10,186
     --------------------------------------------------------------------------------------------
                             $     116,445   $      63,810   $      52,635   $     35,758
     --------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
Page 11

CTI DIVERSIFIED HOLDINGS, INC.
(A Development Stage Enterprise)
(Unaudited)
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
June 30, 2002
================================================================================

5.   Notes payable

     The terms of the notes payable are as follows:

<TABLE>
<CAPTION>
     -----------------------------------------------------------------------------------------------------
                                                                         June 30, 2002  December 31, 2001
     -----------------------------------------------------------------------------------------------------
     <S>                                                               <C>               <C>
     Note payable - Unity Wireless Corporation ("Unity"). The note
     bears interest at 1% per month and is secured by a general
     security agreement covering the assets of Cobratech Industries
     Inc. The balance at June 30, 2002 consists of principle plus
     accrued interest. In November 2001, the company agreed to pay
     10% of all funds received from financing in excess of $100,000
     to Unity in repayment of the notes. The repayment terms
     expired on May 5, 2002. As of July 31, 2002, the Company is in
     default of this agreement.                                        $       99,940    $        94,153


     Notes payable - The notes bear interest at the Bank of Montreal
     prime rate plus 5% per annum, compounded monthly. The holder of
     the note has agreed not to demand repayment prior to June 2003.           50,158             30,030

     Notes payable - The notes bear interest at 9% per annum,
     compounded monthly and are due on demand.                                284,488               -

     Notes payable - The notes bear interest at the Bank of Montreal
     prime rate plus 5% per annum, compounded monthly and are due on
     demand. The notes hold as security all of the assets of Sentry.          327,244               -
     ---------------------------------------------------------------------------------------------------
     Total notes payable   761,830   124,183

     Less: current portion due within one year   711,672   94,153
     ---------------------------------------------------------------------------------------------------
     Long term portion   $ 50,158   $ 30,030
     ---------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
Page 12

CTI DIVERSIFIED HOLDINGS, INC.
(A Development Stage Enterprise)
(Unaudited)
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
June 30, 2002
================================================================================

6.   Due to shareholders

     The terms of the amounts due to shareholders are as follows:
<TABLE>
<CAPTION>
     -----------------------------------------------------------------------------------------------------
                                                                         June 30, 2002  December 31, 2001
     -----------------------------------------------------------------------------------------------------
     <S>                                                               <C>               <C>
     Notes payable - The notes payable are due to shareholders and
     bear interest at the Bank of Montreal prime rate plus 5% per
     annum, compounded monthly.                                        $      552,188    $       522,097

     Notes payable - The notes are due to a shareholder and director
     of CTI. The notes bear interest at the Bank of Montreal prime
     rate plus 5% per annum, compounded monthly.                               92,098             85,891

     Advances from shareholders, bearing interest at 6% per annum,
     compounded monthly, with no set terms of repayment.                      103,315               -

     Advances from shareholders, non-interest bearing with no set
     terms of repayment.                                                       93,463             79,479
     ---------------------------------------------------------------------------------------------------
                                                                              841,064            687,467

     Less: current portion due within one year                                564,717             79,479
     ---------------------------------------------------------------------------------------------------
                                                                       $      276,347    $       607,988
     ---------------------------------------------------------------------------------------------------
</TABLE>


     (a)   The minimum principal repayments on the notes payable to shareholders
           during the next two years are as follows:

                         ------------------------------------------------------
                           2002                                   $     564,717
                           2003                                         276,347
                         ------------------------------------------------------
                           Total                                  $     841,064
                         ------------------------------------------------------

7.   Capital Stock

     (a)   Authorized: 50,000,000 common shares with a par value of $0.0001 per
           share

     (b)   Issued: 19,182,967 common shares

     (c)   Warrants

           In February 2002, the Company issued 300,000 share purchase warrants,
           with an exercise price of $0.25 per share and an expiry date of
           December 2006, to two directors of the company. The warrants also
           have a cashless exercise price. In lieu of exercising this warrant,
           the holder may elect to receive shares of common stock equal to the
           "value" of the warrant, calculated based on the fair market value of
           the shares in excess of the market price. As of June 30, 2002, the
           Company has the following warrants outstanding:

              Number of warrants            Exercise price       Expiry date
              ------------------            --------------       -----------
                 702,770                        $ 2.20            June 2003
                 601,380                        $ 1.50            June 2003
                 300,000                        $ 0.25            December 2006
             -----------
               1,604,150
             ===========




<PAGE>
Page 13

CTI DIVERSIFIED HOLDINGS, INC.
(A Development Stage Enterprise)
(Unaudited)
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
June 30, 2002
================================================================================

7.   Capital Stock, continued

     (d)   Share issuances during the period

           In April 2002, the Company issued 100,000 shares of common stock in
           exchange for financial consulting and corporate public relations
           services performed during the period April 2001 to April 2002. The
           shares have been valued at $0.23 per share, the market price of the
           shares at the date of issuance.

           In April 2002, the Company issued 181,397 shares of common stock to
           seed capital investors of Cobratech as a bonus for non-filing of a
           registration statement, valued at $0.0001 (par value) per share.

           In April 2002, the Company issued 500,000 shares of common stock in
           exchange for 7,160,000 common shares of Sentry. The shares have been
           valued at $0.22 per share, the market price of the shares at the date
           the share purchase agreement was signed. 150,000 of the shares were
           released on the acquisition closing date of April 15, 2002. The
           remaining 350,000 shares are held in trust by the Company's
           solicitors and will only be released as certain performance
           milestones are achieved. To the extent that these performance
           milestones are not met, some or all of these unreleased shares will
           be surrendered and returned to the Company for cancellation.

           In May 2002, the Company agreed to convert certain amounts owing by
           Sentry to British Columbia Advanced Systems Institute ("ASI") into
           shares of common stock of CTI. ASI advanced Sentry $172,206 ($270,000
           Canadian) to assist in performing certain specified research and
           development work. In May, ASI agreed to convert the outstanding
           balance into 592,826 common shares of CTI. The shares issued on the
           conversion were valued at $0.29 per share, the average closing price
           for CTI shares for the 20 days prior to April 30, 2002.

8.   Commitments

     (a)   The Company has entered into operating leases for certain office
           equipment. Minimum rental payments under these leases are as follows:

                         ------------------------------------------------
                            2003                 $        3,897
                            2004                          1,948
                         ------------------------------------------------
                            Total                $        5,845
                         ------------------------------------------------

     (b)   The Company has an operating commitment under an offer to lease for
           office facilities in Burnaby BC. The offer to lease expired on July
           31, 2002. Effective August 1, 2002, the Company is operating under a
           month to month lease.

9.   Related party transactions

     The aggregate amount of expenditures made to parties not at arm's length to
     the Company for the six month period ended June 30, consist of the
     following:

     --------------------------------------------------------------------------
                                                        2002          2001
     --------------------------------------------------------------------------
     Consulting fees paid or accrued to a director
       of the Company                               $    25,056     $      -

     Interest paid to shareholders                       28,547          53,704
     ---------------------------------------------------------------------------

     Management is of the opinion that the terms and conditions are consistent
     with standard business practice.


<PAGE>
Page 14

CTI DIVERSIFIED HOLDINGS, INC.
(A Development Stage Enterprise)
(Unaudited)
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
June 30, 2002
================================================================================

10.  Contingency

     The Company is a defendant in an outstanding legal proceeding. The Company
     has disputed the claim and management has advised that the outcome of the
     claim is not determinable at this time.

11.  New authoritative pronouncements

     (a)   In July 2001, the FASB issued SFAS No. 141 "Business Combinations".
           SFAS No. 141 addresses financial accounting and reporting for
           business combinations and supersedes AFS Opinion No. 16 "Business
           Combinations" and SFAS No. 38 "Accounting for Preacquisition
           Contingencies of Purchased Enterprises". This standard eliminates the
           pooling-of-interests method of accounting for business combinations,
           requiring the purchase method of accounting. This standard also
           revises the measures for accounting for negative goodwill and
           establishing whether an intangible asset is a part of acquired
           goodwill. The provisions of this statement apply to all business
           combinations initiated after June 30, 2001. This statement also
           applies to all business combinations accounted for using the purchase
           method for which the date of acquisition is July 1, 2001 or later.
           The adoption of this standard has not had a material impact on our
           financial position or results of operations.

     (b)   In July 2001, the FASB issued SFAS No. 142 "Goodwill and Other
           Intangible Assets". SFAS No. 142 provides guidance on accounting for
           goodwill and intangible assets. This statement requires that goodwill
           not be amortized. A reduction in goodwill will only result from an
           impairment test if the test reveals that the fair value of goodwill
           is below its carrying value. An acquired intangible assets (other
           than goodwill) with an indefinite useful life should not be amortized
           unit its useful economic life is determined to be finite. These
           assets should be annually tested for impairment (at a minimum). An
           acquired intangible asset (other than goodwill) with a limited useful
           life should be amortized over its useful economic life and reviewed
           for impairment.

           The provisions of this statement are required to be applied starting
           with fiscal years beginning after December 31, 2001. Goodwill and
           intangible assets acquired after June 30, 2001, will be subject
           immediately to the non-amortization and amortization provisions of
           this statement. We do not believe that the adoption of this standard
           will have a material impact on our financial position or results of
           operations.

     (c)   In September 2001, the FASB issued SFAS No. 144, "Accounting for
           Impairment or Disposal of Long Term Assets", SFAS supersedes SFAS 121
           "Accounting for Impairment of Long Term Assets and Long-Lived Assets
           to be disposed of:, but retains the basic requirements regarding when
           and how to measure an impairment loss, SFAS applies to long-lived
           assets to be held or disposed of but specifically excludes certain
           classes or assets such as goodwill and intangible not being
           amortized. We do not believe that the adoption of this standard will
           have a material impact on our financial position or results of
           operations.



<PAGE>
Page 15





                 SENTRY TELECOM SYSTEMS INC.
                 Financial Statements
                 (Expressed in Canadian Dollars)
                 October 31, 2001, 2000 and 1999


                 Index
                 -----

                 Independent Auditors' Report

                 Balance Sheet

                 Statement of Operations and Deficit

                 Statement of Cash Flows

                 Notes to Financial Statements

<PAGE>
Page 16

ELLIS FOSTER
    CHARTERED ACCOUNTANTS

1650 West 1st Avenue
Vancouver, BC Canada  V6J 1G1
Telephone: (604) 734-1112 Facsimile: (604) 714-5916
E-Mail: generaldelivery@ellisfoster.com
        -------------------------------

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


INDEPENDENT AUDITORS' REPORT

To the Shareholders of

SENTRY TELECOM SYSTEMS INC.


We have audited the balance sheets of Sentry Telecom Systems Inc. as at October
31, 2001, 2000 and 1999 and the statements of operations and deficit and cash
flows for the years then ended. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating overall
financial statement presentation.

In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at October 31, 2001, 2000 and
1999 and the results of its operations and its cash flows for the years then
ended in accordance with accounting principles generally accepted in Canada.

Differences between Canadian and United States generally accepted accounting
principles affecting the determination of shareholders' equity at October 31,
2001, 2000 and 1999 and the determination of net loss for each of the years in
the three-year period ended October 31, 2001 are summarized in note 17.

Vancouver, Canada                                               /s/ ELLIS FOSTER
April 5, 2002                                              Chartered Accountants

COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA-U.S. REPORTING CONFLICT

In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by significant uncertainties such as that referred to in
the attached balance sheets as at October 31, 2001, 2000 and 1999 and described
in note 2 of the financial statements. Our report to the shareholders dated
April 5, 2002 is expressed in accordance with Canadian reporting standards which
do not permit a reference to such an uncertainty in the auditors' report when
the uncertainty is adequately disclosed in the financial statements.

Vancouver, Canada                                               /s/ ELLIS FOSTER
April 5, 2002                                              Chartered Accountants

--------------------------------------------------------------------------------
EF   A partnership of incorporated professionals
     An independently owned and operated member of Moore Stephens North America
     Inc., a member of Moore Stephens International Limited - members in
     principal cities throughout the world


<PAGE>
Page 17

SENTRY TELECOM SYSTEMS INC.

Balance Sheet
October 31, 2001, 2000 and 1999
(Expressed in Canadian Dollars)
================================================================================
                                               2001         2000         1999
--------------------------------------------------------------------------------

ASSETS

Current
   Cash and cash equivalents              $     3,582  $    31,938  $    37,784
   Accounts receivable                          4,000        2,402         -
   Inventories (note 4)                        74,487       63,392        4,885
   Taxes recoverable (note 5)                 409,410      179,984        3,993
   Prepaid expenses                             8,578       33,028        3,994
   Subscriptions receivable                      -            -          90,000
--------------------------------------------------------------------------------
Total current assets                          500,057      310,744      140,656

Capital assets (note 6)                        35,824       28,981       14,924

Intangible assets (note 7)                      1,573        3,550        5,528
--------------------------------------------------------------------------------

Total assets                              $   537,454  $   343,275  $   161,108
================================================================================


LIABILITIES

Current
   Accounts payable and accrued
      liabilities                         $   580,042  $   424,892  $    96,985
   Due to shareholder (note 8)                150,857      142,247       22,706
   Promissory notes payable (note 9)        1,290,809      219,917         -
   Current portion of long-term debt
      (note 10)                                62,228       30,953        2,381
--------------------------------------------------------------------------------
Total current liabilities                   2,083,936      818,009      122,072

Long-term debt (note 10)                      243,243      188,677       55,119
--------------------------------------------------------------------------------

Total liabilities                           2,327,179    1,006,686      177,191
--------------------------------------------------------------------------------

SHAREHOLDERS' EQUITY (DEFICIENCY)

Share capital (note 11)                       229,852      229,852      120,252

Deficit                                    (2,019,577)    (893,263)    (136,335)
--------------------------------------------------------------------------------

Total shareholders' equity (deficiency)    (1,789,725)    (663,411)     (16,083)
--------------------------------------------------------------------------------

Total liabilities and shareholders'
   equity                                 $   537,454  $   343,275  $   161,108
================================================================================
Commitments (note 14)

The accompanying notes form an integral part of these financial statements.


Approved by the Directors:                 , Director                 , Director
                          -----------------          -----------------



<PAGE>
Page 18

SENTRY TELECOM SYSTEMS INC.

Statement of Operations and Deficit
Years Ended October 31, 2001, 2000 and 1999
(Expressed in Canadian Dollars)
================================================================================
                                               2001         2000         1999
--------------------------------------------------------------------------------
Revenue
   Other revenues                         $     8,696  $       894  $    28,082
--------------------------------------------------------------------------------

Expenses
   Advertising                                  1,377        6,640        4,896
   Amortization                                22,428       18,820       29,715
   Building repairs and maintenance             3,474        5,540        2,504
   Consulting and accounting                  359,984      294,684      114,179
   Financing fees                              37,000       70,000         -
   Insurance                                    3,101        2,542        2,783
   Interest and bank charges                   77,627        8,016        6,531
   Legal                                       83,011       22,520          725
   Licenses and dues                            2,690        4,223        2,078
   Moving expenses                              5,517        1,058         -
   Office supplies                             20,723       18,566        5,776
   Other                                       13,626        2,288          661
   Packaging and transportation                 4,170        3,484        1,153
   Rent and utilities                          77,812       44,067       36,027
   Salaries and benefits                      844,427      488,118      141,385
   Telephone and on-line services               9,865        8,203        5,995
   Trade show                                   1,902       15,731       10,628
   Travel, meals and entertainment             56,588       54,633       15,114
--------------------------------------------------------------------------------
                                            1,625,322    1,069,133      380,150
--------------------------------------------------------------------------------
Operating loss                             (1,616,626)  (1,068,239)    (352,068)
--------------------------------------------------------------------------------

Other items
   Loss on disposal of capital assets            -            -          (1,409)
   Grants/tax credits from research
     and development                          490,312      311,311      147,338
--------------------------------------------------------------------------------
                                              490,312      311,311      145,929
--------------------------------------------------------------------------------
Net loss for the year                      (1,126,314)    (756,928)    (206,139)
--------------------------------------------------------------------------------
Retained earnings (deficit),
  beginning of year                          (893,263)    (136,335)      69,804
--------------------------------------------------------------------------------
Deficit, end of year                      $(2,019,577) $  (893,263) $  (136,335)
================================================================================
Loss per share (Basic and diluted)        $     (0.14) $     (0.10) $     (0.03)
================================================================================
Weighted average number of
  common shares outstanding                 7,999,200    7,830,136    7,203,946
================================================================================

The accompanying notes form an integral part of these financial statements.

<PAGE>
Page 19

SENTRY TELECOM SYSTEMS INC.

Statement of Cash Flows
Years Ended October 31, 2001, 2000 and 1999
(Expressed in Canadian Dollars)
================================================================================
                                               2001         2000         1999
--------------------------------------------------------------------------------
Cash flows from (used in) operating
  activities
   Net loss for the year                  $(1,126,314) $  (756,928) $  (206,139)
   Adjustment for items not involving
     cash:
     Amortization                              22,428       18,820       29,715
     Loss on disposal of capital assets          -            -           1,409
--------------------------------------------------------------------------------
                                           (1,103,886)    (738,108)    (175,015)
Change in non-cash working capital items:
   (Increase) decrease in accounts
     receivable                                (1,598)      (2,402)      61,594
   (Increase) decrease in taxes
     recoverable                             (229,426)    (175,991)     101,903
   Increase in inventories                    (11,095)     (58,507)      (2,885)
   Decrease (increase) in prepaid
     expenses                                  24,450      (29,034)      (1,991)
   Decrease (increase) in subscriptions
     receivable                                  -          90,000      (90,000)
   Increase in accounts payable and
     accrued liabilities                      155,150      327,907       56,630
     Decrease in deferred revenue                -            -         (21,200)
--------------------------------------------------------------------------------
                                           (1,166,405)    (586,135)     (70,964)
--------------------------------------------------------------------------------

Cash flows from (used in) financing
  activities
   Funds received from the issuance
    of share capital                             -         109,600      120,000
   Increase in long-term debt, net             85,841      162,130       57,500
   Increase in promissory notes payable     1,070,892      219,917         -
   Increase (decrease) in amounts due
    to shareholders                             8,610      119,541      (71,043)
--------------------------------------------------------------------------------
                                            1,165,343      611,188      106,457
--------------------------------------------------------------------------------
Cash flows used in investing
  activities
   Purchase of capital assets                 (27,294)     (30,899)        -
--------------------------------------------------------------------------------
Increase (decrease) in cash and
  cash equivalents                            (28,356)      (5,846)      35,493
--------------------------------------------------------------------------------
Cash and cash equivalents,
  beginning of year                            31,938       37,784        2,291
--------------------------------------------------------------------------------
Cash and cash equivalents,
  end of year                             $     3,582  $    31,938  $    37,784
================================================================================

The accompanying notes form an integral part of these financial statements.

<PAGE>
Page 20

SENTRY TELECOM SYSTEMS INC.

Notes to Financial Statements
October 31, 2001, 2000 and 1999
(Expressed in Canadian Dollars)
================================================================================

1.   Incorporation

     The Company was incorporated under the laws of the Province of British
     Columbia on April 17, 1996. The Company's primary business activity
     involves the designing and selling of products for computer
     telecommunication security with intended markets to be located in Canada,
     the United States and Asia. Subsequent to October 31, 2001 the Company has
     undergone a change in control (note 16).

2.   Continuance of Operations

     These financial statements are prepared in accordance with Canadian
     generally accepted accounting principles with the assumption being that the
     Company will continue on a going concern basis and that it will be able to
     realize assets and discharge liabilities in the normal course of business.
     Accordingly, they do not give effect to adjustments, if any, that would be
     necessary should the Company be unable to continue as a going concern and,
     therefore, be required to realize its assets and liquidate its liabilities
     other than in the normal course of business and at amounts which may differ
     from those shown in the financial statements. As at October 31, 2001, the
     Company had a working capital deficiency of $1,583,879 (2000 - $507,265;
     1999 - $nil) and accumulated deficits totalling $2,019,577 (2000 -
     $893,263; 1999 - $136,335.) The Company's continuing operations, as
     intended, are dependent upon its ability to obtain adequate investment
     funding to complete the development and commercialization of its product.
     Thereafter, the Company's continuing operations, as intended, will be
     dependent upon its ability to successfully find markets for its product and
     on its ability to produce, deliver and support its product.

3.   Significant Accounting Policies

     The financial statements of the Company have been prepared in accordance
     with Canadian generally accepted accounting principles and, in management's
     opinion, have been properly prepared within reasonable limits of
     materiality and within the framework of the significant accounting policies
     summarized below:

     (a)  Use of Estimates

          The preparation of financial statements in conformity with Canadian
          generally accepted accounting principles requires management to make
          estimates and assumptions that affect the reported amount of assets
          and liabilities and disclosure of contingent assets and liabilities at
          the date of the financial statements and the reported amount of
          revenues and expenses during the period. Actual results may differ
          from those estimates.

<PAGE>
Page 21

SENTRY TELECOM SYSTEMS INC.

Notes to Financial Statements
October 31, 2001, 2000 and 1999
(Expressed in Canadian Dollars)
================================================================================

3.   Significant Accounting Policies (continued)

     (b)  Impairment of Long-term Assets

          The Company re-evaluates the recoverability of long-term assets,
          including capital assets and intangible assets based upon estimates
          using factors such as future asset utilization, business climate and
          future undiscounted cash flows expected to result from the use of the
          related assets or be realized on sale. The Company's policy is to
          write down assets to their net recoverable amount in the period when
          it is determined that the carrying amount of the asset is not likely
          to be recovered.

     (c)  Cash Equivalents

          Cash equivalents usually consist of highly liquid investments which
          are readily convertible into cash with maturities of three months or
          less when purchased. As at October 31, 2001, there were $Nil (2000 -
          $Nil; 1999 - $30,130) in cash equivalents.

     (d)  Inventories

          Inventories are recorded at the lower of cost and net realizable
          value.

     (e)  Capital Assets

          Capital assets are recorded at historical cost. Amortization of
          capital assets is calculated using the straight-line method at the
          following annual rates:

                Computer equipment           33.33%
                Computer software              100%
                Development/test equipment   33.33%
                Furniture and fixtures       33.33%
                Office equipment             33.33%

     (f)  Other Assets

          Patents and trademarks are recorded at cost and are being amortized on
          the straight-line basis over sixty (60) months.

     (g)  Loss Per Share

          Loss per share is computed using the weighted average number of common
          shares outstanding during the period. Potential common shares which
          could dilute earnings in the future are disclosed in Note 11(d).



<PAGE>
Page 22

SENTRY TELECOM SYSTEMS INC.

Notes to Financial Statements
October 31, 2001, 2000 and 1999
(Expressed in Canadian Dollars)
================================================================================

3.   Significant Accounting Policies (continued)

     (h)  Income Taxes

          The Company has adopted the provision of CICA Handbook Section 3465,
          Income Taxes. Under this standard, current income taxes are recognized
          for the estimated income taxes payable for the current period.

          Future taxes are recognized for the tax consequences of "temporary
          differences" by applying enacted or substantively enacted statutory
          tax rates applicable to future years to differences between the
          financial statement carrying amounts and the tax basis of existing
          assets and liabilities. The effect on deferred taxes for a change in
          tax rates is recognized in income in the period that includes the date
          of enactment or substantive enactment. In addition, Section 3465
          requires the recognition of future tax benefits to the extent that
          realization of such benefits is more likely than not.

     (i)  New Accounting Pronouncements

          In June 2001, the Financial Accounting Standards Board issued
          Statement of Financial Accounting Standards No. 141 (SFAS 141),
          Business Combinations. SFAS 141 applies to all business combinations
          initiated after June 30, 2001 accounted for using the purchase method.
          The adoption of SFAS 141 will not have an impact on the Company's
          financial statements.

          In June 2001, the Financial Accounting Standards Board issued
          Statement of Financial Accounting Standards No. 142 (SFAS 142),
          Goodwill and Other Intangible Assets. The provisions of SFAS 142 are
          required to be applied starting with fiscal years beginning after
          December 15, 2001 with earlier application permitted for entities with
          fiscal years beginning after March 15, 2001 provided that the first
          interim financial statements have not been previously issued. The
          Statement is required to be applied at the beginning of the entity's
          fiscal year and to be applied to all goodwill and other intangible
          assets recognized in its financial statements to that date. The
          adoption of SFAS 142 will not have an impact on the Company's
          financial statements.

          In August 2001, the Financial Accounting Standards Board issued
          Statement of Financial Accounting Standards No. 143 (SFAS 143), Asset
          Retirement Obligations. SFAS 143 establishes accounting standards for
          recognition and measurement of a liability for the costs of assets
          retirement obligations. Under SFAS 143, the costs of retiring an asset
          will be recorded as a liability when the retirement obligation arises
          and will be amortized to expense over the life of the asset. The
          adoption of SFAS 143 will not have an impact on the Company's
          financial statements.

<PAGE>
Page 23

SENTRY TELECOM SYSTEMS INC.

Notes to Financial Statements
October 31, 2001, 2000 and 1999
(Expressed in Canadian Dollars)
================================================================================

3.   Significant Accounting Policies (continued)

     (i)  New Accounting Pronouncements (continued)

          In October, 2001, the Financial Accounting Standards Board issued
          Statement of Financial Accounting Standards No. 144 (SFAS 144),
          Accounting for the Impairment or Disposal of Long-lived Assets. SFAS
          144 supersedes SFAS 121, Accounting for the Impairment of Long-lived
          Assets and Long-lived Assets to be Disposed Of, and APB Opinion 30,
          Reporting the Results of Operations - Reporting the Effects of
          Disposal of a Segment of a Business, and Extraordinary, Unusual and
          Infrequently Occurring Events and Transactions, for segments of a
          business to be disposed of. SFAS 144 is effective for fiscal years
          beginning after December 15, 2001. The adoption of SFAS 144 will not
          have an impact on the Company's financial statements.

     (j)  Stock-based Compensation

          No compensation expense is recognized when stock options are issued to
          employees, directors and consultants of the Company. Any consideration
          paid on the exercise of stock options or purchase of stock is credited
          to share capital.

     (k)  Advertising

          The Company expenses advertising costs as incurred.

4.   Inventories

                                               2001         2000         1999
     ---------------------------------------------------------------------------
     Raw materials                         $    4,708   $   19,377   $    4,885
     Finished goods                            69,779       44,015         -
     ---------------------------------------------------------------------------
                                           $   74,487   $   63,392   $    4,885
     ===========================================================================


5.   Taxes Recoverable

     The Company has reported taxes recoverable totalling $409,410 (2000 -
     $179,984; 1999 - $3,993) in respect of a government program involving the
     recovery of tax credits on scientific research and experimental development
     expenditures. These funds were received in the subsequent period.


<PAGE>
Page 24

SENTRY TELECOM SYSTEMS INC.

Notes to Financial Statements
October 31, 2001, 2000 and 1999
(Expressed in Canadian Dollars)
================================================================================

6.   Capital Assets

     ---------------------------------------------------------------------------
                                                         2001
                                                        Accumulated    Net Book
                                              Cost     Amortization       Value
     ---------------------------------------------------------------------------
     Computer equipment                    $   52,468   $   36,860   $   15,608
     Computer software                         38,172       38,172         -
     Development/test equipment                40,807       25,004       15,803
     Furniture and fixtures                     6,893        2,480        4,413
     Office equipment                             914          914         -
     ---------------------------------------------------------------------------
                                           $  139,254   $  103,430   $   35,824
     ===========================================================================

     ---------------------------------------------------------------------------
                                                         2000
                                                        Accumulated    Net Book
                                              Cost     Amortization       Value
     ---------------------------------------------------------------------------
     Computer equipment                    $   36,962   $   28,287   $    8,675
     Computer software                         38,172       36,844        1,328
     Development/test equipment                33,343       15,254       18,089
     Furniture and fixtures                     2,570        1,681          889
     Office equipment                             914          914         -
     ---------------------------------------------------------------------------
                                           $  111,961   $   82,980   $   28,981
     ===========================================================================

     ---------------------------------------------------------------------------
                                                         1999
                                                        Accumulated    Net Book
                                              Cost     Amortization       Value
     ---------------------------------------------------------------------------
     Computer equipment                    $   27,033   $   19,275   $    7,758
     Computer software                         35,876       35,876         -
     Development/test equipment                15,668        8,502        7,166
     Furniture and fixtures                     1,570        1,570         -
     Office equipment                             914          914         -
     ---------------------------------------------------------------------------
                                           $   81,061   $   66,137   $   14,924
     ===========================================================================



<PAGE>
Page 25

SENTRY TELECOM SYSTEMS INC.

Notes to Financial Statements
October 31, 2001, 2000 and 1999
(Expressed in Canadian Dollars)
================================================================================

7.   Intangible Assets

     ---------------------------------------------------------------------------
                                                         2001
                                                        Accumulated    Net Book
                                              Cost     Amortization       Value
     ---------------------------------------------------------------------------
     Patents and trademarks                $    9,898   $    8,325   $    1,573
     ===========================================================================

     ---------------------------------------------------------------------------
                                                         2001
                                                        Accumulated    Net Book
                                              Cost     Amortization       Value
     ---------------------------------------------------------------------------
     Patents and trademarks                $    9,898   $    6,348   $    3,550
     ===========================================================================

     ---------------------------------------------------------------------------
                                                         2001
                                                        Accumulated    Net Book
                                              Cost     Amortization       Value
     ---------------------------------------------------------------------------
     Patents and trademarks                $    9,898   $    4,370   $    5,528
     ===========================================================================

8.   Due to Shareholder

     The amount due to shareholder is due on demand and bears interest at the
     rate of 6% per annum, compounded monthly. Interest expense for the current
     year totalled $8,610 (2000: $3,241). The indebtedness was non-interest
     bearing for the years ended 1999 and 1998.

<PAGE>
Page 26

SENTRY TELECOM SYSTEMS INC.

Notes to Financial Statements
October 31, 2001, 2000 and 1999
(Expressed in Canadian Dollars)
================================================================================

9.   Promissory Notes Payable

     ---------------------------------------------------------------------------
                                               2001         2000         1999
     ---------------------------------------------------------------------------
     Notes payable, due to a related
     party. The note is due on demand,
     and bears interest at the Bank of
     Montreal prime rate plus 5% per
     annum, compounded monthly.            $    4,029   $     -      $     -

     Various parties, notes were due
     on March 27, 2001 holding as
     security all of the assets of
     the Company. The notes bear
     interest at the Bank of Montreal
     prime rate plus 5% per annum,
     compounded monthly. Note was
     repaid during the year.                     -         219,917         -

     CTI Diversified Holdings, Inc.,
     notes are due on demand and bear
     interest at the Bank of Montreal
     prime rate plus 5% per annum,
     compounded monthly. $US 250,000
     of the promissory notes are
     convertible into common shares
     plus a warrant at a price of $US
     0.25 (Cdn equivalent: $0.40)
     (see note 16).                           818,220         -            -

     Notes payable are due on demand,
     holding as security all of the
     assets of the Company. The notes
     bear interest at the Bank of
     Montreal prime rate plus 5% per
     annum, compounded monthly.               468,560         -            -
     ---------------------------------------------------------------------------
                                           $1,290,809   $  219,917   $     -
     ===========================================================================

     The prime rate at the balance sheet date was 4.50%.


<PAGE>
Page 27

SENTRY TELECOM SYSTEMS INC.

Notes to Financial Statements
October 31, 2001, 2000 and 1999
(Expressed in Canadian Dollars)
================================================================================

10.  Long-term Debt

     (a)  Long-term debt consists of the following:

     ---------------------------------------------------------------------------
                                               2001         2000         1999
     ---------------------------------------------------------------------------
     (i)    Principal to be repaid
            in 84 equal monthly
            installments equal to
            the greater of: (i)
            $2,381; or (ii) an
            amount equal to 5% of
            the gross monthly
            revenues on all of the
            products incorporating
            the Technology developed.
            Payments commenced one
            month after the project
            completion date of
            September 30, 2000. The
            debt is non-interest
            bearing. Subsequent to
            year end, the debt was
            converted into shares of
            common stock of CTI
            Diversified Holdings, Inc.
            (see note 16 (c)).             $  270,000   $  200,000   $   50,000

    (ii)    Principal to be repaid in
            annual installments based
            on 4% of annual incremental
            export sales revenues,
            commencing October, 1999,
            ending November, 2003. The
            debt is non-interest bearing.      25,581       12,130         -

    (iii)   Principal to be repaid in
            annual installments, based on
            4% of sales revenue made in
            the market, commencing June,
            1999, ending June, 2001.
            The debt is non-interest
            bearing.                            7,500        7,500        7,500

    (iv)    Conditional sales contract,
            repayable in 48 monthly
            installments of $84, including
            interest at 19% per annum.          2,390         -            -
    ----------------------------------------------------------------------------
                                              305,471      219,630       57,500
    Less: Current portion                     (62,228)     (30,953)      (2,381)
    ----------------------------------------------------------------------------


                                           $  243,243   $  188,677   $   55,119
    ============================================================================

    (b)  The minimum principal repayments on long-term debt during the next five
         years are as follows:
                    ----------------------------------------------
                      2002                          $      62,228
                      2003                                 29,267
                      2004                                 29,411
                      2005                                 28,852
                      2006                                 28,572
                    ----------------------------------------------
                                                    $     178,330
                    ==============================================

<PAGE>
Page 28

SENTRY TELECOM SYSTEMS INC.

Notes to Financial Statements
October 31, 2001, 2000 and 1999
(Expressed in Canadian Dollars)
================================================================================

11.  Share Capital

    (a)  Authorized: 50,000,000 common shares without par value

    (b)  Issued:

         -----------------------------------------------------------------------
                                                         Number
                                                        of Shares     Amount
         -----------------------------------------------------------------------
         Balance, October 31, 1998 and 1997             7,200,000     $     252
         Issued for cash                                  480,000       120,000
         -----------------------------------------------------------------------
         Balance, October 31, 1999                      7,680,000       120,252
         Issued for cash                                  200,000        50,000
         Allotted for cash issued on November 20, 2000    119,200        59,600
         -----------------------------------------------------------------------
         Balance, October 31, 2000                      7,999,200     $ 229,852
         =======================================================================
         Balance, October 31, 2001                      7,999,200     $ 229,852
         =======================================================================

    (c)  Share Subdivision

         On November 30, 2000, the Company subdivided all of its issued and
         outstanding shares on a one for two basis and, thereafter, reduced the
         authorized share capital to 50,000,000 common shares without par value.
         All share data has been retroactively restated to reflect the share
         subdivision.

    (d)  Stock Options

         As at October 31, 2001, the Company has granted employee incentive
         stock options enabling the holders to acquire 990,000 common shares at
         an exercise price of $0.25 per share and 370,000 common shares at an
         exercise price of $0.40 per share. The options were terminated in
         November 2001.

<PAGE>
Page 29

SENTRY TELECOM SYSTEMS INC.

Notes to Financial Statements
October 31, 2001, 2000 and 1999
(Expressed in Canadian Dollars)
================================================================================

12.  Income Taxes

     The components of the future income tax assets are as follows:

     ---------------------------------------------------------------------------
                                               2001         2000         1999
     ---------------------------------------------------------------------------
     Future tax assets:
       Non-capital loss carry forwards     $  982,241   $  402,724   $   62,062
       Undepreciated capital cost over
        (under) net book value of
        capital assets                          2,085       (7,040)        -
       Undepreciated capital cost over
         net book value of intangible
         assets                                 1,762          879         -
     ---------------------------------------------------------------------------
                                              986,088      396,563       62,062
     Less: valuation allowance               (986,088)    (396,563)     (62,062)
     ---------------------------------------------------------------------------

     Total future income tax assets        $     -      $     -      $     -
     ===========================================================================

     The valuation allowance reflects the Company's estimate that the tax
     assets, more likely than not, will not be realized.

     The Company has accumulated non-capital losses for income tax purposes of
     approximately $2,200,000. The losses expire in the following years:

           2006                             $     136,000
           2007                                   746,000
           2008                                 1,318,000
         ------------------------------------------------
                                            $   2,200,000
         ================================================

13.  Financial Instruments

     The Company's financial instruments consist of cash and cash equivalents,
     accounts receivable, taxes recoverable, accounts payable and accrued
     liabilities, due to shareholder, promissory notes payable and long-term
     debt. The fair value of these financial instruments approximate their
     carrying values, unless otherwise noted. The Company is not exposed to
     significant interest, currency or credit risk arising from these financing
     instruments.

<PAGE>
Page 30

SENTRY TELECOM SYSTEMS INC.

Notes to Financial Statements
October 31, 2001, 2000 and 1999
(Expressed in Canadian Dollars)
================================================================================

14.  Commitments

     (a)  The Company has an operating commitment under an offer to lease office
          space of $74,405 (2000 - $10,449). The offer to lease expires on July
          31, 2002.

     (b)  The Company has entered into operating leases for certain office
          equipment. Minimum rental payments under these leases are as follows:

         ------------------------------------------------
           2002                             $       6,164
           2003                                     2,681
         ------------------------------------------------
           Total                            $       8,845
         ================================================

     (c)  Effective September 14, 2000, the Company has entered into a
          management services contract with a company controlled by the former
          President and CEO of the Company to receive business advisory and
          other support services at a cost of $12,000 per month. The agreement
          is in effect for a two-year period from the effective date. The
          contract was cancelled in March 2002.

15.  Related Party Transactions

     (a)  The aggregate amount of expenditures made to parties not at arm's
          length to the Company and charged to operations consist of the
          following:

     ---------------------------------------------------------------------------
                                               2001         2000         1999
     ---------------------------------------------------------------------------

     Consulting and accounting fees were
     paid or accrued to a company
     controlled by the CEO of the
     Company.                              $  144,000   $  165,155   $   66,667

     Consulting and accounting fees were
     paid or accrued to the president of
     the Company.                                -           2,928         -

     Interest paid and accrued to CTI
     Diversified Holdings, Inc., a
     shareholder of the Company.               18,094         -            -

     Interest paid and accrued to a
     shareholder and director of the
     Company                                    8,610         -            -
     ---------------------------------------------------------------------------

     Management is of the opinion that the terms and conditions of the above
     noted transactions are consistent with standard business practice.

     (b)  Included in accounts payable and accrued liabilities is $268,800 due
          to a company controlled by the CEO of the Company. Interest of 1.5%
          per month is being charged on this amount.

     (c)  Also included in accounts payable and accrued liabilities is $46,972
          due to a shareholder of the Company.

<PAGE>
Page 31

SENTRY TELECOM SYSTEMS INC.

Notes to Financial Statements
October 31, 2001, 2000 and 1999
(Expressed in Canadian Dollars)
================================================================================

16.  Subsequent Events

     Change of Control

     (a)  In November 2001, the Company agreed to convert $250,000US (Cdn
          equivalent: $396,675) of the promissory notes of CTI Diversified
          Holdings, Inc. into units of the Company. Each unit consisted of one
          common share of the Company, plus one share purchase warrant entitling
          the holder to acquire an additional common share of the Company at a
          price of $0.25US (Cdn equivalent: $0.40) per share on or before March
          13, 2002 (note 9).

     (b)  In January 2002, the founding shareholders of the Company entered into
          a purchase and sale agreement with CTI Diversified Holdings, Inc. to
          sell 7,160,000 common shares of the Company. The purchase and sale
          agreement closed on April 15, 2002. After the closing of the share
          purchase agreement and the conversion of the promissory note detailed
          in note 16(a), CTI Diversified Holdings, Inc., a Delaware public
          company, owned 90% of the issued and outstanding shares of the
          Company.

     (c)  In April 2002, a debt-holder of the Company exercised the conversion
          right of debt in the amount of $270,000 for shares of CTI Diversified
          Holdings, Inc. on the basis of one CTI Diversified Holdings, Inc.
          share for each $0.2905US (Cdn equivalent: $0.46) of outstanding
          indebtedness for a total of 592,826 conversion shares.

17.  Differences between Canadian and United States Generally Accepted
     Accounting Principles (Canadian GAAP and US GAAP)

     The financial statements and the selected financial data have been prepared
     under Canadian generally accepted accounting principles ("Canadian GAAP").

     For each year of presentation, the modifications necessary in order for
     these financial statements to conform to U.S. GAAP have been suitably
     provided as follows:

     (a)  Stock Options

          Unlike U.S. GAAP, Canadian GAAP does not require the recording and
          recognition of employee stock options and the related compensation
          expense and deferred compensation expense until the stock options are
          actually exercised by the employees. Reference is made to Note 11(d)
          of the financial statements. As the options were terminated subsequent
          to year end, no material adjustments are deemed necessary in order for
          these financial statements to reconcile to U.S. GAAP.

<PAGE>
Page 32

SENTRY TELECOM SYSTEMS INC.

Notes to Financial Statements
October 31, 2001, 2000 and 1999
(Expressed in Canadian Dollars)
================================================================================

17.  Differences between Canadian and United States Generally Accepted
     Accounting Principles (Canadian GAAP and US GAAP) (continued)

     (b)  Income tax

          Under Canadian GAAP, the future tax benefit related to the non-capital
          loss carry forwards has not been recorded in the accounts. Under U.S.
          GAAP, companies must follow the requirements of Statement of Financial
          Accounting Standards No. 109 (SFAS 109) which requires the use of the
          asset/liability method of measurement of tax liabilities, wherein
          deferred tax assets are recognized as well as deferred tax
          liabilities.

          The Company has significant non-capital loss carry forwards and SFAS
          109 would require the recognition of a long-term tax asset for the
          future benefit expected from the application of these carryforwards to
          future profitable years. If it is expected that the entire amount of
          non-capital loss carryforwards will not be utilized, then a valuation
          allowance is applied to the asset to reasonably state the asset at its
          expected value. As at October 31, 2001, the valuation allowance is
          equal to 100% of the deferred tax asset. Changes in the value of the
          deferred asset are recognized each year as income tax expense.

     (c)  Supplemental Disclosure of Cash Flow Information

          Cash paid (received) during the year for:

          ----------------------------------------------------------------------
                                               2001         2000         1999
          ----------------------------------------------------------------------
          Interest                          $    5,318   $     560   $    6,082
          Income taxes                      $ (179,984)  $  (3,993)  $     -
          ----------------------------------------------------------------------


<PAGE>
Page 33

SENTRY TELECOM SYSTEMS INC.

Notes to Financial Statements
October 31, 2001, 2000 and 1999
(Expressed in Canadian Dollars)
================================================================================

17.  Differences between Canadian and United States Generally Accepted
     Accounting Principles (Canadian GAAP and US GAAP) (continued)

     (d)  Supplemental Financial Information

          (i)     Reconciliation of Deficit under U.S. GAAP

                  --------------------------------------------------------------
                                               2001         2000         1999
                  --------------------------------------------------------------
                  Loss for the year -
                   Canadian GAAP          $(1,126,314)  $ (756,928)  $ (206,139)
                  Adjustments -
                   U.S. GAAP                     -         (10,800)      (7,276)
                  --------------------------------------------------------------
                  Loss for the year -
                   US GAAP                $(1,126,314)  $ (767,728)  $ (213,415)
                  ==============================================================

                  Surplus (deficit) for
                   the year - Canadian
                   GAAP                   $(2,019,577)  $ (893,263)  $ (136,335)
                  Adjustments -
                   U.S. GAAP                  (18,668)     (18,668)      (7,868)
                  --------------------------------------------------------------
                  Surplus (deficit) end
                   of year - U.S. GAAP    $(2,038,245)  $ (911,931)  $ (144,203)
                  ==============================================================

                  The adjustments relate to interest on shareholders loans and
                  long-term debt not previously charged to the operating
                  statement.

          (ii)    Reconciliation of Cash Flows under U.S. GAAP
                  --------------------------------------------------------------
                                               2001         2000         1999
                  --------------------------------------------------------------
                  Cash provided by (used
                   for) operating
                   activities -
                   Canadian GAAP          $(1,166,405)  $ (586,135)  $  (70,964)
                  Adjustments -
                   U.S. GAAP                     -            -            -
                  --------------------------------------------------------------
                  Cash provided by
                   (used for)
                   operating
                   activities -
                   U.S. GAAP              $(1,166,405)  $ (586,135)  $  (70,964)
                  ==============================================================

<PAGE>
Page 34

SENTRY TELECOM SYSTEMS INC.

Notes to Financial Statements
October 31, 2001, 2000 and 1999
(Expressed in Canadian Dollars)
================================================================================

17.  Differences between Canadian and United States Generally Accepted
     Accounting Principles (Canadian GAAP and US GAAP) (continued)

          (iii)   Reconciliation of Total Assets, Liabilities and Shareholders'
                  Equity

                  --------------------------------------------------------------
                                               2001         2000         1999
                  --------------------------------------------------------------
                  Total assets -
                    Canadian GAAP         $   537,454   $  343,275   $  161,108
                  Adjustments -
                    U.S. GAAP                    -            -            -
                  --------------------------------------------------------------
                  Total assets -
                    U.S. GAAP             $   537,454   $  343,275   $  161,108
                  ==============================================================

                  Total liabilities
                   and shareholders'
                   equity - Canadian
                   GAAP                   $   537,454   $  343,275   $  161,108
                  Adjustments -
                   U.S. GAAP                     -            -            -
                  --------------------------------------------------------------
                  Total liabilities
                   and shareholders'
                   equity - U.S. GAAP     $   537,454   $  343,275   $  161,108
                  ==============================================================

          (iv)    Loss per Share - U.S. GAAP

                  --------------------------------------------------------------
                                          Year Ended    Year Ended    Year Ended
                                         October 31,   October 31,   October 31,
                                                2001          2000          1999


                  --------------------------------------------------------------
                  Loss per share            $ (0.14)      $ (0.10)      $ (0.03)
                  ==============================================================


<PAGE>
Page 35

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

   The following discussion of the financial condition, results of operations,
cash flows and changes in financial position of CTI Diversified Holdings, Inc.
(the "Company") should be read in conjunction with the Company's most recent
financial statements and notes appearing elsewhere in this Form 10-QSB; and in
the Company's 10-KSB filed on April 15, 2002.

Overview

   We, CTI Diversified Holdings, Inc., intend to design, develop and
manufacture telecommunication security products for a broad range of corporate,
government, military and institutional (collectively referred to as
"enterprise") applications. We are in the start-up phase of our operations,
having not yet completed development of our initial product and having not yet
booked any sales of our initial product. Upon the completion of a purchase and
sale agreement in April 2002 to acquire 90% of the outstanding shares of Sentry
Telecom Systems Inc. ("Sentry") from the founding shareholders of Sentry, the
Company adopted the Business plan of Sentry.

   Sentry is a private company incorporated in British Columbia, Canada. Sentry
has a limited history of operations, and has not been profitable to date. Sentry
has focused its efforts on developing security and detection products for
corporate and public telecommunications systems since 1998. Telecommunications
security and detection products encompass the hardware and software tools,
policies and procedures needed to ensure that only authorized persons may access
telecommunications resources. Our goal is to become a significant supplier of
security products to corporate customers and communications service providers
through the continuing development and introduction of security and
telecommunications network products that are compatible with other manufacturers
product offerings used in telecommunications.

   Our initial and primary product at present, the "Phonewall", is a
telecommunications security product, or a product that restricts or blocks
access to all or part of a telecommunications network. It has been designed to
protect communications or telephone networks that carry information or data
stored in an electronic form from the threat of unauthorized modem access and to
protect communications or telephone networks that carry primarily voice traffic
from the theft of unauthorized services. The Phonewall is a combination of
hardware and software that is installed on telephone lines between the user of
the product and a telephone service provider and that blocks access to computer
networks from intruders and/or unauthorized persons attempting to enter through
telephone lines and telephone networks.

  It monitors calls on the telephone lines and classifies their content as
voice, fax or data using our own proprietary signal processing capabilities. The
Phonewall can be configured to allow or disallow particular types of traffic,
such as data calls via modems, over an entire organization, or configured to
define limits for access to designated telephone numbers within an organization.
The Phonewall has the capability to distinguish phone calls carrying modem
signals from other types of phone calls, including voice, and the ability to
terminate the call if it violates security policy. Extensive reporting
capabilities, including reporting on the duration of calls, the type of traffic
including data, fax and voice calls, the number dialed, and the originating
number are included with the product.

  In the future, we intend to research, develop, and market a family of network
security monitoring and warning systems and associated peripheral control
devices for both domestic and international markets. The encompassing design is
planned to be capable of integration with converging broadband wireless and
wireline infrastructures, wireless computing, domestic electronic equipment, and
the Internet. We intend to focus on advancing our patented technologies with an
emphasis on addressing open global wireline/wireless standards that enable
electronic devices within personal and business networks to securely "talk" with
one another. We intend to strive to develop the next generation of security
gatekeepers, which will use our proprietary application algorithms and protocols
to facilitate and enable diverse communication devices to access and transfer
data without sacrificing security in the process.

   Sentry's plan over the next twelve months is to have the Phonewall
commercially available for sale. Achievement of this goal is dependent on the
Company accessing adequate financing, successfully completing its planned
personnel hires, developing and executing a solid marketing plan, successfully
establishing strategic alliances and effective distribution channels,
successfully designing, developing and commercializing its products,

<PAGE>
Page 36

successfully creating and protecting its intellectual property, and its ability
to sustain volatility in markets, systems failures, technological changes, and
government regulations.

   Our negotiations to acquire Sentry commenced in February 2001, when we
entered into a Letter of Intent with Sentry. Sentry agreed to deal exclusively
with us for potential acquisition and we agreed to commence funding their
operational requirements on a monthly basis by way of unsecured loans. In May
2001 we entered into a Purchase and Sale Agreement (the "Sentry Purchase") with
Sentry to purchase a 34% equity interest, or 4,400,000 units, each unit
comprised of one common share plus one purchase warrant, for $1,100,000. The
Agreement was to close by August 15, 2001. We paid $250,000 as a non-refundable,
convertible deposit to Sentry and, between May 15 and August 15, advanced by way
of promissory notes approximately $224,000 to Sentry. The non-refundable deposit
was converted into units of Sentry at $0.25 per unit, each unit comprising one
common share and one warrant to purchase an additional common share.

   On August 15, 2001, the Sentry Purchase agreement between Sentry and CTI
expired. Due to our inability to generate revenues as planned in our Asian
operations, the need to fund those offices longer than planned and eventually
the need to expend additional money to wind down these operations, we had
experienced difficulties in advancing sufficient monies to Sentry for them to
meet their own business plan objectives. We commenced negotiating an extension
to the Sentry closing to December 31, but the extension negotiations were never
completed. In September, the capital markets were rocked by the events of 9/11
and it became even more difficult for us to continue to raise funds.
Accordingly, we reduced significantly the amount of funding being provided to
Sentry, and commenced negotiating a new agreement with the founding shareholders
of Sentry whereby we would acquire only their shares.  As a result of the
cessation of funding from us, Sentry ceased its operations in late September and
dismissed all of its employees. During the period October 2001 through March
2002, we advanced approximately $43,000 to Sentry, to cover only absolutely
essential expenditures, in order to keep Sentry alive during this period.

   In January 2002, we entered into an agreement to acquire an additional
7,160,000 common shares (80%) of Sentry, directly from the founding shareholders
of Sentry, in exchange for 500,000 shares of common stock of CTI. This agreement
closed on April 15, 2002 with the release of 150,000 shares. The remaining
350,000 shares are held in trust by the Company's solicitors and will only be
released as certain performance milestones are achieved. To the extent that
these performance milestones are not met, some or all of these unreleased shares
will be surrendered and returned to the Company for cancellation. Including the
1,000,000 shares of Sentry that were received pursuant to the non-refundable,
but convertible deposit on the May 2001 Sentry Purchase Agreement, CTI now owns
90.7% of the outstanding common stock of Sentry. It is our intent that Sentry's
minority stockholders, currently holding the balance of 839,200 shares of
Sentry, will receive an offer to exchange their Sentry shares for shares in our
company on a basis yet to be determined.

   We received $277,654 in the first four months of 2002 in financing from an
outside party, which allowed us to commence re-starting Sentry's operations in
late March.  We advanced $24,800 to Sentry during the period January 1, 2002 to
March 31, 2002, and advanced a further $110,000 in April 2002. These funds were
augmented by approximately $275,000 that Sentry received from Canadian income
tax authorities as a refund of the previous year's scientific research and
development expenditures. The aggregate of these funds allowed us to re-commence
Sentry's operations in April, 2002.

   In late March 2002, after completion of the new Sentry agreement, Donald
Farnell, resigned his positions at Sentry and was re-appointed a director,
President & CEO of our company and Marlene Gaudry was re-appointed our Chief
Financial Officer. Concurrently, Mark Godsy, who had become a significant
shareholder of our company, was appointed a director and agreed to serve as
Chairman of the Board. These management changes were augmented in early April by
the nomination of Douglas A. Mazur as a director and President and CEO of Sentry
and appointment of Mark Godsy as a director and Chairman of Sentry.

   By June, 2002, it was becoming obvious that CTI was not succeeding in its
attempts to raise additional funding through private placements in spite of the
assistance of Mr. Godsy in this initiative. Accordingly, CTI was unable to
advance promised additional funding to Sentry that would allow Sentry to hire
additional development and marketing personnel. As a direct consequence of this
funding shortfall, in June 2002, Mr. Mazur resigned as a director and President
& CEO of Sentry, Ms. Gaudry resigned as Chief Financial Officer of CTI and Mr.
Godsy resigned as a director and Chairman of both CTI and Sentry. Mr. Farnell
re-assumed the positions of President & CEO of Sentry and Chairman of CTI on an
interim basis.

<PAGE>
Page 37

   CTI continues to seek funding sources for its Sentry operations but will be
unable to continue Sentry's operations beyond August of 2002 unless it succeeds
in this initiative.


Results of Operations

(All amounts are in US dollars unless otherwise stated)

   The results for the period ended June 30, 2002 reflect the operating
results of CTI, Cobratech Industries Inc., for the period January 1 to June 30,
2002 and Sentry for the period from the date of acquisition (April 15, 2002)
until June 30, 2002. The results for the period ended June 30, 2001 reflect the
operating results of CTI and Cobratech Industries Inc. on a consolidated basis,
and the Asian subsidiaries; Cobratech Industries Limited, Cobratech Industries
Japan Limited, and IT Transit Limited (collectively "Asian Operations"), on an
equity basis.

For the 3 months ended June 30, 2002
------------------------------------

   The total expenses for the 3 months ended June 30, 2002 was $329,338
compared to $301,860 for the three months ended June 30, 2001. The total
operating expenses for Sentry for the period April 15 to June 30, 2002 of
$135,367are included in the results of operation for the second quarter of 2002.
Sentry's operating results for the periods prior to April 15, 2002 are not
included in the consolidated operating results of CTI.

   Sentry's operating costs for the second quarter of 2002 consisted of wages
and benefits of approximately $101,500, premises costs of $10,225 and
miscellaneous office and professional consulting costs of $23,642.

   The total expenses for the 3 months ended June 30, 2002 relating to CTI and
Cobratech amounted to $193,971, compared to $301,860 in the same three month
period ended June 30, 2001. The majority of expenses related to legal, and
accounting costs, investor relations and regulatory costs, consulting fees,
office and general administrative expenses, and interest charges on promissory
notes and advances from shareholders. The total interest paid or accrued to
shareholders during the three months ended June 30, 2002 was $15,271 compared to
$72,373 for the comparable period in 2001. The decrease in interest paid to
shareholders is a result of the conversion of amounts owed to shareholders into
common stock in June 2001 and a decrease in bank prime rates. The overall
decrease in expenses for CTI and Cobratech for the 3 months ended June 30, 2002
compared to the 3 months ended June 30, 2001 is the result of a decrease in
activity in the company in 2002 compared to 2001.

   The company had a loss from operations of $1,242,555 for the three months
ended June 30, 2002, compared to $877,193 for the 3 months ended June 30, 2001
and a loss per share of $0.07 for the three months ended June 30, 2002 and $0.04
for the three month period ended June 30, 2001. The Company incurred a loss on
its investments in its foreign subsidiaries of $582,441 for the period ended
June 30, 2001. The Company wrote down its goodwill resulting from the
acquisition of Sentry to nil at June 30, 2002, representing the estimated net
realizable of the goodwill at June 30, 2002. The Company anticipates that Sentry
will not be able to operate as a going concern past August 31, 2002 unless
financing is secured.

For the 6 months ended June 30, 2002
------------------------------------

   For the first six months of 2002, the Company had limited operations and
did not generate any revenue from operations.

   Total expenses for the 6 months of 2002 were $466,871 compared to $487,198
for the six months ended June 30, 2001. Included in the total expenses for the
six months ended June 30, 2002 are Sentry operating costs from April 15, 2002
until June 30, 2002 of $135,367, compared to nil in the comparable six month
period.

   The total expenses for the 6 months of 2002 relating to CTI amounted to
$331,504 compared to $487,198 in the same period of 2001. The majority of
expenses incurred in the first half of 2002 consisted of legal, and accounting
costs, investor relations and regulatory costs, consulting fees and travel
expenses. Travel costs, which amounted to $48,141, were largely attributable to
fund raising activities undertaken in the first and second quarter. Legal and
accounting costs and consulting fees are primarily costs associated with the
preparation of our 10-KSB and general financial consulting services incurred in
the first two quarters of 2002.  Overall general and administrative costs are

<PAGE>
Page 38

down over the same period for 2001 due to the limited activity of the company
during this period and cost cutting measures undertaken by the company in 2002
until adequate financing could be put in place.

   For the six months of 2001, we recorded a loss on our investments of
$3,725,520, which includes a write down of goodwill recorded on the acquisition
of Cobratech, a writedown of our equity investment in our Asian operations and a
provision for impairment in value of our investment in Sentry.

   As a result of the above transactions noted above, we incurred a loss of
$1,400,812 or $0.34 per share for the first half of 2002 compared to a loss of
$4,204,793 or $0.21 per share for the first half of 2001.

Liquidity and Capital Resources

   At June 30, 2002, our current assets totaled $128,409 compared to $1,288 at
December 31, 2001. Our current assets at June 30, 2002 consisted of $117,170 in
cash, and $5,397 in prepaid expenses, and $5,482 in miscellaneous amounts
receivable.

   During the first 6 months of 2002, we used $225,455 of cash in operating
activities, generated $379,375 in cash from financing activities, and used
$37,699 of cash in investing activities.

   Our cash generated from financing activities relating to promissory notes
issued during the period which bear interest at 9% per annum, are unsecured, and
have no set terms of repayment, amounted to $323,511.

   At June 30, 2002, we had total liabilities of $2,397,790 compared to
$1,158,186 at December 31, 2001. The increase in liabilities reflects the
shareholder advances and promissory notes issued during the quarter as well as
an increase in accounts payable and accrued liabilities of $415,317 during the
quarter.

   We believe our existing cash balances are sufficient to carry our normal
operations for the next one month. In order to continue to fund the research
and development expenditures of Sentry at present staffing levels, we will need
to raise approximately $1 million during the next 12 months. 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 of our stockholders. There can be no
assurance that additional financing, will be available to our company or on
acceptable terms.

We also intend to ask creditors and shareholders to convert amounts owing to
them (see notes 5 and 6 to the financial statements) into equity in order to
eliminate the need to raise additional funding to retire these liabilities. To
the extent that we are successful in converting these liabilities into equity,
we will issue additional shares, which will result in dilution to our existing
stockholders. There can be no assurance that we will be successful in converting
these liabilities to equity.


PART II - OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

   CTI, along with Cobratech, has been sued in the Supreme Court of British
Columbia, Canada by Rajesh Taneja, an ex-contractor of Cobratech. The action is
dated 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. The company is
vigorously defending the claim. No trial date has been set, and no Examinations
for Discovery have been conducted.

   Cobratech, along with various alleged guarantors, has been sued in the
Supreme Court of British Columbia, by Unity Wireless Corp. for repayment of
certain funds advanced to Cobratech. In November 2000, Unity advanced $200,000
to Cobratech, evidenced by a promissory note and secured by a general security
agreement covering the assets of Cobratech. The loan bears interest at 1% per
month. The action is dated October 24, 2001. The principal balance owing at
December 31, 2001 under the loan agreement was approximately $78,000. The action
has been stayed until May 2002 on the condition that Cobratech pays 10 percent
of all funds received from financing in excess of $100,000 until May 2002, until
the outstanding amount has been paid. Two of our directors were also directors
of Unity. The company is currently in default of this agreement.

   In August, 2002, CTI reached a verbal agreement with Unity Wireless Corp.
wherein Unity agreed to convert its outstanding indebtedness into common sharers
of CTI at current market rates. A written agreement to formalize this conversion
is currently being prepared. To the extent that we are successful in converting
this indebtedness into equity, we will issue additional shares, which will
result in dilution to our existing stockholders. There can be no assurance that
we will be successful in converting this indebtedness into equity.

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Page 39

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

We issued the following securities during the period, January 1, 2002 to June
30, 2002:

    April 2002 - 100,000 shares of common stock issued to two shareholders in
    exchange for financial consulting and corporate public relations services,
    under Regulation S.

    April 2002 - 181,397 shares of common stock issued to approximately 35 seed
    capital investors of Cobratech as a bonus for non-filing of a registration
    statement, under Regulation S

    April 2002 - 500,000 shares of common stock issued to two persons in
    exchange for shares of Sentry, under Regulation S.

    May 2002 - 592,826 shares of common stock to a Canadian company issued on
    conversion of debts of Sentry, under Regulation S

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

See Item 1 above.

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
June 30, 2002.

ITEM 5.   OTHER INFORMATION

   In March 2002, after completion of the new Sentry agreement, Donald
Farnell, resigned his positions at Sentry and was re-appointed a director,
President & CEO of our company and Marlene Gaudry was re-appointed our Chief
Financial Officer. Ms. Gaudry resigned her position as CFO of CTI effective
June 28, 2002.

   Mr. Mark Godsy, who became a significant shareholder of our company in the
first quarter of 2002, was appointed a director and agreed to serve as Chairman
of the Board in March 2002.

   In April 2002, Mr. Douglas A. Mazur was appointed a Director, President and
CEO of Sentry. Mr. Douglas A. Mazur resigned from his position as Director,
President and CEO of Sentry effective June 28, 2002.

   In April 2002, Mr. Mark Godsy was appointed a Director and Chairman of
Sentry. Mr. Godsy resigned from his position as Director and Chairman of Sentry
and CTI effective June 26, 2002. Mr. Godsy will be returning the shares he
acquired from other shareholders to those other shareholders and, on completion,
will cease being a significant shareholder of our company.

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

(a)   The following exhibits are filed as part of this Quarterly Report on
      Form 10-Q.

      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   Bylaws of Unique Bagel Co., Inc. (now CTI Diversified Holdings,
              Inc., a Delaware corporation), dated August 11, 1998. Incorporated
              by reference to Exhibit 3.1 of the company's Form 10SB12G, filed
              with the SEC on March 24, 2000)

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Page 40

      10.1    Warrant to Purchase Common Stock of CTI Diversified Holdings, Inc.
              (incorporated by reference to Exhibit 10.1 of the Company's 10QSB,
              filed with the Sec on May 15, 2002).

      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 with the SEC on April 17, 2001)

(b)   The following Current Reports on Form 8-K were filed by the Company
      during the last quarter of the period covered by this report:

      June 28, 2002     Notice of resignation of Mr. Mark Godsy as Director and
                        Chairman of the Board of Sentry and CTI.

                                    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 the 22nd day of
August 2002.


                                          CTI DIVERSIFIED HOLDINGS INC.

Date: August 22, 2002

                                          By: /s/ Donald Farnell
                                             ---------------------------------
                                             Director, Chief Executive Officer


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Exhibit 99.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of CTI Diversified Holdings, Inc., (the
"Company") on Form 10-QSB for the period ended June 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Donald
Farnell, Chief Executive Officer and Acting Chief Financial Officer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)   The Report complies with the requirements of Section 13(a) or 15(d) of
      the Securities Exchange Act of 1934; and

(2)   The financial information contained in the Report fairly presents, in all
      material respects, the financial condition and results of operations of
      the Company.

    /s/ Donald Farnell
 -----------------------------------
   Donald Farnell
   Chief Executive Officer and
   Acting Chief Financial Officer
   August 22, 2002



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