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

                                   FORM 10-KSB

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934


                         COMMISSION FILE NUMBER: 0-08718

                                CT HOLDINGS, INC.
                 (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

                 DELAWARE                                       75-2432011
     (STATE OR OTHER JURISDICTION OF                         (I.R.S. EMPLOYER
      INCORPORATION OR ORGANIZATION)                        IDENTIFICATION NO.)

         TWO LINCOLN CENTRE, SUITE 1600, 5420 LYNDON B. JOHNSON FREEWAY
                               DALLAS, TEXAS 75240
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                 (214) 520-9292
                (ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)

      SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT:  NONE

         SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:

                     COMMON STOCK, PAR VALUE $.01 PER SHARE
                                (TITLE OF CLASS)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period 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 [_]

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference to such filing requirements incorporated by reference
in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [_]

State issuer's revenue from continuing operations for its most recent fiscal
year $ 0.

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).  Yes [_] No [X]

As of April 12, 2005, there were outstanding 58,545,928 shares of common stock,
par value $.01 per share. The aggregate market value of common stock held by
non-affiliates of the issuer (39,427,091 shares) based on the closing price of
the issuer's common stock as reported on the OTC Bulletin Board of $0.01 per
share, on April 12, 2005, was $394,270.91. For purposes of this computation, all
executive officers, directors, and 10% beneficial owners of the issuer are
deemed to be


<PAGE>
affiliates.  Such determination should not be deemed an admission that such
officers, directors, or 10% beneficial owners are, in fact, affiliates of the
issuer.

Transitional Small Business Disclosure Format. Yes [_] No [X]

<TABLE>
<CAPTION>
                                CT HOLDINGS, INC.
                                   FORM 10-KSB
                                  ANNUAL REPORT
                            FOR THE FISCAL YEAR ENDED
                                DECEMBER 31, 2004

                                TABLE OF CONTENTS

PART I
<S>         <C>                                                             <C>
Item 1.     Description of Business. . . . . . . . . . . . . . . . . . . .   3

Item 2.     Description of Property. . . . . . . . . . . . . . . . . . . .  11

Item 3.     Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . .  11

Item 4.     Submission of Matters to a Vote of Security Holders. . . . . .  12

PART II

Item 5.     Market for Common Equity and Related Stockholder Matters . . .  13

Item 6.     Management's Discussion and Analysis . . . . . . . . . . . . .  14

Item 7.     Financial Statements . . . . . . . . . . . . . . . . . . . . .  21

Item 8.     Changes in and Disagreements with Accountants on Accounting
            and Financial Disclosure . . . . . . . . . . . . . . . . . . .  21

Item 8A.    Control and Procedures . . . . . . . . . . . . . . . . . . . .  22

Item 8B.    Other Information. . . . . . . . . . . . . . . . . . . . . . .  22

PART III

Item 9.     Directors and Executive Officers of the Registrant . . . . . .  22

Item 10.    Executive Compensation . . . . . . . . . . . . . . . . . . . .  26

Item 11.    Security Ownership of Certain Beneficial Owners and Management
            And Related Stockholder Matters. . . . . . . . . . . . . . . .  27

Item 12.    Certain Relationships and Related Transactions . . . . . . . .  29

Item 13.    Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . .  31

Item 14.    Principal Accountant Fees and Services . . . . . . . . . . . .  31

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32
</TABLE>


<PAGE>
                                     PART I
            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report on Form 10-KSB contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. CT Holdings,
Inc. ("CT Holdings" or the "Company") bases these forward-looking statements on
its expectations and projections about future events, which CT Holdings has
derived from the information currently available to it. In addition, from time
to time, CT Holdings or its representatives may make forward-looking statements
orally or in writing. Furthermore, forward-looking statements may be included in
CT Holdings' filings with the Securities and Exchange Commission or press
releases or oral statements made by or with the approval of one of CT Holdings'
executive officers. For each of these forward-looking statements, CT Holdings
claims the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995. These
forward-looking statements relate to future events or CT Holdings' future
performance, including but not limited to:

     -    possible or assumed future results of operations;

     -    future revenue and earnings; and

     -    business and growth strategies

Forward-looking statements are those that are not historical in nature,
particularly those that use terminology such as may, could, will, should,
likely, expects, anticipates, contemplates, estimates, believes, plans,
projected, predicts, potential or continue or the negative of these or similar
terms. The statements contained in this Report that are not purely historical
are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, including statements regarding the Company's
expectations, beliefs, intentions or strategies regarding the future.
Forward-looking statements are subject to certain known and unknown risks and
uncertainties that could cause actual results to differ materially from those
expressed in any forward-looking statements. These risks and uncertainties
include, but are not limited to, the following important factors with respect to
CT Holdings:

(1)  the uncertainty of general business and economic conditions;

(2)  the financial performance of our investments;

(3)  adverse developments, outcomes and expenses in legal proceedings;

(4)  those described under Risk Factors.

Forward-looking statements are only predictions as of the date they are made and
are  not  guarantees  of performance. All forward-looking statements included in
this  document  are based on information available to CT Holdings on the date of
this  Annual  Report.  Readers  are  cautioned  not  to  place undue reliance on
forward-looking  statements. The forward-looking events discussed in this report
on Form 10-KSB and other statements made from time to time by CT Holdings or its
representatives  may  not  occur,  and  actual  events  and  results  may differ
materially  and  are  subject  to  risks, uncertainties and assumptions about CT
Holdings  including  without limitation those discussed elsewhere in this Annual
Report  under  the  heading Risk Factors as well as those discussed elsewhere in
this  Annual  Report,  and  the  risks  discussed in our Securities and Exchange
Commission  filings.  Except  for  their  ongoing


                                        2
<PAGE>
obligations to disclose material information as required by the federal
securities laws, CT Holdings is not obligated to publicly update or revise any
forward-looking statement, whether as a result of new information, future events
or otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this Annual Report on Form 10-KSB and in
other statements made from time to time by CT Holdings or its representatives
might not occur.


ITEM 1. DESCRIPTION OF BUSINESS

OVERVIEW OF CT HOLDINGS

Since 1996 CT Holdings has provided management expertise including consulting on
operations, marketing and strategic planning and has been a source of capital to
early stage technology companies. The Company was incorporated in Delaware in
1992.  The business model was designed to enable the companies with whom the
Company acquires or invests to become market leaders in their industries.  The
Company's business strategy since 1996 has led to the development, acquisition
and operation of technology based businesses with compelling valuations and
strong business models.  The goal has been to realize the value of these
investments for the Company's shareholders through a subsequent liquidity event
such as a sale, merger, spin-off or initial public offering of the investee
companies.

At December 31, 2004, the Company held investments in Parago, Inc. ("Parago")
and River Logic, Inc. ("River Logic). Parago is a marketing services company
that brings transaction processing capabilities together with information-based
marketing in a way that transforms the way companies interact with their
customers.  Through web-enabled products, processes and resources, Parago
creates solutions to meet their clients' marketing objectives.  Parago provides
a proprietary, promotional marketing technology platform that helps their
clients reduce promotional program costs, increase sales, and enhance customer
relationships. We account for our investment in Parago using the cost method of
accounting. The carrying value of the investment was written down in prior
periods and the investment has no carrying value at December 31, 2004 and 2003.

In May 2000, CT Holdings acquired a minority interest in River Logic, Inc.
(River Logic"), which develops decision-support applications for industries.
River Logic's applications enable industry professionals to model complex
enterprises and explore financial relationships on a desktop computer or laptop.
Embedded analytics allow end-users to understand the financial implications of
critical business decisions by manipulating graphical icons that model their
enterprise. We account for our investment in River Logic using the cost method
of accounting. The carrying value of the investment was written down in prior
periods and the investment has no carrying value at December 31, 2004 and 2003.

Other than its holdings of Parago and River Logic, the Company does not have any
products or services, customers or revenue, and the Company has no other lines
of business.

OVERVIEW OF PARAGO

We formed Parago in 1999 through the contribution of some technology assets
acquired in the late 1990's during the growth period of Internet electronic
commerce industry.

At December 31, 2004, the Company holds 25,000 shares of Parago common stock and
28.8749 shares of Series A-3 convertible preferred stock (convertible into 2,887


                                        3
<PAGE>
shares of Parago common stock). In February 2004, our Chief Executive Officer
("CEO") loaned us $30,000 in order for us to exercise our warrants to purchase
the shares of Series A-3 convertible preferred stock, pursuant to a promissory
note secured by a pledge of the preferred stock. Our CEO also elected to
exercise an exchange right whereby he exchanged 5,000,000 (before a 1:1000
reverse stock split that occurred in 2001) shares of Parago, Inc. common stock
for 6,000,000 shares of CT Holdings common stock. Our CEO has postponed his
right to receive these shares until such time as the shares become authorized.
In prior periods due to continuing operating losses and other factors we
wrote down the carrying value of our investment in Parago to zero.  We believe
that our initial $50,000 investment along with the $30,000 to purchase warrants
in Parago, represented by 20,000 shares of common stock, 28.8749 shares of
Series A-3 convertible preferred stock (convertible into 2,887 shares of Parago
common stock) and an additional 5,000 shares (5,000,000 pre reverse split
shares) received in February 2004 may ultimately provide an appropriate return
on our investment in Parago.

OVERVIEW OF RIVER LOGIC

In May 2000, CT Holdings acquired a minority ownership interest in River Logic.
River Logic develops and markets enterprise optimization technologies and
decision support software applications. Recognizing a need in the marketplace,
River Logic created strategic-level, process modeling tools and approaches for
helping senior managers suggest, evaluate, and understand the impact of business
decisions as they relate to the overall profitability of their organizations.
River Logic's optimization tools integrate several technologies such as mixed
integer optimization, visual process modeling, accounting, and constraint theory
to bring financial planning and profitability tools to market.

The Company holds an ownership interest in River Logic of approximately 8% at
December 31, 2004. Since our initial investment in May 2000, River Logic has
raised additional capital through the issuance of preferred stock and other
equity securities. In a prior period, we wrote down the carrying value of our
investment in River Logic to zero. While we believe that our investment in River
Logic will be successful there can be no assurance that our investment in River
Logic will ultimately provide an appropriate return on our investment.

SPIN-OFF OF CITADEL SECURITY SOFTWARE INC.

On May 17, 2002, we effected a spin-off of Citadel Security Software Inc.
("Citadel"), a wholly-owned subsidiary of the Company at the time, through the
declaration of a pro rata dividend distribution to CT Holdings shareholders in a
ratio of one (1) share of Citadel common stock for every four (4) shares of CT
Holdings common stock (the "Distribution").  In connection with the
Distribution, we entered into a Plan and Agreement of Distribution, a Tax
Disaffiliation Agreement and a Transition Services Agreement with Citadel.

EMPLOYEES

As of December 31, 2004 and 2003, CT Holdings had no full-time employees.

GOVERNMENT REGULATION

Government regulation has not had a material effect on the conduct of our
business to date.


                                        4
<PAGE>
ACCOUNTANT'S REPORT

We have received a report from our independent registered public accounting firm
for our year ended December 31, 2004 containing an explanatory paragraph that
describes the uncertainty regarding our ability to continue as a going concern
due to our recurring operating losses and our significant working capital
deficiency. Please see Management's Discussion and Analysis - Liquidity and
Capital Resources, Factors That May Affect Future Operating Results and Note A
to our financial statements for discussions of some of the conditions that could
impact our ability to continue operations under the current business conditions.

FORWARD-LOOKING STATEMENTS

The following discussion contains forward-looking statements that involve known
and unknown risks, uncertainties and other factors that may cause our actual
results, levels of activity, performance, or achievements to be materially
different from any future results, levels of activity, performance, or
achievements expressed or implied by such forward-looking statements.  Such
factors include, among others things, those risk factors set forth in this
section and elsewhere in this report.  We identify forward-looking statements by
words such as may, should, could, expects, plans, anticipates, believes,
estimates, predicts, potential, or continue or similar terms that refer to the
future.  We cannot guarantee future results, levels of activity, performance or
achievements.

FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

Investing in our common stock involves a high degree of risk.  Any of the
following risks could materially adversely affect our business, operating
results and financial condition and could result in a complete loss of your
investment.

In addition to the other information in this Report, the following factors
should be considered carefully in evaluating the Company and its business.  This
disclosure is for the purpose of qualifying for the safe harbor provisions of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended.  It contains factors that could
cause results to differ materially from such forward-looking statements.  These
factors are in addition to any other cautionary statements, written or oral,
which may be made or referred to in connection with any such forward-looking
statement.

The following matters, among other things, may have a material adverse effect on
the business, financial condition, liquidity, or results of operations of the
Company.  Reference to these factors in the context of a forward-looking
statement or statements shall be deemed to be a statement that any one or more
of the following factors may cause actual results to differ materially from
those in such forward-looking statement or statements.  Before you invest in our
common stock, you should be aware of various risks, including those described
below.  Investing in our common stock involves a high degree of risk. You should
carefully consider these risk factors, together with all of the other
information included in this Report, before you decide whether to purchase
shares of our common stock. Our business and results of operations could be
seriously harmed by any of the following risks. The trading price of our common
stock could decline due to any of these risks, and you may lose part or all of
your investment.


                                        5
<PAGE>
                                  GENERAL RISKS

WE HAVE RECEIVED A GOING CONCERN REPORT FROM OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM, HAVE A HISTORY OF NET LOSSES AND WILL NEED ADDITIONAL FINANCING
TO CONTINUE AS A GOING CONCERN.

We received a report from our independent registered public accounting firm for
our year ended December 31, 2004 containing an explanatory paragraph that
describes the uncertainty regarding our ability to continue as a going concern
due to our recurring operating losses and our significant working capital
deficiency. Historically, we have incurred recurring operating losses and have a
significant stockholders' deficit at December 31, 2004 of approximately $5.4
million. We had a cash balance of $4,168 at December 31, 2004 and current
liabilities total approximately $5.4 million. We have limited access to capital
at December 31, 2004, no plans to raise capital, and we have not identified
sources of capital at December 31, 2004. During the year ended December 31,
2004, we received $200,000 from CITN Investment Inc. ("CII") as part of an
interest bearing Promissory Note. CII is an entity owned 50% by our CEO and 50%
by a shareholder. Our past funding needs of the business have been provided by
financings through short-term notes payable and additional investments from
related parties, including our CEO and CII, however there can be no assurance
that such funds will be available from these related parties in the future. The
Company has been and continues to be dependent upon outside financing to perform
its business development activities, make investments in new technology
companies and to fund operations.

We have made investments in entities that we believe may provide liquidity to
the Company in the long term and we believe that Parago and River Logic may
ultimately be successful. Both Parago and River Logic are privately held
companies and because we hold minority interests in these companies, we have
received only limited information regarding their results of operations and
financial condition. We have not participated in the additional capital
infusions since our initial investments and as a result, our ownership
percentage in both investee companies has been significantly diluted. Our
ownership in Parago consists of 25,000 shares of common stock and 28.8749 shares
of Series A-3 convertible preferred stock (convertible to 2,887 shares of Parago
common stock), and approximately 8% of River Logic. There is no carrying value
in these investments on the balance sheet.

While we believe that the performance of the investee companies to date has been
as expected, there can be no assurance that we will ever achieve liquidity from
these investments.  In addition, there can be no assurance that our plans will
be successful or what other actions may become necessary in the future.  Until
we are able to create liquidity from our investments through sale to a strategic
investor, an initial public offering or some other liquidity transaction, we
will continue to require working capital to fund operating expenses.  Although
we have been successful raising capital in the past, an inability to raise
capital may require us to sell assets.  Such actions could have a material
adverse effect on our business operations and result in charges that could be
material to the Company's business and results of operations.  At December 31,
2004 we have not identified sources of capital nor do we have any plans to raise
sufficient amounts of capital to settle liabilities or to fund business
development activities.

OUR CONVERTIBLE NOTE MAY ADVERSELY IMPACT THE COMPANY AND OUR COMMON
STOCKHOLDERS OR HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY.

We have issued a $200,000 convertible secured promissory note (the "Note")
payable to CII, an entity owned 50% by Steven B. Solomon, our CEO and Chairman
of the Board, and 50% by Lawrence Lacerte, a shareholder and former director of
our


                                        6
<PAGE>
Company.  Pursuant to the terms of the note and the related Loan and Security
Agreement (the "Agreement"), the Note is secured by a pledge of all of our
assets and the Note is convertible into approximately 23.7 million shares of our
common stock, at the option of CII.  CT Holdings has the option to borrow up to
$600,000 under the Agreement (at the sole discretion of CII).  In the event the
entire $600,000 is advanced, the notes would be convertible into 51% of our
common stock.  We have also agreed to use our best efforts to amend our
certificate of incorporation or undertake a reverse stock split to permit
conversion if CII elects to convert the notes.  The terms of the Note and the
Agreement will make it more difficult or impossible for us to raise additional
funds in the future and may have a material adverse effect on us and our
financial condition and results of operations. The Note is senior to our common
stock on any liquidation or sale of our Company, so the Note must be paid before
common stockholders would receive funds in the event of a liquidation or sale.
In addition, the Note is due and payable on the earlier to occur of May 24, 2006
or demand by CII. In the event of a default to CT Holdings under the Note or
Agreement or demand for payment by CII, CII could foreclose on the loans and
obtain all of our assets or force us into bankruptcy, in which case our common
stock would most likely be worthless. These terms and conditions could have a
material adverse effect on us and our financial condition and results of
operations.

OUR BUSINESS FOCUS IS THE DEVELOPMENT AND ACQUISITION OF EARLY STAGE COMPANIES;
HENCE, WE WILL ENCOUNTER NUMEROUS RISKS ASSOCIATED WITH OUR BUSINESS FOCUS AND
OUR PRIOR OPERATING HISTORY MAY NOT BE A MEANINGFUL GUIDE TO EVALUATING OUR
FUTURE PERFORMANCE.

Our business model is designed to enable the companies in whom we invest or
acquire to become market leaders in their industries.  Our strategy over the
years has led to the development, acquisition and operation of technology based
businesses with strong business models and compelling valuations. We believe
that the anticipated growth in technology creates strong opportunities for us to
increase shareholder value by investing in early stage ventures well positioned
for growth in their respective marketplaces.  Our business strategy seeks to
increase the value of each investee by providing management, marketing and
financial expertise along with financial capital and then realize this new value
through a subsequent liquidity event such as a sale, merger or initial public
offering of the investee companies.  However, the impact of any advice and
expertise may be limited due to a lack of a significant ownership percentage in
any of our investees and the lack of available capital.

In May 2002, we were successful in spinning off of Citadel Security Software
Inc. ("Citadel") into a standalone company through the pro-rata dividend
distribution of Citadel common stock to shareholders of CT Holdings.  At the
time of the spin-off, which was first considered in November 2001, Citadel was
losing substantial amounts of money and the investee assets of CT Holdings were
more valuable than the assets in Citadel.  At December 31, 2004 we held
investments in two companies, Parago and River Logic.  However the investments
have no carrying value on the balance sheet of the Company at December 31, 2004
and 2003. The lack of availability of private and public capital available to us
has prevented us from making any additional investments and there can be no
assurance that the availability of capital will improve so that the Company can
execute its business plan.

We have a limited history in executing our business strategy.  As a consequence,
our prior operating history may not provide a meaningful guide to our prospects
in emerging markets.  Moreover, our business model and prospects must be
considered in light of the risk, expense and difficulties frequently encountered
by companies in early stages of development, particularly companies in new and
rapidly evolving markets. We may be unable to execute our strategy of developing
our business due to


                                        7
<PAGE>
numerous risks, including the following:

     -    We may be unable to identify or develop relationships with emerging
          companies.

     -    Any companies that we are able to attract may not succeed and the
          value of our assets and the price of our common stock could
          consequently decline.

     -    Our business model is unproven and depends on the willingness of
          companies to participate in our business development model and
          collaborate with each other and us.

     -    Our expenses may increase as we build the infrastructure necessary to
          implement this model.

     -    We face competition from other incubators, some of which are publicly
          traded companies, venture capital companies and large corporations;
          many of these competitors have greater financial resources and brand
          name recognition than we do, which may make it difficult for us to
          effectively compete.

     -    We will require additional capital resources in order to implement our
          business model and we may not be able to obtain these resources on
          attractive terms, if at all.

WE HAVE INVESTED IN EARLY STAGE VENTURES; AND THERE CAN BE NO ASSURANCE THAT OUR
INVESTMENTS WILL PROVE TO BE FINANCIALLY ATTRACTIVE.

We have developed and invested in Parago and River Logic (our "investees" or
"investee companies"). Inasmuch as our investee companies are early stage
ventures, it is difficult to judge their future prospects. Economic,
governmental, industry and internal company factors outside of our control may
materially and adversely affect each of our investee companies. These investee
companies have had losses in the past and may have substantial losses in the
future. To continue in business, the investee companies may need to raise
capital and may not be able to do so on reasonable terms or at all. In addition,
if the investee companies are able to raise capital, our ownership stake in
these companies would be diluted. Our investee companies may also never be able
to complete an initial public offering of stock, or successfully close a sale,
merger or other liquidity event whereby we would realize a return on our
investment.

WE HAVE LIMITED ACCESS TO FINANCIAL AND OPERATING REPORTS OF OUR INVESTEE
COMPANIES.

Both Parago and River Logic are privately held entities and as such are not
required to provide financial information to its minority shareholders.
Consequently we have limited access to financial operating reports on
performance measures.  As a result, we cannot measure or estimate the long-term
prospects of these investments and while we believe that both Parago and River
Logic have been successful, we cannot assure you that because of the limited
financial reporting that they may be successful in the future or that they will
provide an appropriate return on our investment.


                                        8
<PAGE>
CT HOLDINGS DOES NOT HAVE ACCESS TO THE CASH FLOW OR ASSETS OF ITS INVESTEE
COMPANIES AND HAS BEEN UNABLE TO OPERATE PROFITABLY.

Historically, businesses and technologies in which we have invested are not
controlled by us and as such we have been unable to rely on the investee company
businesses for a source of cash flow, earnings, assets or capital.  There can be
no assurance that CT Holdings will be able to successfully put in place the
financial, administrative and managerial structure necessary to continue to
operate as an independent public company, or that the development of such
structure will not require a significant amount of management's time and other
resources.

WE MAY INCUR SIGNIFICANT COSTS TO AVOID INVESTMENT COMPANY STATUS AND MAY SUFFER
OTHER ADVERSE CONSEQUENCES IF WE ARE DEEMED TO BE AN INVESTMENT COMPANY.

We may incur significant costs to avoid investment company status and may suffer
other adverse consequences if we are deemed to be an investment company under
the Investment Company Act of 1940.  Some of our contemplated equity investments
in other businesses may constitute investment securities under the 1940 Act.  A
company may be deemed to be an investment company if it owns investment
securities with a value exceeding 40% of its total assets, subject to certain
exclusions.  Investment companies are subject to registration under, and
compliance with, the 1940 Act unless a particular exclusion or Securities and
Exchange Commission safe harbor applies.  If we were to be deemed an investment
company, we would become subject to the requirements of the 1940 Act.  As a
consequence, we would be prohibited from engaging in some businesses or issuing
our securities and might be subject to civil and criminal penalties for
noncompliance.  In addition, certain of our contracts might be voided, and a
court-appointed receiver could take control of us and liquidate our business.
Following the Distribution of Citadel, we may be deemed to be an investment
company unless we qualify for a safe harbor within the time permitted under the
1940 Act.

Although we have yet to make any investments in the investment securities of
companies other than Parago and River Logic, such investments, if and when made,
could fluctuate in value, which may cause the value of such securities to exceed
40% of our total assets.  Unless an exclusion or safe harbor were available to
us, we would have to attempt to reduce our investment securities as a percentage
of our total assets.  This reduction could be accomplished in a number of ways,
including the disposition of investment securities and the acquisition of
non-investment security assets. If we were required to sell investment
securities, we may sell them sooner than we may otherwise have preferred. These
sales may be at depressed prices and we might never realize anticipated benefits
from, and may incur losses on, these investments.  Some investments may not be
sold due to contractual or legal restrictions or the inability to locate a
suitable buyer.  Moreover, we may incur tax liabilities when we sell assets.  We
may also be unable to purchase additional investment securities that may be
important to our operating strategy.  If we decide to acquire non-investment
security assets, we may not be able to identify and acquire suitable assets and
businesses.

OUR STOCK IS TRADED IN THE OVER THE COUNTER MARKET.

Our common stock was de-listed from the NASDAQ SmallCap Market on May 17, 2001,
because we did not meet the NASDAQ's requirements for continued listing. Our
common stock now trades on the OTC Bulletin Board.  The OTC Bulletin Board is
generally considered to be a less efficient market, and our stock price, as well
as the liquidity of our common stock, may be adversely impacted as a result.


                                        9
<PAGE>
WE ARE INVOLVED IN LEGAL PROCEEDINGS THAT COULD HAVE A MATERIAL ADVERSE EFFECT
ON OUR BUSINESS

We are involved in legal proceedings as described in PART I Item 3. Legal
Proceedings and from time to time, we may be subject to other legal proceedings,
including but not limited to claims that we have infringed the intellectual
property rights of others, product liability claims, or other claims incidental
to our business.  While we intend to defend such lawsuits, adverse decisions or
settlements, and the costs of defending such suits, could have a material
adverse effect on our business.

OUR EARNINGS AND STOCK PRICE ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS.

Due to the factors noted in this Report, our earnings and stock price have been
and may continue to be subject to significant volatility, particularly on a
quarterly basis.  We have experienced no revenue or earnings which have had an
immediate and significant adverse effect on the trading price of our common
stock.  This may occur again in the future.

FAILURE TO QUALIFY AS A TAX-FREE TRANSACTION COULD RESULT IN SUBSTANTIAL
LIABILITY

In May 2002, CT Holdings effected a pro rata distribution of the common stock of
Citadel to Stockholders of CT Holdings in a ratio of one (1) share of Citadel
common stock for every four (4) shares of CT Holdings common stock.  CT Holdings
and Citadel intend for the Distribution to be tax-free for U.S. federal income
tax purposes.  Neither CT Holdings nor Citadel has requested an advance ruling
from the Internal Revenue Service, or any opinion of their tax advisors, as to
the tax consequences of the Distribution.  No assurance can be given that the
Internal Revenue Service or the courts will agree that the Distribution is
tax-free.

If the Distribution does not qualify for tax-free treatment, a substantial
corporate tax would be payable by the consolidated group of which CT Holdings is
the common parent measured by the difference between (1) the aggregate fair
market value of the Citadel Shares on the Distribution Date and (2) CT Holdings'
adjusted tax basis in the Citadel Shares on the Distribution Date.  The
corporate level tax would be payable by CT Holdings.  However, Citadel has
agreed under certain circumstances to indemnify CT Holdings for all or a portion
of this tax liability.  In addition, under the applicable treasury regulations,
each member of CT Holdings' consolidated group (including Citadel) is severally
liable for such tax liability.

Furthermore, if the Distribution does not qualify as tax-free, each CT Holdings
stockholder who received Citadel Shares in the Distribution would be taxed as if
he had received a cash dividend equal to the fair market value of his Citadel
Shares on the Distribution Date.

Even if the Distribution qualifies as tax-free, CT Holdings could nevertheless
incur a substantial corporate tax liability under Section 355(e) of the Internal
Revenue Code of 1986, as amended (the Internal Revenue Code or the Code), if CT
Holdings or Citadel were to undergo a change in control (whether by acquisition,
additional share issuance or otherwise) pursuant to a plan or series of related
transactions which include the Distribution.  Any transaction which occurs
within the four-year period beginning two years prior to the Distribution is
presumed to be part of a plan or series of related transactions which includes
the Distribution unless CT Holdings establishes otherwise.  Under certain
circumstances, Citadel would be obligated to indemnify CT Holdings for all or a
portion of this substantial corporate tax liability under the tax disaffiliation
agreement.


                                       10
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY

CT Holdings shares office space with Citadel Security Software Inc. and as part
of an agreement, CT Holdings is charged a monthly administrative fee of
approximately $7,500 per month, reduced from $20,000 per month in May 2004,
which includes the cost of the space. We believe that this space will be
sufficient to meet our needs for the foreseeable future.

The telephone number of our principal office is (214) 520-9292.  The Company
maintains a website at http://www.ct-holdings.com.

ITEM 3. LEGAL PROCEEDINGS

Set forth below are litigation matters to which we are a party. We believe that
we have meritorious defenses and will vigorously defend ourselves.  However, an
unfavorable resolution of, settlement, or defense costs related to one or more
of these lawsuits could have a material adverse effect on our business, results
of operations or financial condition.

In August 1998, Janssen-Meyers Associates L.P. (JMA) filed a lawsuit against the
Company arising out of an alleged 1995 contract with the Company's predecessor
(Old Citadel). The suit alleged that Old Citadel breached a letter of intent
dated September 1995 and/or a Placement Agency Agreement dated November 1995
between JMA and Old Citadel. As its damages, JMA claimed that it was entitled
to, among other things, the cash value of warrants to purchase 1.8 million
shares of CT Holdings common stock at an exercise price of $0.89 per share,
valued during May 1996. According to JMA's valuation of those warrants,
potential damages were alleged to exceed $40 million. The Company vigorously
disputes that it breached either the letter of intent or the Placement Agency
Agreement or that it is liable to JMA. The lawsuit was styled Janssen-Meyers
Associates, L.P. v. Citadel Technology, Inc., and was filed in the Supreme Court
of the State of New York, County of New York. The Company removed the case to
federal court in the Southern District of New York.

Following mediation in July 2000, the Company entered into a settlement term
sheet, to attempt to resolve the disputes between it and JMA, pursuant to which
the Company and JMA agreed in principle to settle the lawsuit for an aggregate
of $3 million, in a combination of $1.5 million in cash and 300,000 shares of
the Company's common stock with a guaranteed value of $5 per share as of
January, April and October 2001 (with respect to 100,000 of the shares for each
period). The settlement was subject to execution of definitive settlement
documents and approval of the boards of directors of both parties.

However, the Company and JMA were unable to negotiate the final definitive
settlement agreement. The case was dismissed in August 2000 without any
resolution of this issue. On March 27, 2001, JMA attempted to reopen this
matter, but the Court hearing the JMA lawsuit issued a Summary Order denying
JMA's motion to enforce the settlement term sheet and confirmed the prior
dismissal of the lawsuit. The Court further ruled that JMA would either have to
bring an action on the proposed settlement or move to re-open the dismissed
case. The Court stated that it did not express any view with respect to the
merits of the settlement that brought about the dismissal of the case. There was
no activity on the case from March 2001 through August 2001. On August 27, 2001
JMA refiled its lawsuit with a federal court in New York, and the Company filed
its motion to dismiss the case because the plaintiffs lacked the required
diversity jurisdiction to pursue the claims in federal court. On October 31,
2001 the case was dismissed in federal court. In December 2001, the plaintiffs
refiled the lawsuit in the state court seeking to enforce the proposed
settlement term sheet. The case was filed in Supreme Court of


                                       11
<PAGE>
New York, that state's trial court, in a case styled Roan Meyers v. CT Holdings.
CT Holdings has filed counterclaims for breach of the term sheet as well as
breach of the placement agency agreement. Cross motions for partial summary
judgments have been argued but the court entered judgment in favor of
Roan-Meyers in the amount of $3,000,000 and granted interest at the rate of 9%
from October 31, 2000 through the date of final judgment, and thereafter at the
statutory rate allowed by law.  The amount for the judgment as well as the
interest through December 31, 2004 has been accrued.  The Company has appealed
the final judgment. The Company intends to vigorously defend this case.

In August 2002, PriceWaterhouseCoopers, LLP ("PWC") filed a lawsuit against CT
Holdings seeking payment of $131,816 for services performed pursuant to a
contract with CT Holdings related to the JMA lawsuit described above. The court
ordered that mediation be held by July 2003.  The case is styled
PriceWaterhouseCoopers, LLP v. CT Holdings, and was filed in the 192nd District
Court, Dallas County, Texas.  In July 2003, PWC obtained a summary judgment
against the Company for damages of $131,816 plus pre-judgment interest of
$57,615, post-judgment interest at 10% and attorneys' fees in the amount of
$8,605. During the year ended December 31, 2003 the Company recorded an accrual
for legal settlement of $207,000 including accrued interest in association with
this judgment. PWC has obtained a garnishment of CT Holdings' bank account and
is seeking to obtain post-judgment discovery.  The Company has reached a
settlement and in May 2004 paid an amount less than the amount that had been
accrued.

In January 2003, R.R Donnelly asserted claims against the Company and Steve B.
Solomon alleging non-payment for services provided to CT Holdings by the
plaintiff during the nine months ended September 30, 2002. The plaintiff is
seeking $16,872 from the Company for past due invoices as well as attorney's
fees in the amount of $24,000, court costs and post-judgment interests at the
highest legal rate. The Company had reached a settlement in the third quarter of
2004 for an amount less than the amount that had been accrued.  The settlement
was assumed by Citadel and paid in October 2004.

In April 2003 MWW Group re-filed an old suit styled "MWW Group v. CT Holdings
et.al" in the Superior Court of Bergen County, New Jersey which had been
dismissed for want of prosecution. On July 21, 2003 a default judgment was
entered against CT Holdings and Steve Solomon. On December 9, 2003, the Court
signed an order vacating the default judgment. The plaintiff alleges damages in
the amount of $91,290. The case was settled for $35,000 in September 2004, which
the Company had previously accrued approximately $54,000 in accounts payable for
settlement.  The company paid $15,000 in September 2004.  The Company paid the
remaining $20,000 of the settlement in October 2004 by obtaining a $5,000 90-day
note, bearing interest at 5% per year, from the CEO of the Company.

The Company may become involved from time to time in litigation on various
matters which are routine to the conduct of our business. The Company believes
that none of these actions, individually or in the aggregate, will have a
material adverse effect on our financial position or results of operations,
though any adverse decision in these cases or the costs of defending or settling
such claims could have a material adverse effect on our business.

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

No matters were submitted to a vote of our security holders during the fourth
quarter of 2004.


                                       12
<PAGE>
PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

Our common stock trades on the OTC Bulletin Board ("OTCBB") under the symbol
CITN.  The following table sets forth, for the periods indicated, the high and
low closing sale prices for the Common Stock as reported by the OTCBB and
displayed on its website.  The quotations reflect inter-dealer prices, without
retail markup, markdown or commission, and may not represent actual
transactions.

<TABLE>
<CAPTION>
                                HIGH    LOW
                              -------  ------
<S>                           <C>      <C>
YEAR ENDED DECEMBER 31, 2004
          1st Quarter . . . . $ 0.100  $0.030
          2nd Quarter . . . .   0.050   0.030
          3rd Quarter . . . .   0.040   0.020
          4th Quarter . . . .   0.030   0.010


YEAR ENDED DECEMBER 31, 2004
          1st Quarter . . . . $ 0.020  $0.011
          2nd Quarter . . . .   0.065   0.010
          3rd Quarter . . . .   0.036   0.021
          4th Quarter . . . .   0.079   0.021
</TABLE>

At December 31, 2004 there were approximately 762 recordholders of common stock
of the Company.  Holders of common stock are entitled to dividends when and if
declared by the Board of Directors out of funds legally available therefore.
The Company has never paid cash dividends on its common stock, and management
intends, for the immediate future, to retain any earnings for the operation and
expansion of the Company's business.  Any future determination regarding the
payment of dividends will depend upon results of operations, capital
requirements, the financial condition of the Company and such other factors that
the Board of Directors of the Company may consider.

The stock option information shown below is not subject to a stock option plan
approved by shareholders.

<TABLE>
<CAPTION>
                             Equity Compensation Plan Information
----------------------------------------------------------------------------------
                                                                              Number of
                                                                              securities
                                                                         remaining available
                                                                         for future issuance
                                                                             under equity
                       Number of securities to      Weighted-average      compensation plans
                       be issued upon exercise     exercise price of          (excluding
                       of outstanding options,    outstanding options,   securities reflected
Plan category            warrants and rights      warrants and rights       in column (a))
                                 (a)                      (b)                    (c)
---------------------  ------------------------  ----------------------  --------------------
<S>                    <C>                       <C>                     <C>
Equity compensation
plans approved by
security holders.                            -                        -                     -

Equity compensation
Plans not approved by
Security holders.                 2,917,500 (1)  $                 0.24                     -
</TABLE>


                                       13
<PAGE>
(1)  Excludes common stock that may be issued in connection with the Company's
     CEO exercise of a right to exchange 5,000,000 (pre 1:1000 reverse stock
     split) shares of Parago common stock for 6,000,000 shares of CT Holdings
     common stock exercised in February 2004. The CEO has waived his right to
     receive these shares until such time as shares become authorized.

The options were issued under individual arrangement and were not issued
pursuant to a plan.

Recent Sales of Unregistered Securities

The Company made no sales of unregistered securities during the period covered
by this Report.

Repurchases of Securities

The Company made no repurchases of shares during the fourth quarter of 2004.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS

The following discussion should be read in conjunction with the financial
statements and notes thereto found elsewhere in this Form 10-KSB, as well as the
disclosure relating to forward-looking statements set forth above under the
caption Factors That May Affect Future Operating Results.

OVERVIEW

CT Holdings, Inc. provides management expertise and sources of capital to early
stage companies. At December 31, 2004 and 2003 we held investments in Parago and
River Logic. We were incorporated in Delaware in 1992. Our business model is
designed to enable the companies in which we invest or acquire to become market
leaders in their industries. Our strategy is expected to lead to the
development, acquisition and operation of technology based businesses with
compelling valuations and strong business models. We believe that the
anticipated growth in technology creates strong opportunities for us to increase
shareholder value by investing in well-positioned early stage ventures. Our goal
is to realize the value of our investments for our shareholders through a
subsequent liquidity event such as a spin-off, sale, merger or initial public
offering of the investee companies.

At December 31, 2004 the lack of available capital has limited our ability to
raise sufficient capital to invest in additional companies and technologies that
could offer us and our shareholders a reasonable rate of return on their
investment in the foreseeable future. We expect that if and when capital becomes
available to us, we may continue our business development and investment
activities, however there can be no assurance that any capital will be available
to us. Until such time as capital becomes available the Company's business
activities will be limited to reviewing investment opportunities, filing of
compliance documents and defending the lawsuits disclosed in Part I, Item 3 -
Legal Proceedings.

OVERVIEW OF PARAGO

We formed Parago in 1999 through the contribution of some technology assets
acquired in the late 1990's during the growth period of Internet electronic
commerce industry.


                                       14
<PAGE>
At December 31, 2004, the Company holds 25,000 shares of Parago common stock and
28.8749 shares of Series A-3 convertible preferred stock (convertible into 2,887
shares of Parago common stock). In February 2004, our CEO loaned us $30,000 in
order for us to exercise our warrants to purchase the shares of Series A-3
convertible preferred stock, pursuant to a promissory note secured by a pledge
of the preferred stock. Our CEO also elected to exercise an exchange right
whereby he exchanged 5,000,000 (before a 1:1000 reverse stock split that
occurred in 2001) shares of Parago, Inc. common stock for 6,000,000 shares of CT
Holdings common stock. Our CEO has waived his right to receive these shares
until such time as the shares become authorized.  Our investment in Parago has
no carrying value on our balance sheet as a result of the write down of the
carrying value to zero in prior periods. We believe that our initial $50,000
investment along with the $30,000 to purchase warrants in Parago, represented by
20,000 shares of common stock, 28.8749 shares of Series A-3 convertible
preferred stock (convertible into 2,887 shares of Parago common stock) and an
additional 5,000 shares (5,000,000 pre reverse split shares) received in
February 2004 may ultimately provide an appropriate return on our investment.

OVERVIEW OF RIVER LOGIC

In May 2000, CT Holdings acquired a minority ownership interest in River Logic.
River Logic develops and markets enterprise optimization technologies and
decision support applications. Recognizing a need in the marketplace, River
Logic created strategic-level, process modeling tools and approaches for helping
senior managers suggest, evaluate, and understand the impact of business
decisions as they relate to the overall profitability of their organizations.
River Logic's optimization tools integrate several technologies such as mixed
integer optimization, visual process modeling, accounting, and constraint theory
to bring together the best active financial planning and profitability tools on
the market.

The Company holds an ownership interest in River Logic of approximately 8% at
December 31, 2004. Since our initial investment in May 2000, River Logic has
raised additional capital through the issuance of preferred stock and other
equity securities. In a prior period, we wrote down the carrying value of our
investment in River Logic to zero. While we believe that our investment in River
Logic will be successful there can be no assurance that our investment in River
Logic may ultimately provide an appropriate return on our investment.

CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition and results of operations
are based upon our financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States of America.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses and related disclosure of contingent assets and liabilities.  On an
ongoing basis, we evaluate our estimates, including those related to our
investments in our investee companies and commitments and contingencies. We base
our estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities.
Actual results may differ from these estimates under different assumptions or
conditions.

We believe the following critical accounting policies are most important to the
presentation of our financial statements and require the most difficult,
subjective and complex judgments.


                                       15
<PAGE>
IMPAIRMENT CHARGES

We periodically evaluate the carrying value of our ownership interests in our
investee companies for possible impairment based on achievement of business plan
objectives and milestones, the value of each ownership interest in the investee
company relative to carrying value, the financial condition and prospects of the
investee company, and other relevant factors.  The business plan objectives and
milestones we consider include, among others, those related to financial
performance such as achievement of planned financial results or completion of
capital raising activities, and those that are not primarily financial in nature
such as obtaining key business relationships or the hiring of key employees.  If
an indication of impairment exists with respect to the carrying value of an
investee company, we perform an evaluation by comparing the estimated fair value
of the asset with its carrying value.  Fair value is determined by estimating
the cash flows related to the asset, including estimated proceeds on
disposition, if any.  If the fair value is less than the carrying value a loss
is recorded.

COMMITMENTS AND CONTINGENCIES

From time to time, we are a defendant or plaintiff in various legal actions,
which arise in the normal course of business. We are also a guarantor of various
third-party obligations and commitments.  We are required to assess the
likelihood of any adverse judgments or outcomes to these matters as well as
potential ranges of probable losses.  A determination of the amount of reserves
required for these contingencies, if any, which would be charged to earnings, is
made after careful analysis of each individual issue.  The required reserves may
change in the future due to new developments in each matter or changes in
circumstances, such as a change in settlement strategy.

Changes in required reserves could increase or decrease our earnings in the
period the changes are made.

EFFECT OF VARIOUS ACCOUNTING METHODS FOR EQUITY INVESTMENTS

The interests that we acquire in our investee companies are accounted for under
three broad methods: consolidation, equity method and cost method. The
applicable accounting method is generally determined based on our percentage
ownership in an investee company.

CONSOLIDATION METHOD: Investee companies in which we directly or indirectly own
more than 50% of the outstanding securities or those where we have effective
control are generally accounted for under the consolidation method of
accounting.  Under this method, an investee company's accounts are consolidated
within our financial statements. Participation of other unrelated stockholders
in the earnings or losses of a consolidated investee company would be reflected
as a minority interest in consolidated financial statements.  Minority interest
adjusts our consolidated net results of operations to reflect only our share of
the earnings or losses of the consolidated investee company.  At December 31,
2004 and 2003, we had no investee company qualified for this accounting method.

EQUITY METHOD: Investee companies whose results we do not consolidate, but over
whom we exercise significant influence, are generally accounted for under the
equity method of accounting.  Whether or not we exercise significant influence
with respect to an investee company depends on an evaluation of several factors
including, among others, representation on the investee company's board of
directors and percentage ownership level, which is generally a 20% to 50%
interest in the securities of the investee company, including our holdings in
common,


                                       16
<PAGE>
preferred and other convertible instruments in the investee company where we may
have voting rights.  Under the equity method of accounting, an investee
company's accounts are not reflected within our financial statements; however,
our share of the earnings or losses of the investee company is reflected in our
statements of operations. At December 31, 2004 and 2003, we had no investee
company qualified for this accounting method.

COST METHOD: Investee companies not accounted for under either the consolidation
or the equity method of accounting are accounted for under the cost method of
accounting.  Under this method, our share of the earnings or losses of these
companies is not included in our statements of operations. Our investments in
Parago and River Logic were accounted for using this method of accounting at
December 31, 2004 and 2003.

RESULTS OF OPERATIONS

THE YEAR ENDED DECEMBER 31, 2004 COMPARED WITH THE YEAR ENDED DECEMBER 31, 2003

Our operations consist of costs and expenses for providing services to our
investee companies and the activities to identify additional technologies and
companies in which we might invest.  We do not generate any direct revenue and
because our investee companies are not consolidated, we do not report revenue
from investee businesses.

GENERAL AND ADMINISTRATIVE EXPENSES

During the year ended December 31, 2004 general and administrative expenses were
approximately $107,000 representing a decrease of approximately $189,000 or 64%
from the approximately $296,000 of general and administrative expenses recorded
for the year ended December 31, 2003. The decrease is primarily due to the
reversal of  accrued bonuses that would not be paid out.

FORGIVENESS OF ACCOUNTS PAYABLE

During the year ended December 31, 2003, a vendor released the Company from
payment of approximately $162,000 of invoices for professional services rendered
to the Company.

LITIGATION ACCRUAL AND REVERSAL

On August 27, 2001 JMA refiled its lawsuit with a federal court in New York, and
the Company filed its motion to dismiss the case because the plaintiffs lacked
the required diversity jurisdiction to pursue the claims in federal court. On
October 31, 2001 the case was dismissed in federal court. In December 2001, the
plaintiffs refiled the lawsuit in the state court seeking to enforce the
proposed settlement term sheet. The case was filed in Supreme Court of New York,
that state's trial court, in a case styled Roan Meyers v. CT Holdings. CT
Holdings has filed counterclaims for breach of the term sheet as well as breach
of the placement agency agreement. Cross motions for partial summary judgments
have been argued but the court entered judgment in favor of Roan-Meyers in the
amount of $3,000,000 and granted interest at the rate of 9% from October 31,
2000 through the date of final judgment, and thereafter at the statutory rate
allowed by law.  The Company has accrued for the amount of the partial summary
judgment plus interest of approximately $1,126,000 as of December 31, 2004.  The
Company has appealed the final judgment. The Company intends to vigorously
defend this case.

During the year ended December 31, 2003 the Company recorded an accrual for
legal


                                       17
<PAGE>
settlement of $202,000 plus accrued interest of $5,000 in association with the
judgment received related to PriceWaterhouseCoopers, LLP.  During the year ended
December 31, 2004 we settled the lawsuit and reversed $42,000 of the litigation
accrual in excess of the settlement.  The Company reversed approximately $33,000
of the litigation accrual in connection with settlements with the MWW Group and
RR Donnelly during the year ended December 31, 2004.  In April 2003 we settled a
lawsuit and reversed $560,000 of the litigation accrual in excess of the
settlement.

REVERSAL OF RESERVE FOR NOTE RECEIVABLE FROM RELATED PARTY AND RELATED INTEREST
INCOME

In May 2004 the Company received a payment of $55,000 plus interest of $5,500 on
a note receivable from a related party secured by shares of stock of the
Company.  The note receivable had been previously reserved and accordingly the
Company reversed the reserve of $55,000 and recorded interest income of $5,500.

GAIN ON SETTLEMENT OF LIABILITIES

During the year ended December 31, 2003 we completed negotiations to settle
approximately $665,000 of liabilities that had been outstanding prior to the
Citadel Distribution by issuing 1,000,000 shares of CT Holdings common stock
along with 250,000 pro rata dividend shares of Citadel common stock that had
been reserved for issuance at the Distribution Date. The difference between the
fair value of the shares and the recorded liabilities of approximately $415,000
was recognized as a gain in the statement of operations.

GAIN FROM SETTLEMENTS WITH RELATED PARTIES

During 2003, the Company agreed to offset a note payable to our CEO, a note
payable to a former director and a note payable to an entity controlled by an
employee (as to each of which the Company was in default) aggregating
approximately $525,000 plus accrued interest of approximately $172,000 against
notes receivable from these individuals aggregating approximately $1,107,000
plus accrued interest receivable of approximately $148,000. The notes receivable
and related accrued interest had been fully reserved. As a result, the Company
has recorded a gain of approximately $642,000.

INTEREST (INCOME) EXPENSE

Interest expense for the year ended December 31, 2004 was approximately
$1,225,000 representing interest accrued for litigation, amortization of a
beneficial conversion feature on convertible debt, interest expense on advances
and notes payable to an officer and a related party, note payable to
shareholders, and the demand note payable to Citadel. Interest expense for the
year ended December 31, 2003 was approximately $125,000 and includes interest
expense on advances and notes payable to related parties, notes payable to
shareholders and the demand note payable to Citadel. The increase in interest
expense, excluding the charge for the beneficial conversion feature of $60,000,
is due to the $1,126,000 of interest accrued for the JMA litigation and higher
average balances of interest bearing debt outstanding during the year ended
December 31, 2004. Interest income of approximately $5,500 related to payment of
a note receivable plus accrued interest due from a related party was recognized
during the year ended December 31, 2004. Interest income of approximately
$55,000 related to notes receivable from shareholders was recognized during the
year ended December 31, 2003.


                                       18
<PAGE>
WRITE-OFF OF AFFILIATES SHARES ACQUIRED THROUGH THE EXERCISE OF WARRANTS

The $30,000 write-off of investment in affiliates during the year ended December
31, 2004 is related to the warrant exercised by the Company to obtain shares of
Parago's Series A-3 Preferred Stock, which was determined by the Company to have
no fair market value and was immediately written off.

NET INCOME (LOSS)

For the year ended December 31, 2004 we reported a net loss of approximately
$4,227,000 versus net income of approximately $1,211,000 for the year ended
December 31, 2003, representing a decrease of approximately $5,438,000 primarily
due to accruals related to the JMA litigation judgment and related interest
expense.

LIQUIDITY AND CAPITAL RESOURCES

We received a report from our independent registered public accounting firm for
our year ended December 31, 2004 containing an explanatory paragraph that
describes the uncertainty regarding our ability to continue as a going concern
due to our recurring operating losses and our significant working capital
deficiency. Historically, we have incurred recurring operating losses and have a
significant stockholders' deficit at December 31, 2004 of approximately $5.4
million. We had a cash balance of $4,168 at December 31, 2004 and current
liabilities total approximately $5.4 million. We have limited access to capital
at December 31, 2004, no plans to raise capital, and we have not identified
sources of capital at December 31, 2004. Our past funding needs of the business
have been provided by financings through short-term notes payable and additional
investments from related parties, including our CEO, and CII however there can
be no assurance that such funds will be available from these related parties in
the future. The Company has been and continues to be dependent upon outside
financing to perform its business development activities, make investments in
new technology companies and to fund operations.

Our plans to continue to support and expand our business development activities
are limited due to a lack of identification and availability of near term
capital. As a result, it is unlikely that the implementation of the Company's
business strategy will generate positive cash flow in the foreseeable future.
Achieving positive cash flow is currently highly dependent upon obtaining
liquidity from our investments in unconsolidated affiliates. We have no plans at
December 31, 2004 to raise additional capital to invest in new business
opportunities. To do so we estimate that we will need to raise up to $5.4
million to settle recorded liabilities at December 31, 2004 after which we may
then need to raise additional funds to support our incubator and business
development activities. However there can be no assurance that we will raise
additional funds needed to settle our liabilities.

There can be no assurance that management's plans will be successful or what
other actions may become necessary.  There can be no assurance that the Company
will ever achieve liquidity for its investments.  Until we are able to create
liquidity from an additional inflow of new capital or from our investments
through sale to a strategic investor, an initial public offering or some other
liquidity transaction, we will continue to require external sources of working
capital to fund our operating expenses. Our inability to raise capital could
have a material adverse effect on our business and operations that could be
material to our results of operations.


                                       19
<PAGE>
Cash Flows From Operating Activities

The net cash used in operating activities was $226,000 for the year ended
December 31, 2004. This is the result of a net loss of approximately $4,227,000
for the year ended December 31, 2004 and non-cash adjustments for the
amortization of debt discount of $60,000 recorded as interest expense, an
accrual for a legal settlement of $3,000,000 plus accrued interest of
approximately $1,126,000, the reversal of an excess litigation accrual of
approximately $75,000, the $60,500 reversal of a reserve for a note receivable
and interest from a related party and the write-off of the $30,000 cost of
shares of an affiliate which were acquired through the exercise of warrants.  In
addition, the Company paid a legal settlement of $165,000 in May 2004.  A
decrease in accounts payable and accrued expenses of approximately $117,000 and
a $203,000 increase in the payable to Citadel partially offset the operating
cash items previously noted.

The net cash used in operating activities was $225,000 for the year ended
December 31, 2003.  This is the result of net income of approximately $1,211,000
for the year ended December 31, 2003 and an accrual for a legal settlement of
$207,000 including accrued interest, offset by the reversal of litigation
accrual of $560,000 resulting from the settlement of a legal claim, a gain on
the offset of notes payable with note receivable that were previously written
off of approximately $697,000, the forgiveness of vendor accounts payable of
approximately $162,000 a gain of approximately $415,000 recognized upon the
settlement of operating liabilities with the issuance of common stock and offset
by cash from changes in operating assets and liabilities of approximately
$192,000.

Cash Flows From Investing Activities

Net cash provided by investing activities of $25,000 included the payment in May
2004 of a note payable to our CEO resulting from our exercise of warrants to
acquire Parago Series A-3 preferred stock for $30,000. Offsetting this amount
was a $55,000 payment received from a related party to settle a note receivable.
There was no net cash resulting from investing activities for the year ended
December 31, 2003.

Cash Flows From Financing Activities

On May 24, 2004, we entered into a Loan and Security Agreement (the "Loan
Agreement") with CITN Investment, Inc., a Texas corporation ("CII").  The Loan
Agreement provides for advances by CII to the Company of up to $600,000, such
advances to be made in the sole discretion of CII.  In the event the entire
$600,000 is advanced to the Company, the loans would be convertible, at the
option of CII, into 71,000,000 shares of the Company's common stock,
representing 51% of the Company's common stock.  The loans are also secured by a
pledge of all the Company's assets.

On May 24, 2004, we were advanced $200,000 by CII pursuant to the Loan Agreement
and evidenced by a Secured Convertible Promissory Note (the "Note").  The note
accrues interest at 8% per annum and is due the earlier of May 24, 2006 or
demand by CII.  This Note is convertible in whole or in part, at the option of
CII, into up to 23,666,667 shares of the Company's common stock (approximately
25% of the Company's common stock on a fully diluted basis), and is secured by a
pledge of all of the Company's assets.

CII is owned 50% by Steven B. Solomon, the Company's CEO and Chairman of the
Board, and 50% by Lawrence Lacerte, a shareholder and former director of the
Company.  Prior to the loans, Mr. Solomon beneficially owned 14,285,992 shares
of the


                                       20
<PAGE>
Company's common stock.  As a result of his stock ownership in CII, Mr. Solomon
is deemed the beneficial owner of the shares of common stock owned by CII.
Therefore, on May 24, 2004, Mr. Solomon and CII beneficially owned a total of
39,952,660 shares of our common stock (if the Note were converted into shares of
our common stock), or more than 50% of our common stock outstanding on that
date, giving him potential control of the Company through the voting power over
a majority of the shares of our outstanding common stock.  The conversion price
of approximately $0.00845 per share was below the fair value per share of the
common stock at the date the note was issued.  Accordingly, the Company recorded
the fair value of the beneficial conversion feature of the note payable of
$200,000 as a debt discount.  The debt discount is being amortized over the two
year life of the Note and a $60,000 charge was recorded as interest expense
during the year ended December 31, 2004.

The Company does not have a sufficient number of authorized shares of common
stock available to permit the conversion of the Note at this time.  The Company
has agreed to obtain shareholder approval to (a) increase the number of
authorized shares of common stock to a number sufficient to permit conversion,
or (b) to effect a reverse stock split to reduce the number of currently
outstanding shares of common stock to a number small enough to permit the
conversion of the Note.

The Company was loaned $35,000 by an officer during the year ended December 31,
2004.  The officer was paid back $30,000 of this loan in the same period.

Cash flows provided from financing activities for the year ended December 31,
2003 includes $225,000 of proceeds from a note payable to Citadel.

CONTRACTUAL OBLIGATIONS

At December 31, 2004 we have a note payable to CII of $200,000 plus accrued
interest of approximately $9,400 secured by all the assets of the Company, a
demand note payable to Citadel of $225,000 plus accrued interest of
approximately $49,000, a $5,000 unsecured note payable to an officer and a
$9,000 unsecured note payable plus accrued interest of approximately $4,500 to a
shareholder which is in default at December 31, 2004.  There are no other
long-term debt obligations, capital lease obligations, operating lease
obligations or long-term capital purchase commitments.  However at December 31,
2004 we have accrued for payments to Citadel under the transition services
agreement and demand note payable, none of which may be paid until such time as
the Company has sufficient cash to pay these obligations.

OFF-BALANCE SHEET ARRANGEMENTS

The Company has no off-balance sheet arrangements that have had, or are
reasonably likely to have, a current or future effect on the Company's financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to investors.

ITEM 7.   FINANCIAL STATEMENTS

The Financial Statements for the years ended December 31, 2004 and 2003 are
found following the signature page of this report.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.


                                       21
<PAGE>
ITEM 8A.  CONTROL AND PROCEDURES

The Company's management, including the Company's principal executive officer
and principal financial officer, has evaluated the effectiveness of the
Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934) as of the year ended
December 31, 2004, the period covered by the Annual Report on Form 10-KSB. Based
upon that evaluation, the Company's principal executive officer and principal
financial officer have concluded that the disclosure controls and procedures
were effective as of December 31, 2004 to provide reasonable assurance that
material information relating to the Company is made known to management
including the CEO and CFO.

There were no changes in the Company's internal control over financial reporting
that occurred during the Company's last fiscal quarter that have materially
affected, or are reasonably likely to materially affect, the Company's internal
control over financial reporting.

ITEM 8B.  OTHER INFORMATION

None.

                                    PART III

ITEM 9.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


DIRECTORS

The names of our directors, their principal occupations and the year in which
each current Director of CT Holdings, Inc. (the "Company") initially joined the
Board of Directors are set forth below.

<TABLE>
<CAPTION>
DIRECTOR
NAME                AGE       POSITION WITH THE COMPANY       SINCE
------------------  ---  -----------------------------------  -----
<S>                 <C>  <C>                                  <C>
Steven B. Solomon    40  President, Chief Executive Officer,
                          and Secretary                        1992
Chris A. Economou    49  Director                              1993
Mark Rogers          44  Director                              1996
Dr. Axel Sawallich   59  Director                              1993
</TABLE>

STEVEN B. SOLOMON has served as President and Chief Executive Officer of CT
Holdings since May 1997 and as a director of CT Holdings since February 1996, as
the President and Chief Executive Officer of Citadel Security Software Inc.
("Citadel") since its formation in December 1996 and as a director of LoneStar
Hospitality Corp from 1992 until its merger with the Company in 1996. Until May
2004 Mr. Solomon also served as a Director of Parago, Inc., an incubation
venture of CT Holdings, and he served as Chairman of the Board of Directors of
Parago from January 1999 to April 2001, and Chief Executive Officer of Parago
from January 1999 to August 2000. Mr. Solomon has also served as a director of
River Logic, Inc., an incubation venture of CT Holdings, since May 5, 2000.


CHRIS A. ECONOMOU has served as a director of CT Holdings since February 1996
and as a director of Citadel since November 2001, and as a director of LoneStar


                                       22
<PAGE>
Hospitality Corp. from June 1993 until its merger with the Company in 1996. Mr.
Economou has been engaged in the private practice of law in Fort Lauderdale,
Florida, primarily in the transactional and corporate areas since 1981. Mr.
Economou also served as a director of Parago during its incubation phase from
January 1999 to February 2000.


MARK ROGERS has served as a director of the Company since July 1996. Since 1999
Mr. Rogers has been President of Alchemy Consulting, Inc., a business advisor
firm focusing on venture-backed technology companies throughout their life
cycle. He has been involved with several turnarounds and has also advised and
assisted start-up companies with strategy and financings including mergers and
acquisitions. From 1989 to 1999 Mr. Rogers has served as a partner and Chief
Operating Officer of NFT Ventures, a venture capital fund established by Ray
Noorda, the founder of Novell, Inc.  In connection with his position at NFT
Ventures, Mr. Rogers advised several computer software companies in Texas, Utah
and Silicon Valley, with respect to various strategic and developmental matters.
Mr. Rogers also served as a director of Parago during its incubation phase from
January 1999 to February 2000.


DR. AXEL SAWALLICH has served as a director of the Company since February 1996
and was a director of LoneStar from March 1993 until its merger with the Company
in 1996. Since January 1997, Dr. Sawallich has been chief investment consultant
for Lifeplan Investments, Vienna, Austria. Since 1993, he has been the managing
partner of Global Invest, an investment firm located in Vienna. Dr. Sawallich
has also been acting as an independent, publicly certified, investment advisor
since 1993.

There are no family relationships among any of the directors or executive
officers of the Company. See "Certain Relationships and Related Transactions"
for a description of transactions between the Company and its directors,
executive officers or their affiliates. Section 16(a) of the Exchange Act, as
amended, requires the Company's Directors, executive officers and persons who
own more than 10% of a registered class of the Company's equity securities to
file certain reports regarding ownership of the Company's Common Stock with the
SEC.  These insiders are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file.  To the Company's knowledge, based
solely on a review of the copies of the Section 16(a) forms furnished to the
Company during 2004, or written representations from certain reporting persons
that no Forms 5 were required for those persons, all Section 16(a) filing
requirements applicable to the Company's officers, Directors and beneficial
owners of more than 10% of the outstanding shares of Common Stock were filed on
a timely basis.

EXECUTIVE OFFICERS

The executive officers of the Company are as follows:

<TABLE>
<CAPTION>
                             POSITION WITH        Officer
NAME               AGE        THE COMPANY          Since
-----------------  ---  ------------------------  -------
<S>                <C>  <C>                       <C>

Steven B. Solomon   40  President,
                        Chief Executive Officer,
                        Secretary and Director       1992

Richard Connelly    53  Chief Financial Officer      2002
</TABLE>

STEVEN B. SOLOMON has served as President and Chief Executive Officer of CT
Holdings since May 1997 and as a director of CT Holdings since February 1996, as


                                       23
<PAGE>
the President and Chief Executive Officer of Citadel since its formation in
December 1996 and as a director of LoneStar Hospitality Corp from 1992 until its
merger with the Company in 1996. Until May 2004 Mr. Solomon also served as a
Director of Parago, Inc., an incubation venture of CT Holdings, and he served as
Chairman of the Board of Directors of Parago from January 1999 to April 2001,
and Chief Executive Officer of Parago from January 1999 to August 2000. Mr.
Solomon has also served as a director of River Logic, Inc., an incubation
venture of CT Holdings, since May 5, 2000.

RICHARD CONNELLY joined the Company in March 2002 and serves as Chief Financial
Officer. Mr. Connelly also serves as Chief Financial Officer of Citadel. Mr.
Connelly initially served as a financial consultant to CT Holdings from January
2002 until March 2002. Prior to this, he served as Chief Financial Officer for
several venture funded technology companies, including from February 2001 until
December 2001 at ASSET InterTech, Inc., a boundary scan software tool developer;
from September 1998 through November 2000 at JusticeLink, Inc., an ecommerce
legal services provider; and from April 1997 through July 1998 at AnswerSoft,
Inc., a developer of computer telephony software. From February 1987 through
March 1997, Mr. Connelly served in various financial management capacities at
Sterling Software Inc., an enterprise software development company, including
Vice President Corporate Controller, Vice President Treasurer and Group Vice
President Finance & Administration of Sterling's Systems Management Group.

Family Relationships

There are no family relationships among any of the directors or executive
officers of the Company. See "Certain Relationships and Related Transactions"
for a description of transactions between the Company and its directors,
executive officers or their affiliates.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act, as amended, requires the Company's Directors,
executive officers and persons who own more than 10% of a registered class of
the Company's equity securities to file certain reports regarding ownership of
the Company's Common Stock with the SEC.  These insiders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.  To the Company's knowledge, based solely on a review of the copies of the
Section 16(a) forms furnished to the Company during 2004, or written
representations from certain reporting persons that no Forms 5 were required for
those persons, all Section 16(a) filing requirements applicable to the Company's
officers, Directors and beneficial owners of more than 10% of the outstanding
shares of Common Stock were filed on a timely basis.

Committees of the Board of Directors

During fiscal year 2004, there were two meetings of the Company's Board of
Directors. All directors attended 75% or more of the aggregate of meetings of
the Board and their committees held during their respective terms.

The Company's Board of Directors has established a standing Audit Committee
composed exclusively of outside directors, Mr. Economou and Mr. Rogers to assist
in the discharge of its responsibilities.

The Audit Committee meets with the Company's financial management and
independent registered public accounting firm and reviews the accounting
principles and the


                                       24
<PAGE>
scope and control of the Company's financial reporting practices, and makes
reports and recommendations to the Board with respect to audit matters. The
Audit Committee also recommends to the Board the appointment of the firm
selected to be the independent registered public accounting firm for the Company
and monitors the performance of such firm; reviews and approves the scope of the
annual audit and evaluates with the independent registered public accounting
firm the Company's annual audit and annual financial statements; and reviews
with management the status of internal accounting controls and internal audit
procedures and results. The Audit Committee met four (4) times during fiscal
year 2004 and took action by written consent one time. The Audit Committee is
required to have and will continue to have at least two members, all of whom
must be "independent directors" as defined in the Marketplace Rules of the
Nasdaq Stock Market. Messrs. Economou and Rogers are the current members of the
Audit Committee. The Board has determined that Messrs. Economou and Rogers are
financially literate in the areas that are of concern to the Company, and are
able to read and understand fundamental financial statements. The Board has also
determined that Messrs. Economou and Rogers each meet the independence
requirements set forth in the Marketplace Rules of the Nasdaq Stock Market.

The Securities and Exchange Commission ("SEC") has adopted rules to implement
certain requirements of the Sarbanes-Oxley Act of 2002 pertaining to public
company audit committees. One of the rules adopted by the SEC requires a company
to disclose whether it has an "audit committee financial expert" serving on its
audit committee. Based on its review of the criteria of an audit committee
financial expert under the rule adopted by the SEC, the Board of Directors does
not believe that any member of the Board of Directors' Audit Committee would be
described as an audit committee financial expert. At this time, the Board of
Directors believes it would be desirable for the Audit Committee to have an
audit committee financial expert serving on the committee, though the Company
believes that its current financial position, small size and limited resources
will render it difficult to engage an audit committee financial expert at this
time. Because of the Company's small size and limited resources, the Company
believes that it would be difficult to recruit an audit committee financial
expert.  The Company's Board of Directors has adopted a written charter for the
Audit Committee of the Board. A copy of the written Audit Committee charter will
be attached as an exhibit to the proxy statement for CT Holdings annual
shareholder meeting and will be made available on the Company's website,
www.ct-holdings.com.

The Company does not have a Compensation Committee, but the entire Board reviews
the compensation and employee benefits of officers of the Company.

The Board does not have a Nominating Committee, as nominations are made by the
independent members of the Board as a whole.

The Board seeks to identify qualified individuals to become board members and
determine the composition of the Board and its committees. When considering a
potential director candidate, the Board looks for personal and professional
integrity, demonstrated ability and judgment and business experience. The Board
will review and consider director nominees recommended by stockholders. There
are no differences in the manner in which the Board evaluates director nominees
based on whether the nominee is recommended by a shareholder.

Our Board of Directors adopted a Code of Business Conduct for all of our
directors, officers and employees and a Code of Ethics for our CEO and Senior
Financial Executives in April 2004. Stockholders may request a free copy of our
Code of Business Conduct and Code of Ethics from:


                                       25
<PAGE>
CT Holdings, Inc.
Attention: Investor Relations
Two Lincoln Centre
5420 LBJ Freeway, Suite 1600
Dallas, Texas 75240
214/520-9292

To date, there have been no waivers under our Code of Business Conduct and
Ethics. We will post any waivers, if and when granted, of our Code of Business
Conduct and Ethics on our website at www.ct-holdings.com.

ITEM 10.  EXECUTIVE COMPENSATION

The table below sets forth certain information with respect to the annual and
long term compensation of the named executives for services to CT Holdings for
its CEO and CFO who are the only officers of CT Holdings. Since the Distribution
on May 17, 2002 Mr. Solomon has been employed by Citadel as Citadel's CEO.
During the year ended December 31, 2001 and the period from January 1, 2002
through May 17, 2002 compensation was paid by CT Holdings and has been allocated
to the operations of Citadel as if paid by Citadel. Pursuant to the transition
services agreement CT Holdings is charged $7,500 per month for the services of
Mr. Solomon as CEO. Except for share information the compensation table presents
the total compensation paid by CT Holdings to Mr. Solomon.

<TABLE>
<CAPTION>
                                  SUMMARY COMPENSATION TABLE                       LONG-TERM
                                    ANNUAL COMPENSATION                           COMPENSATION
                  -------------------------------------------------------  ----------------------------
                                                                        SECURITIES
                  PERIOD                  ANNUAL          OTHER         UNDERLYING        ALL OTHER
                   ENDED   SALARY ($)   BONUS ($)   COMPENSATION ($)    OPTIONS (#)   COMPENSATION ($)
                  -------  -----------  ----------  -----------------  -------------  -----------------
<S>               <C>      <C>          <C>         <C>                <C>            <C>
Steven B.Solomon  12/2004  $         0  $        0  $               0          0      $           0
Chief Executive   12/2003  $         0  $        0  $               0          0      $           0
Officer           12/2002  $    75,000  $   56,250  $               0  2,000,000 (1)          7,804 (2)
</TABLE>

(1)  Excludes 6,000,000 shares of CT Holdings common stock that were issued
     in February 2004 to Mr. Solomon when he exercised his right to exchange
     5,000,000 (before a 1:1000 reverse stock split) shares of Parago common
     stock for shares of common stock of the Company. Because the Company did
     not have enough authorized shares at the date of exercise, Mr. Solomon has
     waived his right to those shares until such time as additional shares are
     authorized.

(2)  Includes a car allowance of $4,275, and payments for life, health and
     disability insurance premiums.


OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                         INDIVIDUAL GRANTS
                   ----------------------------------------------------------------
                                             PERCENT OF
                   NUMBER OF SECURITIES    TOTAL OPTIONS      EXERCISE
                    UNDERLYING OPTIONS       GRANTED TO        PRICE     EXPIRATION
NAME                     GRANTED         EMPLOYEES IN 2004     ($/SH)       DATE
-----------------  --------------------  ------------------  ----------  ----------
<S>                <C>                   <C>                 <C>         <C>
Steven B. Solomon                     0                0.0%  $     0.00
</TABLE>

The following table describes, for each of the Named Executive Officers, options
exercised and the potential values for their unexercised in-the-money options at
December 31, 2004:


                                       26
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
                                                NUMBER OF             VALUE OF
                                                SECURITIES           UNEXERCISED
                                                UNDERLYING          IN-THE-MONEY
                                           UNEXERCISED OPTIONS         OPTIONS
                                 SHARES      AT FISCAL YEAR-       AT FISCAL YEAR-
                   ACQUIRED ON    VALUE     END (EXERCISABLE/     END (EXERCISABLE/
NAME                EXERCISE    REALIZED      UNEXERCISABLE)     UNEXERCISABLE) (2)
------------------------------------------------------------------------------------
<S>                <C>          <C>        <C>                   <C>
Steven B. Solomon            0  $       0      2,000,000 / 0(1)  $            0 / $0
</TABLE>

(1)  Based on the market price on the date exercised less the exercise price
     payable for each share.

(2)  Based on the fair market value of the Company's Common Stock (at December
     31, 2004) per share less the exercise price payable for each share.

Compensation of Directors

CT Holdings reviews its compensation arrangements for directors from time to
time and may alter these arrangements. Directors will receive no cash
compensation for services as a director or as a member of a committee of CT
Holdings' board. CT Holdings will reimburse each director for out-of-pocket
expenses incurred in connection with attendance at board and committee meetings.

We may, in our discretion, grant stock options and other equity awards to our
non-employee directors. Our outside directors hold no options to purchase common
stock of the Company at December 31, 2004.


EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AGREEMENTS

The transition services agreement between Citadel and CT Holdings calls for the
sharing of the salaries and benefits of the CEO, CFO and some administrative
employees of Citadel that perform services for CT Holdings but whose payroll and
benefits are assigned to Citadel. The agreement allows for a charge to CT
Holdings of $7,500 per month, reduced from $20,000 a month in May 2004,
representing an allocation of the payroll, benefits and an allocation of
overhead (includes rent and general office expenses applied as a percentage of
payroll and benefits) associated with the shared employees. The transition
service agreement expires May 2005. At December 31, 2004, Mr. Solomon does not
have an employment agreement with CT Holdings.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

As of April 12, 2005, there were issued and outstanding approximately 58,545,928
shares of Common Stock.  There is no other class of voting security of the
Company issued or outstanding.  The following table sets forth the number of
shares of the Company's Common Stock beneficially owned, as of April 12, 2005 by
(i) each person known to the Company to own more than 5% of the Common Stock of
the Company (the only class of voting securities now outstanding), (ii) each
director, (iii) each executive officer named in the Summary Compensation Table
and (iv) all directors, named executive officers and other executive officers as
a group.  The number and percentage of shares beneficially owned is determined
in accordance with Rule 13d-3 of the Securities Exchange Act and the information
is not necessarily indicative of beneficial ownership for any other purpose.
Under this rule, beneficial ownership


                                       27
<PAGE>
includes any shares to which the individual has the right to acquire within 60
days of April 12, 2005 through the exercise of any stock option or other right.
Unless otherwise indicated in the footnotes or table, each person or entity has
sole voting and investment power (or shares such powers with his or her spouse)
with respect to the shares shown as beneficially owned and has an address of c/o
CT Holdings, Two Lincoln Centre, 5420 LBJ Freeway, Suite 1600, Dallas, TX 75240.

<TABLE>
<CAPTION>
                                         NUMBER OF    APPROXIMATE
                                                        PERCENT
NAME AND ADDRESS                        SHARES OWNED    OF CLASS
--------------------------------------  ------------  ------------
<S>                                     <C>           <C>

Steven B. Solomon (1)                     28,135,993         35.9%

Lawrence Lacerte (2)                      17,300,000         24.5%
     5950 Sherry Lane
     Dallas, Texas 75225

Thomas E. Oxley (3)                        6,244,800         10.2%
     2727 South Ocean Blvd., #803
     Highland Beach, FL 33487

Chris A. Economou                            724,400          1.2%
     150 North Federal Highway, # 210
     Fort Lauderdale, Florida 33301

Mark Rogers                                  651,500          1.1%
     751 Laurel St. #19
     San Carlos, California

Dr. Axel Sawallich                           387,144            *
     Beatrixgasse 3
     1030 Vienna, Austria.


All officers and directors
  as a group (5 persons)(4)               30,174,037         45.3%

*    Less than 1%
</TABLE>

(1)  Includes 2,000,000 shares of Common Stock subject to fully vested options.
     Includes 6,000,000 shares of CT Holdings common stock that were issuable in
     February 2004 when Mr. Solomon exercised his right to exchange 5,000,000
     (pre 1:1000 reverse stock split) shares of Parago common stock. Since the
     issuance of all 6,000,000 shares would cause the number of shares
     outstanding to exceed the authorized shares of 60,000,000, Mr. Solomon has
     waived his right to these shares until such time as the shares become
     authorized.  Includes 11,850,000 shares of Common Stock that are issuable
     upon conversion of the demand note by CII.

(2)  Includes 200,000 shares of Common Stock subject to fully vested options.
     Includes 11,850,000 shares of Common Stock that are issuable upon
     conversion of the demand note by CII.

(3)  During the first quarter of 2003, Mr. Oxley converted a $600,000 note
     convertible note payable into 2,700,000 shares of common stock of the
     Company. Since the issuance of all 2,700,000 would cause the number of


                                       28
<PAGE>
     shares outstanding to exceed the authorized shares of 60,000,000, Mr. Oxley
     has waived his right to these shares until such time as the shares become
     authorized.

(4)  Includes 2,000,000 shares issuable pursuant to presently exercisable
     options or warrants and 6,000,000 shares of CT Holdings Common Stock that
     were issuable in February 2004 when Mr. Solomon exercised his right to
     exchange 5,000,000 pre 1:1000 split shares of Parago common stock for
     shares of CT Holdings common stock. Mr. Solomon has elected not to receive
     the actual shares until such time as the shares become authorized.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The following is a description of the material terms of the agreements and
arrangements involving the Company and its subsidiaries.

AGREEMENTS RELATING TO THE CITADEL SECURITY SOFTWARE DISTRIBUTION

We have entered into several agreements with Citadel to define our ongoing
relationship after the Distribution and to allocate tax and other specified
liabilities and obligations arising from periods prior to the distribution date.
We entered into these agreements prior to the Distribution while Citadel was a
wholly owned subsidiary of CT Holdings.

TRANSITION SERVICES AGREEMENT

In connection with the Distribution, Citadel entered into a transition services
agreement with CT Holdings. This agreement provides that CT Holdings and Citadel
will provide each other services in such areas as information management and
technology, sharing of office space, personnel and indirect overhead expenses,
employee benefits administration, payroll, financial accounting and reporting,
claims administration and reporting, and other areas where CT Holdings and
Citadel may need transitional assistance and support. The transition services
agreement provides generally that each of Citadel and CT Holdings will undertake
to provide substantially the same level of service and use substantially the
same degree of care as their respective personnel provided and used in providing
such services prior to the execution of the agreement. The agreement provided
for an initial one year term and will renew for additional one year term, which
expires in May 2005, but may be terminated earlier under certain circumstances,
including a default, and may be renewed for additional years upon approval from
the Board of Directors of both companies. Initially, CT Holdings paid Citadel a
monthly fee of $20,000, subject to adjustment on a quarterly basis. In May 2004,
the monthly fee was reduced to $7,500 a month. We believe that the terms and
conditions of the transition services agreement are as favorable to us as those
available from unrelated parties for a comparable arrangement.

TAX DISAFFILIATION AGREEMENT

On the Distribution date CT Holdings and Citadel entered into a tax
disaffiliation agreement which sets out each party's rights and obligations with
respect to deficiencies and refunds, if any, of federal, state, local or foreign
taxes for periods before and after the Distribution Date and related matters
such as the filing of tax returns and the conduct of Internal Revenue Service
and other audits.  Under the tax disaffiliation agreement, Citadel will
indemnify CT Holdings for all taxes and liabilities incurred as a result of
Citadel's or an affiliate's post-Distribution action or omission contributing to
an Internal Revenue Service


                                       29
<PAGE>
determination that the Distribution was not tax-free.  CT Holdings will
indemnify Citadel for all taxes and liabilities incurred solely because CT
Holdings or an affiliate's post-Distribution action or omission contributes to
an Internal Revenue Service determination that the Distribution was not
tax-free.  If the Internal Revenue Service determines that the Distribution was
not tax-free for any other reason, CT Holdings and Citadel will indemnify each
other against all taxes and liabilities pro rata based on relative values as of
the Distribution Date.

Citadel will indemnify CT Holdings against any taxes resulting from any internal
realignment undertaken to facilitate the Distribution on or before the
Distribution date.

CT HOLDINGS' RELATED PARTY TRANSACTIONS

During February 2004, the CEO exercised his conversion right to exchange
5,000,000 (pre 1:1000 reverse stock split) shares of Parago common stock for
6,000,000 shares of common stock of the Company.  This exchange right was
granted during June 2001 as consideration for the CEO funding the Company's
participation in a Parago bridge loan.  Since the issuance of these shares would
exceed the number of authorized shares, the CEO has waived his right to receive
the shares until such time as the shares become authorized. When the Company is
able to issue the shares, it will record a $60,000 (par value) increase to
common stock and an offsetting reduction to additional paid in capital.

In February 2004, our CEO loaned the Company $30,000 in order for the Company to
exercise the Company's warrants to purchase 28.8749 shares of Series A-3
convertible preferred stock.  The promissory note to our CEO was secured by a
pledge of the Parago Series A-3 preferred stock and was repaid in May 2004.  In
November 2004, our CEO loaned the Company $5,000 in order for the Company to
have the ability to pay off the balance on a legal settlement.

In May 2004, the Company received $55,000 for payment of note receivable from an
officer plus interest of $5,500.  The note receivable was issued in May 2002
upon the exercise of stock options by the officer and had been fully reserved.
Accordingly the Company reversed the $55,000 reserve and recognized $5,500 of
interest income.

On May 24, 2004, we entered into a Loan and Security Agreement (the "Loan
Agreement") with CITN Investment, Inc., a Texas corporation ("CII").  The Loan
Agreement provides for advances by CII to the Company of up to $600,000, such
advances to be made in the sole discretion of CII.  In the event the entire
$600,000 is advanced to the Company, the loans would be convertible, at the
option of CII, into 71,000,000 shares of the Company's common stock,
representing 51% of the Company's common stock.  The loans are also secured by a
pledge of all the Company's assets.

On May 24, 2004, we were advanced $200,000 by CII pursuant to the Loan Agreement
and evidenced by a Secured Convertible Promissory Note (the "Note").  The note
accrues interest at 8% per annum and is due the earlier of May 24, 2006 or
demand by CII.  This Note is convertible in whole or in part, at the option of
CII, into up to 23,666,667 shares of the Company's common stock (approximately
25% of the Company's common stock on a fully diluted basis), and is secured by a
pledge of all of the Company's assets.

CII is owned 50% by Steven B. Solomon, the Company's Chief Executive Officer and
Chairman of the Board, and 50% by Lawrence Lacerte, a shareholder and former
director of the Company.  Prior to the loans, Mr. Solomon beneficially owned


                                       30
<PAGE>
14,285,992 shares of the Company's common stock.  As a result of his stock
ownership in CII, Mr. Solomon is deemed the beneficial owner of the shares of
common stock owned by CII.  Therefore, on May 24, 2004, Mr. Solomon and CII
beneficially owned a total of 39,952,660 shares of our common stock (if the Note
were converted into shares of our common stock), or more than 50% of our common
stock outstanding on that date, giving him potential control of the Company
through the voting power over a majority of the shares of our outstanding common
stock.  The conversion price of approximately $0.00845 per share was below the
fair value per share of the common stock at the date the note was issued.
Accordingly, the Company recorded the fair value of the beneficial conversion
feature of the note payable of $200,000 as a debt discount.  The debt discount
is being amortized over the two year life of the Note and a $60,000 charge was
recorded as interest expense during the year ended December 31, 2004.

The Company does not have a sufficient number of authorized shares of common
stock available to permit the conversion of the Note at this time.  The Company
has agreed to obtain shareholder approval to (a) increase the number of
authorized shares of common stock to a number sufficient to permit conversion,
or (b) to effect a reverse stock split to reduce the number of currently
outstanding shares of common stock to a number small enough to permit the
conversion of the Note.

ITEM 13.  EXHIBITS

(a)  EXHIBITS

The exhibits listed in the accompanying index to exhibits are filed or
incorporated by reference as part of this Annual Report.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

(1)  Audit Fees:

Fees for audit services provided by KBA Group LLP total approximately $36,000
for 2004 and approximately $30,000 for 2003, including fees associated with the
annual audit, the reviews of the Company's quarterly reports on Form 10-QSB and
review of the registration statements.

(2)  Audit Related Fees:

KBA Group LLP did not bill the Company any audit related fees during 2004 or
2003.

(3)  Tax Fees:

KBA Group LLP did not bill the Company any tax fees during 2004 or 2003.

(4)  All Other Fees:

KBA Group LLP did not bill the Company any other fees during 2004 or 2003.

(5)  Audit Committee's Pre-Approval Policies and Procedures

(i)  The Audit Committee of the Board of Directors approves the scope of
services and fees of the outside accountants on an annual basis, generally prior
to the beginning of the services.

(ii) The Audit Committee of the Board of Directors reviewed and approved 100% of
the fees for the services above.


                                       31
<PAGE>
                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this Annual Report on
Form 10-KSB to be signed on its behalf by the undersigned, thereunto duly
authorized.

Date: April 13, 2005                    CT HOLDINGS, INC.

                                        By: /s/  STEVEN B. SOLOMON
                                        ---------------------------------------
                                        STEVEN B. SOLOMON, PRESIDENT AND
                                          CHIEF EXECUTIVE OFFICER


                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Steven B. Solomon his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
to sign any and all amendments to this Annual Report on Form 10-KSB and to file
the same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done in connection therewith, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, or any of them, shall do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
         SIGNATURE                      TITLE                       DATE
------------------------  -----------------------------------  --------------
<S>                       <C>                                  <C>
 /s/  STEVEN B. SOLOMON   President, Chief Executive Officer   April 13, 2005
------------------------   and Director
      Steven B. Solomon   (Principal Executive Officer)

 /s/  RICHARD CONNELLY    Chief Financial Officer              April 13, 2005
------------------------  (Principal Accounting Officer)
      Richard Connelly

 /s/  CHRIS A. ECONOMOU   Director                             April 13, 2005
------------------------
      Chris A. Economou

 /s/  MARK ROGERS         Director                             April 13, 2005
------------------------
      Mark Rogers

                          Director
------------------------
      Dr. Axel Sawallich
</TABLE>


                                       32
<PAGE>
INDEX TO EXHIBITS

EXHIBIT
NUMBER    DESCRIPTION
------    -----------

2.1       Second Amended and Restated Plan of Merger, dated February 29, 1996,
          by and between LoneStar Hospitality Corporation, LSHC Acquisition,
          Inc. and Citadel Computer Systems Incorporated (without exhibits)
          (incorporated by reference to Exhibit 2.1 of the Company's Current
          Report on Form 8-K dated February 29, 1996).

2.2       Purchase and Sale Agreement, dated March 1, 1996, by and between the
          LoneStar Hospitality Corporation, LS Holding Corp. and Miami Subs USA,
          Inc. (without exhibits) (incorporated by reference to Exhibit 2.2 of
          the Company's Current Report on Form 8-K dated February 29, 1996).

2.3       Technology Transfer Agreement, by and between LoneStar Hospitality
          Corporation and Circuit Masters Software, Inc., dated February 29,
          1996 (without exhibits) (incorporated by reference to Exhibit 2.3 of
          the Company's Current Report on Form 8-K dated February 29, 1996).

2.4       Technology Transfer Agreement, by and between the Company and Bill
          Mulvany, dated February 29, 1996 (without exhibits) (incorporated by
          reference to Exhibit 2.4 of the Company's Current Report on Form 8-K
          dated February 29, 1996).

2.5       Technology Transfer Agreement, by and between the Company and Kim
          Marie Newman, dated February 29, 1996 (without exhibits) (incorporated
          by reference to Exhibit 2.5 of the Company's Current Report on Form
          8-K dated February 29, 1996).

2.6       Agreement, by and between the Company, Circuit Masters Software, Inc.,
          Patrick William Mulvany and Kim Marie Newman, dated May 16, 1996,
          effective as of February 29, 1996 (incorporated by reference to
          Exhibit 2.6 of the Current Report on Form 8-K/A filed with the
          Securities and Exchange Commission on June 10, 1996).

3.1       Certificate of Incorporation (incorporated by reference to the
          registration statement on Form S-1, File No. 33-25462, for Apollo
          Resources, Inc., on November 10, 1988, and declared effective January
          4, 1989).

3.2       Certificate of Amendment to Certificate of Incorporation filed with
          the Delaware Secretary of State on June 4, 1990 (incorporated by
          reference to Exhibit 3.2 of the Company's Annual Report on Form 10-KSB
          for the fiscal year ended February 29, 1996).

3.3       Bylaws (incorporated by reference to the registration statement on
          Form S-1, File No. 33-25462, filed with the Securities and Exchange
          Commission on November 10, 1988).

3.4       Certificate of Amendment to Certificate of Incorporation filed with
          the Delaware Secretary of State on October 15, 1991 (incorporated by
          reference to the Company's Annual Report on Form 10-KSB for the year
          ended December 31, 1991).


                                       33
<PAGE>
3.5       Certificate of Amendment to Certificate of Incorporation filed with
          the Delaware Secretary of State on July 20, 1994 (incorporated by
          reference to the Company's Quarterly Report on Form 10-QSB for the
          year June 30, 1994).

3.6       Certificate of Amendment to Certificate of Incorporation filed with
          the Delaware Secretary of State on December 11, 1995 (incorporated by
          reference to the Company's Quarterly Report on Form 10-QSB for the
          year December 31, 1995).

3.7       Certificate of Amendment to Certificate of Incorporation filed with
          the Delaware Secretary of State on May 1, 1996 (incorporated by
          reference to Exhibit 3.7 of the Company's Annual Report on Form 10-KSB
          for the fiscal year ended February 29, 1996).

3.8       Certificate of Designations of Series A Preferred Stock. (incorporated
          by reference to Exhibit 4 of the Company's Quarterly Report on Form
          10-QSB for the fiscal year May 31, 1996).

3.9       Certificate of Designations of Series B Preferred Stock (incorporated
          by reference to Exhibit 4.2 of the Company's Quarterly Report on Form
          10-QSB for the fiscal year August 31, 1996).

3.10      Certificate of Amendment to Certificate of Incorporation filed with
          the Delaware Secretary of State on February 27, 1998 (incorporated by
          reference to Exhibit 4.2 of the Company's registration statement on
          Form S-8 filed May 20, 1998, File No. 333-53131).

3.11      Certificate  of Designations of Series C Preferred Stock (incorporated
          by reference to Exhibit 4.6 of the Company's registration statement on
          Form S-8 filed May 20, 1998, File No. 333-53131).

3.12      Certificate of Designations of Series D Preferred Stock (incorporated
          by reference to Exhibit 4.8 of the Company's registration statement on
          Form S-8 filed May 20, 1998, File No. 333-53131).

3.13      Certificate of Designations of Series E Preferred Stock (incorporated
          by reference to Exhibit 4.7 of the Company's registration statement on
          Form S-8 filed May 20, 1998, File No. 333-53131).

3.14      Certificate for Renewal and Revival of Charter filed with the Delaware
          Secretary of State on October 29, 1999. (incorporated by reference to
          Exhibit 3.14 to the Company's Annual Report on Form 10-KSB for the
          fiscal year ended February 29, 2000).

4.1       Loan and Security Agreement dated May 22, 2004 between the Company and
          CITN Investments (filed as Exhibit 4.1 to the Form 8-K filed with the
          Commission on May 26, 2004 and incorporated herein by reference).

4.2       Secured Convertible Note in the principal amount of $200,000 dated May
          22, 2004 payable by the Company to CITN Investments (filed as Exhibit
          4.2 to the Form 8-K filed with the Commission on May 26, 2004 and
          incorporated herein by reference).

10.1      Employment Agreement dated July 15, 1997, by and between the Company
          and Steven Solomon (incorporated by reference to Exhibit 10.1 to the
          Company's Annual Report on Form 10-KSB for the fiscal year ended
          February 28, 1998).


                                       34
<PAGE>
10.2      Stock Purchase Agreement, dated August 16, 1996, among the Company,
          Kent- Marsh Ltd., Inc., Bob Wesolek and Vance Nesbitt. (incorporated
          by reference to Exhibit 2.1 of the Company's Current Report on Form
          8-K filed September 3, 1996).

10.3      Stock Purchase Agreement, dated August 16, 1996, among the Company,
          Astonishing Developments, Inc., Bob Wesolek and Vance Nesbitt
          (incorporated by reference to Exhibit 2.2 of the Company's Current
          Report on Form 8-K filed September 3, 1996).

10.4      Agreement, dated April 11, 1997, among the Company, George Sharp and
          Gil Gertner (incorporated by reference to Exhibit 99.1 of the
          Company's Current Report on Form 8-K filed April 11, 1997).

10.5      Form of Offshore Securities Subscription Agreement, Convertible Notes,
          Warrants and Registration Rights Agreement between the Company and
          First Bermuda Securities Limited (incorporated by reference to
          Exhibits 99.1 through 99.4 of the Company's Current Report on Form 8-K
          filed March 26, 1997).

10.6      Form of Offshore Securities Subscription Agreement, Convertible Notes,
          Warrants and Registration Rights Agreement between the Company and
          Willora Company Ltd. (incorporated by reference to Exhibits 99.1
          through 99.4 of the Company's Current Report on Form 8-K filed April
          28, 1997).

10.7      Form of Offshore Securities Subscription Agreement, Convertible Notes,
          Warrants and Registration Rights Agreement between the Company and
          Silenus Ltd. (incorporated by reference to Exhibits 99.1 through 99.4
          of the Company's Current Report on Form 8-K filed June 24, 1997).

10.8      Purchase Agreement between the Company and CORESTAFF, Inc., dated
          October 6, 1997 (incorporated by reference to Exhibit 10.10 to the
          Company's Annual Report on Form 10-KSB for the fiscal year ended
          February 28, 1997).

10.9      Warrant to Purchase Common Stock of the Company issued to Worldwide
          PetroMoly Inc. (incorporated by reference to Exhibit 10.11 to the
          Company's Annual Report on Form 10-KSB for the fiscal year ended
          February 28, 1997).

10.10     Series D Preferred Stock Purchase Agreement between the Company and
          METAMOR WORLDWIDE, Inc., dated May 15, 1998 (incorporated by reference
          to Exhibit 10.12 to the Company's Annual Report on Form 10-KSB for the
          fiscal year ended February 28, 1998).

10.11     Stock Purchase Agreement between the Company and Precision Capital
          Limited Partnership I, dated April 30, 1998 (incorporated by reference
          to Exhibit 10.13 to the Company's Annual Report on Form 10-KSB for the
          fiscal year ended February 28, 1998).

10.12     Stock Purchase Agreement between the Company and Icarus Investments I,
          Ltd., dated May 27, 1998 (incorporated by reference to Exhibit 10.14
          to the Company's Annual Report on Form 10-KSB for the fiscal year
          ended February 28, 1998).

10.13     Stock Purchase Agreement, dated March 11, 1999, among inLighten.com,
          Inc., 2-Lane Media, Inc., and the shareholders of 2-Lane Media, Inc.


                                       35
<PAGE>
          (incorporated by reference to Exhibit 10.15 to the Company's Annual
          Report on Form 10-KSB for the fiscal year ended February 28, 1999).

10.14     Stock Purchase Agreement, dated May 20, 1999, among inLighten.com,
          Inc., Forward Communications, Inc., FCI Services Inc., and the
          shareholders of Forward Communications, Inc. and FCI Services Inc.
          (incorporated by reference to Exhibit 2.1 to the Company's Current
          Report on Form 8-K filed June 3, 1999).

10.15     Agreement and Plan of Reorganization, dated May 20, 1999, among
          inLighten.com, Inc., Forward Freight, Inc., and the shareholders of
          Forward Freight Inc. (incorporated by reference to Exhibit 2.1 to the
          Company's Current Report on Form 8-K filed June 3, 1999).

10.16     Settlement and Release Agreement dated January 14, 2000 by and among
          Richard L. Travis, How2.com, Inc. and the Company (incorporated by
          reference to Exhibit 10.18 to Post-Effective Amendment No. 1 to the
          Company's Registration Statement on Form SB-2 filed March 23, 2000).

10.17     Settlement and Release Agreement dated March 1, 2000 by and among
          Bennett Klein and the Company (incorporated by reference to Exhibit
          10.19 to Post-Effective Amendment No. 1 to the Company's Registration
          Statement on Form SB-2 filed March 23, 2000).

10.18     Standard Office Lease, dated August 2, 1999, between Arden Realty
          Limited Partnership and How2HQ.com, Inc. (Santa Monica, California).
          (incorporated by reference to Exhibit 10.18 to the Company's Annual
          Report on Form 10-KSB for the fiscal year ended February 29, 2000).

10.19     Guaranty of Lease, dated August 2, 1999, by the Company to Arden
          Realty Limited Partnership, with respect to certain obligations of
          How2HQ.com, Inc. under Standard Office Lease. (incorporated by
          reference to Exhibit 10.19 to the Company's Annual Report on Form
          10-KSB for the fiscal year ended February 29, 2000).

10.20     Promissory Note dated September 30, 1999 payable to How2HQ.com, Inc.
          (incorporated by reference to Exhibit 10.20 to the Company's Annual
          Report on Form 10-KSB for the fiscal year ended February 29, 2000).

10.21     Asset Purchase Agreement dated as of May 5, 2000 by and between EBSCO
          CASIAS, Inc., iNetze.com, Inc., ESRN Acquisition, LLC and the Company
          (incorporated by reference to Exhibit 2.1 to the Company's Current
          Report on Form 8-K filed June 12, 2000).

10.22     Asset Contribution Agreement dated as of May 5, 2000 by and between
          iNetze.com, Inc., ESRN Acquisition, LLC, the Company and the
          stockholders set forth on the signature pages attached hereto
          (incorporated by reference to Exhibit 2.2 to the Company's Current
          Report on Form 8-K filed June 12, 2000).

10.23     Stock Purchase Agreement dated as of May 5, 2000 by and between the
          Company, Tim Collins, F. Shanahan McAdoo and Robert C. Whitehair
          (incorporated by reference to Exhibit 2.3 to the Company's Current
          Report on Form 8-K filed June 12, 2000).

10.24     Form of Plan and Agreement of Distribution between the Company and
          Citadel Security Software Inc.


                                       36
<PAGE>
10.25     Form of Tax Disaffiliation Agreement between the Company and Citadel
          Security Software Inc.

10.26     Form of Transition Services Agreement between the Company and Citadel
          Security Software Inc.

10.27     Secured Promissory Note dated as of February 17, 2004 payable by the
          Company to the order of Steven B. Solomon (Filed as Exhibit 10.27 to
          the Form 10-KSB filed with the Commmission on April 14, 2004 and
          incorporated herin by reference).

10.28     Security and Pledge Agreement dated as of February 17, 2004 between
          the Company and Steven B. Solomon as Secured Party (Filed as Exhibit.
          10.28 to the Form 10-KSB filed with the Commission on April 14, 2004
          and incorporated herein by reference).

10.29     Approval and Release Agreement dated December 31, 2003 between the
          Company and Steven B. Solomon (Filed as Exhibit 10.29 to the Form
          10-KSB filed with Commission on April 14, 2004 and incorporated herein
          by reference).

*23.1     Consent of KBA Group LLP.

*24.1     Power of Attorney (included as part of the signature page of this
          Annual Report on Form 10-KSB).

*31.1     Certification of Principal Executive Officer.

*31.2     Certification of Principal Financial Officer.

*32.1     Certification of Chief Executive Officer and Chief Financial Officer
          Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906
          of the Sarbanes-Oxley Act of 2002.


*    Filed Herewith


                                       37
<PAGE>
<TABLE>
<CAPTION>
                          INDEX TO FINANCIAL STATEMENTS

<S>                                                                         <C>
Report of Independent Registered Public Accounting Firm. . . . . . . . . .  F-2

Balance Sheets as of December 31, 2004 and 2003. . . . . . . . . . . . . .  F-3

Statements of Operations for the years ended December 31, 2004 and 2003. .  F-4

Statements of Stockholders' Deficit for the years ended
    December 31, 2004 and 2003 . . . . . . . . . . . . . . . . . . . . . .  F-5

Statements of Cash Flows for the years ended
    December 31, 2004 and 2003 . . . . . . . . . . . . . . . . . . . . . .  F-6

Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . .  F-7
</TABLE>


<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
CT Holdings, Inc.

We have audited the accompanying balance sheets of CT Holdings, Inc. (the
Company) as of December 31, 2004 and 2003, and the related statements of
operations, stockholders' 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 the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require that we
plan and perform the audits to obtain reasonable assurance about 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 the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CT Holdings, Inc. as of
December 31, 2004 and 2003, and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.  As more fully described in Note A,
the Company has incurred recurring operating losses and has a significant
working capital deficiency at December 31, 2004.  These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note A.  The
financial statements do not include any adjustments that may result from the
outcome of this uncertainty.


/s/KBA Group LLP
Dallas, Texas
March 9, 2005


                                      F - 2
<PAGE>
<TABLE>
<CAPTION>
                                CT HOLDINGS, INC.
                                 BALANCE SHEETS

                                                         DECEMBER 31,
                                                      2004           2003
                                                  -------------  -------------
<S>                                               <C>            <C>
                       ASSETS
                       ------
CURRENT ASSETS
  Cash                                            $      4,168   $          -
                                                  -------------  -------------

  TOTAL ASSETS                                    $      4,168   $          -
                                                  =============  =============

        LIABILITIES AND STOCKHOLDERS' DEFICIT
        -------------------------------------
CURRENT LIABILITIES
 Accounts payable and accrued expenses            $    325,300   $    480,396
 Convertible secured note payable to
   related party, net of deferred debt
   discount of $140,000                                 60,000              -
 Demand note payable to Citadel plus accrued
   interest payable of $48,895 and $20,934             273,895        245,934
 Payable to Citadel                                    585,000        410,000
 Note payable to officer                                 5,000              -
 Note payable to shareholder                             9,000          9,000
 Accrual for litigation including accrued
   interest of $1,125,738 and $5,000                 4,125,738        207,000
                                                  -------------  -------------
Total current liabilities                            5,383,933      1,352,330

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT
 Preferred stock, $.01 par value per share;
   1,000,000 shares authorized; no shares issued
   or outstanding                                            -              -
 Common stock, $.01 par value per share;
   60,000,000 shares authorized; 58,545,928
   issued and outstanding                              585,460        585,460
 Common stock pending issuance                         600,000        600,000
 Additional paid-in capital                         57,390,601     57,190,601
 Accumulated deficit                               (63,955,826)   (59,728,391)
                                                  -------------  -------------
Total stockholders' deficit                         (5,379,765)    (1,352,330)
                                                  -------------  -------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT       $      4,168   $          -
                                                  =============  =============
</TABLE>

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


                                      F - 3
<PAGE>
<TABLE>
<CAPTION>
                                CT HOLDINGS, INC.
                            STATEMENTS OF OPERATIONS

                                                          Years Ended
                                                         December 31,
                                                      2004          2003
                                                  ------------  ------------
<S>                                               <C>           <C>
Revenue                                           $         -   $         -
General and administrative expense                    107,348       296,262
Forgiveness of accounts payable                             -      (162,384)
Litigation accrual                                  3,000,000       202,000
Reversal of litigation accrual                        (74,733)     (560,000)
Reversal of reserve for note receivable
  from related party                                  (55,000)            -
Gain on settlement of liabilities with stock                -      (414,930)
Gain on settlement with related parties                     -      (641,549)
Interest income                                        (5,500)      (55,350)
Interest expense                                    1,225,320       125,434
Write-off of affiliate shares acquired
  through exercise of warrants                         30,000             -
                                                  ------------  ------------
Income (loss)                                      (4,227,435)    1,210,517
Provision for income taxes                                  -             -
                                                  ------------  ------------
Net income (loss)                                 $(4,227,435)  $ 1,210,517
                                                  ============  ============

Net income (loss) per share - basic and diluted   $     (0.06)  $      0.02
                                                  ============  ============

Weighted average shares outstanding -
  basic and diluted                                66,311,502    59,909,558
                                                  ============  ============
</TABLE>

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


                                      F - 4
<PAGE>
<TABLE>
<CAPTION>
                                                     CT HOLDINGS, INC.
                                            STATEMENTS OF STOCKHOLDERS' DEFICIT

                                Common Stock           Common
                          -------------------------     Stock       Additional
                                                       Pending         Paid       Accumulated
                            Shares        Amount        Issue        Capital        Deficit         Total
                          -----------  ------------  ------------  ------------  -------------  -------------
<S>                       <C>          <C>           <C>           <C>           <C>            <C>
Balances at
December 31, 2002          57,545,928  $    575,460  $          -  $ 56,950,601  $(60,938,908)  $ (3,412,847)

Common stock issued
in lieu of cash for
settlement of
liabilities                 1,000,000        10,000             -       240,000             -        250,000

Note payable converted
to common stock
pending issuance                    -             -       600,000             -             -        600,000

Net income                          -             -             -             -     1,210,517      1,210,517
                           ----------------------------------------------------------------------------------
Balances at
December 31, 2003          58,545,928       585,460       600,000    57,190,601   (59,728,391)    (1,352,330)

Beneficial conversion
feature of note
payable to related party            -             -             -       200,000             -        200,000

Net loss                            -             -             -             -    (4,227,435)    (4,227,435)
                           ----------------------------------------------------------------------------------
Balances at
December 31, 2004          58,545,928  $    585,460  $    600,000  $ 57,390,601  $(63,955,826)  $ (5,379,765)
                          ===========  ============  ============  ============  =============  =============
</TABLE>

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


                                      F - 5
<PAGE>
<TABLE>
<CAPTION>
                                CT HOLDINGS, INC.
                            STATEMENTS OF CASH FLOWS

                                                            Years Ended
                                                           December 31,
                                                         2004         2003
                                                     ------------  ------------
<S>                                                  <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)                                    $(4,227,435)  $ 1,210,517
 Adjustments to reconcile net income (loss) to
  net cash used in operating activities:
   Amortization of deferred debt discount
    recorded as interest expense                          60,000             -
   Accrual for litigation and related interest
    expense                                            4,125,738       207,000
   Reversal of accrual for litigation                    (74,733)     (560,000)
   Reversal of reserve for collectibility
    of related party note receivable                     (60,500)            -
   Write-off affiliate shares acquired through
    the exercise of warrants                              30,000             -
   Gain on settlement of liability in exchange for
    shares of common stock                                     -      (414,930)
   Gain from offset of notes payable
    against notes receivable                                   -      (696,899)
   Forgiveness of accounts payable                             -      (162,384)
 Changes in operating assets and liabilities:
   Accounts payable and accrued expenses                (116,863)      156,696
   Payable to Citadel                                    202,961       260,000
   Accrual for legal settlement                         (165,000)     (225,000)
                                                     ------------  ------------
NET CASH USED IN OPERATING ACTIVITIES                   (225,832)     (225,000)

CASH FLOWS FROM INVESTING ACTIVITIES
 Exercise of warrants to acquire affiliate's
   Series-A preferred stock                              (30,000)            -
 Payment received on notes receivable from
   related party                                          55,000             -
                                                     ------------  ------------
NET CASH PROVIDED BY INVESTING ACTIVITIES                  25,000             -

CASH FLOWS FROM FINANCING ACTIVITIES
 Proceeds from advances and notes payable
   to related party                                      200,000       225,000
 Proceeds from note payable to officer                    35,000             -
 Payment on note payable to officer                      (30,000)            -
                                                     ------------  ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                205,000       225,000
                                                     ------------  ------------
Net change in cash and cash equivalents                    4,168             -
Cash and cash equivalents at the beginning
  of the year                                                  -             -
                                                     ------------  ------------
Cash and cash equivalents at the end of the year     $     4,168   $         -
                                                     ============  ============

SUPPLEMENTAL CASH FLOW ITEMS
 Interest paid                                       $       519   $         -
                                                     ============  ============


                                      F - 6
<PAGE>
Income taxes paid                                    $         -   $         -
                                                     ============  ============

Fair value of stock issued in settlement
   of accounts payable                               $         -   $   106,250
                                                     ============  ============
Beneficial conversion feature of note payable
   to related party recorded as deferred
   debt discount                                     $   200,000   $         -
                                                     ============  ============
Conversion of note payable in equity                 $         -   $   600,000
                                                     ============  ============
</TABLE>

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


CT HOLDINGS, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE A - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

CT Holdings, Inc. (the "Company" or "CT Holdings") provides management expertise
including consulting on operations, marketing and strategic planning and a
single source of capital to early stage technology companies.  The Company was
incorporated in Delaware in 1992.  The business model is designed to enable the
companies with whom the Company acquires or invests to become market leaders in
their industries.  The strategy over the years has led to the development,
acquisition and operation of technology based businesses with compelling
valuations and strong business models.  The goal is to realize the value of
these investments for the Company's shareholders through a subsequent liquidity
event such as a sale, merger or initial public offering of the investee
companies.

At December 31, 2004 the Company held investments in two companies, Parago, Inc.
("Parago") and River Logic, Inc. ("River Logic"). At December 31, 2004 the
Company owned approximately 25,000 shares of Parago common stock and 28.8749
shares of Series A-3 convertible preferred stock (convertible into 2,887 shares
of Parago common stock) and approximately 8% of River Logic.

Parago is a marketing services company that brings transaction processing
capabilities together with information-based marketing in a way that transforms
the way companies interact with customers. Through web-enabled products,
processes and resources, Parago creates solutions that meet their client's
marketing objectives. Parago provides a proprietary, promotional marketing
technology platform that helps their clients reduce promotional program costs,
increase sales, and enhance customer relationships. The Company accounts for the
investment in Parago using the cost method of accounting. In prior periods due
to continuing operating losses and other factors the Company wrote down the
carrying value of the investment in Parago to zero. The investment has no
carrying value at December 31, 2004 and December 31, 2003.

In May 2000, CT Holdings acquired a minority interest in River Logic which
develops decision-support applications for industry. River Logic's applications
enable industry professionals to model complex enterprises and explore financial
relationships on a desktop computer or laptop. Embedded analytics allow
end-users to understand the financial implications of critical business
decisions


                                      F - 7
<PAGE>
by manipulating graphical icons that model their enterprise. The Company
accounts for the investment in River Logic using the cost method of accounting.
In prior periods due to continuing operating losses and other factors the
Company wrote down the carrying value of the investment in Parago to zero. The
investment has no carrying value at December 31, 2004 and December 31, 2003.

LIQUIDITY

The Company has incurred recurring operating losses and has a significant
stockholders' deficit at December 31, 2004 of approximately $5.4 million. There
is a cash balance of $4,168 at December 31, 2004 and current liabilities total
approximately $5.4 million. The Company has limited access to capital at
December 31, 2004, no plans to raise capital, and management has not identified
sources of capital at December 31, 2004. During the year ended December 31,
2004, the Company received $200,000 from CITN Investment Inc. ("CII") as part of
an interest bearing Promissory Note. CII is an entity owned 50% by the Company's
CEO and 50% by a shareholder of the Company. Past funding needs of the business
have been provided by financings through short-term notes payable and additional
investments from related parties, including the Company's CEO and CII, however
there can be no assurance that such funds will be available from these related
parties in the future. The Company has been and continues to be dependent upon
outside financing to perform its business development activities, make
investments in new technology companies and to fund operations.

The Company has made investments in entities that management believes may
provide liquidity to the Company in the long term and the management believes
that Parago and River Logic may ultimately be successful. Both Parago and River
Logic are privately held companies and because the Company holds minority
interests in these companies, the Company has received only limited information
regarding their results of operations and financial condition. The Company has
not participated in the additional capital infusions since the initial
investments and as a result, the ownership percentage in both investee companies
has been significantly diluted. The Company's ownership in Parago consists of
25,000 shares of common stock and 28.8749 shares of Series A-3 convertible
preferred stock (convertible to 2,887 shares of Parago common stock), and
approximately 8% of River Logic.

While manangement believes that the performance of the investee companies to
date has been as expected, there can be no assurance that the Company will ever
achieve liquidity from these investments. In addition, there can be no assurance
that the Company's plans will be successful or what other actions may become
necessary in the future. Until the Company is able to create liquidity from the
investments through sale to a strategic investor, an initial public offering or
some other liquidity transaction, the Company will continue to require working
capital to fund operating expenses. Although the Company has been successful
raising capital in the past, an inability to raise capital may require us to
sell assets. Such actions could have a material adverse effect on the Company's
business operations and result in charges that could be material to the
Company's business and results of operations. At December 31, 2004 the Company
has not identified sources of capital nor does the Company have any plans to
raise sufficient amounts of capital to settle liabilities or to fund business
development activities.

BASIS OF PRESENTATION

The accompanying financial statements of CT Holdings have been prepared in
accordance with accounting principles generally accepted in the United States.

Certain 2003 amounts have been reclassified to conform to 2004 financial
statement presentations.


                                      F - 8
<PAGE>
USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements.  Actual results could
differ from those estimates.

INVESTMENT IN UNCONSOLIDATED AFFILIATES

At December 31, 2004 the Company held investments in two companies, Parago and
River Logic.  The Company recorded the carrying amount of these investments
under the cost method of accounting because the Company's percentage ownership
in each Company was a non-controlling interest of less than 20%.

After a 1 for 1000 reverse stock split, the Company holds 20,000 shares of
common stock of Parago and warrants to purchase 28.8749 shares of Series A-3
preferred stock (convertible into 2,887 shares of common stock) at December 31,
2003 and an additional 5,000 (5,000,000 pre 1:1000 reverse stock split) shares
received from our CEO in February 2004 upon exercising his exchange right for
6,000,000 shares of the Company's common stock. Also in February 2004, the
Company's CEO loaned the Company $30,000 in order for the Company to exercise
warrants to purchase the Series A-3 convertible preferred stock, pursuant to a
promissory note secured by the preferred stock. In December 2001 Parago
completed an equity financing of approximately $13.6 million of a total $15
million financing. Approximately $1.4 million of equity financing was closed in
February 2002. As a result of the equity financing, the Company's ownership
percentage in Parago was reduced to less than 1%. The Company's investment in
Parago for the period from January 1, 2001 through December 12, 2001 was
accounted for under the equity method of accounting for investments and
accordingly as a result of the Company's ownership falling below 20%, has been
accounted for using the cost method of accounting beginning December 13, 2001.
Under the cost method, the Company's share of income or loss of Parago is not
included in the Company's Statements of Operations. Under the equity method of
accounting, the Company's share of the investee's income or losses is included
in the statements of operations. If the carrying value of the Company's net
investment falls below zero, as it did during the year ended December 31, 2000,
the Company discontinues applying the equity method until the carrying value of
the net investment rises above zero. In addition, in the event the Company's
ownership percentage exceeds 20% and the value of the Company's equity
investment rises above zero, the Company will resume applying the equity method
and will recognize an investment in Parago after the Company's share of net
losses not recognized is recovered through its proportionate share of net income
if Parago turns profitable.

As the Company owns approximately 8% of River Logic at December 31, 2004, the
investment has been accounted for under the cost method of accounting. Under
this method, the Company's share of the income or losses of River Logic is not
included in the Company's statements of operations. The Company's carrying value
of its investment in River Logic was $2,703,975 at December 31, 2001. In July
2002 River Logic entered into an equity line of credit at a per share valuation
below the carrying value of the Company's investment in River Logic. Management
determined that due to the new valuation, lower spending in the information
technology industry, and continuing operating losses by River Logic that the
carrying value of the investment in River Logic should be reduced to zero. The
Company periodically evaluates the carrying value of its investments in investee
companies for impairment based upon the prospects of the entity and the value of
the investment when compared to other investments in the entity from other
unrelated parties. If these factors indicate that an other than temporary
impairment exists, then the Company will write down the value of the investment
to its realizable value. For reasons noted above, during the year ended December
31, 2002 the Company wrote down its investment in River Logic.


                                      F - 9
<PAGE>
IMPAIRMENT OF LONG-LIVED ASSETS

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, the Company
reviews its long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable and exceeds its fair value. If conditions indicate an asset might be
impaired, the Company estimates the future cash flows expected to result from
the use of the asset and its eventual disposition. The impairment would be
measured by the amount by which the asset exceeds its fair value typically
represented by the future discounted cash flow associated with the asset. At
December 31, 2004 and 2003 the Company had no long lived assets.

INCOME TAXES

Deferred income taxes are recognized using the asset and liability method.
Deferred income taxes are provided based upon estimated future tax effects of
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes calculated based
upon provisions of enacted laws.

STOCK-BASED COMPENSATION

The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board ("APB") Opinion No.25,
"Accounting for Stock Issued to Employees," and complies with the disclosure
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" as amended
by SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and
Disclosure, an amendment of FASB Statement No. 123".  Under APB Opinion No. 25,
compensation expense for employees is based on the excess, if any, on the date
of grant, between the fair value of the Company's stock over the exercise price.

The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of SFAS No. 123 and SFAS No. 148 and Emerging
Issues Task Force ("EITF") Issue No. 96-18, "Accounting for Equity Instruments
That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services."  All transactions in which goods or services are
the consideration received for the issuance of equity instruments are accounted
for based on the fair value of the consideration received or the fair value of
the equity instrument issued, whichever is more reliably measurable.  The
measurement date of the fair value of the equity instrument issued is the
earlier of the date on which the counterparty's performance is complete or the
date on which it is probable that performance will occur.

If the Company had recognized compensation expense, in accordance with SFAS No.
123 and 148, based upon the fair value at the grant date for options granted to
employees, officers and directors during the years ended December 31, 2004 and
2003, the pro forma effect on net income (loss) and net income (loss) per share
would have been as follows:


                                     F - 10
<PAGE>
<TABLE>
<CAPTION>
                                                              2004         2003
                                                          ------------  ------------
<S>                                                       <C>           <C>
Net income (loss) attributable
  to common stockholders
  as reported                                             $(4,227,435)  $  1,210,517

Add: Stock-based employee
  compensation expense included
  in reported net income (loss)                                     -              -

Deduct: Stock-based employee
  compensation expense
  determined under fair value
  based method                                                      -              -
                                                          ------------  ------------
Pro forma net income (loss)                               $(4,227,435)  $  1,210,517
                                                          ============  ============

Net income (loss) per common share - basic and diluted
  As reported                                             $     (0.06)  $       0.02
                                                          ============  ============
  Pro forma                                               $     (0.06)  $       0.02
                                                          ============ =============
</TABLE>

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments, including accounts payable and notes
payable are carried at cost, which approximates fair value due to the short
maturity of these instruments.

NET INCOME AND LOSS PER COMMON SHARE

Net income per common share and net loss per common share are computed by
dividing net income (loss) by the weighted average number of shares of common
stock outstanding during the period. Included in the weighted average number of
common shares outstanding for the year ended December 31, 2004 are 2,700,000
shares that would have been issued when a shareholder exercised his right to
convert a note payable to common stock and 6,000,000 shares that would have been
issued to the CEO when he exercised his right to exchange Parago shares for CT
Holdings shares if the Company had the available authorized shares. These shares
have been included in the computation from the date that they would have been
issued. Basic income (loss) per share excludes any dilutive effects of stock
options. Stock options to purchase 2,917,500 shares of common stock at December
31, 2004 and December 31, 2003, have been excluded from the computation of
diluted income (loss) per share, as the effect would be anti-dilutive. At
December 31, 2004, the Company does not have any outstanding stock options or
warrants that have an exercise price below market value.

RECENT ACCOUNTING PRONOUNCEMENTS

On December 16, 2004, the Financial Accounting Standards Board ("FASB") issued
FASB Statement No. 123 (revised 2004), Share-Based Payment ("SFAS No. 123R"),
which is a revision of FASB Statement No. 123, Accounting for Stock-Based
Compensation. SFAS No. 123R supersedes APB Opinion No. 25, Accounting for Stock
Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows.
Generally, the approach in SFAS No. 123R is similar to the approach described in
SFAS No. 123. However, SFAS 123R requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the income
statement based on their fair values. Pro forma disclosure is no longer an
alternative. The Company expects to adopt SFAS No. 123R on January 1, 2006.

The Company is evaluating the impact of adopting SFAS 123R and expects that it
will record substantial non-cash stock compensation expenses. The adoption of
SFAS 123R is not expected to have a significant effect on the Company's
financial condition or cash flows but is expected to have a significant effect
on the Company's results of operations. The future impact of the adoption of
SFAS 123R cannot be predicted


                                     F - 11
<PAGE>
at this time because it will depend on the levels of share-based payments
granted by the Company in the future. However, had the Company adopted SFAS 123R
in prior periods, the impact of the standard would have approximated the impact
of SFAS 123 as described in the pro forma net loss attributable to common
shareholders included in the Stock-Based Compensation policy footnote.

NOTE B - INCOME TAXES

The significant components of the Company's deferred tax assets are as
follows:

<TABLE>
<CAPTION>
                                                December 31,
                                            2004           2003
                                         -------------  -------------
<S>                                      <C>            <C>
Deferred tax assets
  Net operating loss carryforwards       $ 10,894,000   $ 10,793,000
  Reserve on investments                    1,059,000      1,059,000
  Accounts payable and accrued expenses     1,403,000        111,000
                                         -------------  -------------
Total deferred tax assets, net             13,356,000     11,963,000
Valuation allowance                       (13,356,000)   (11,963,000)
                                         -------------  -------------
Total deferred tax assets, net           $          -   $          -
                                         =============  =============
</TABLE>

The difference between the provision for income taxes and the amount computed by
applying the federal statutory rate to loss before provision for income taxes
are as follows:

<TABLE>
<CAPTION>
                                                              December 31,
                                                            2004         2003
                                                        ------------  ------------
<S>                                                     <C>           <C>
Provision (benefit) computed at federal statutory rate  $(1,437,000)  $   412,000
Increase (decrease) in valuation allowance                1,393,000      (500,000)
Other                                                        44,000        88,000
                                                        ------------  ------------
                                                        $         -   $         -
                                                        ============  ============
</TABLE>

For federal income tax purposes, at December 31, 2004 the Company had a net
operating loss carryforward of approximately $32,000,000, which is subject to
annual limitations as prescribed by the Internal Revenue Code, is available to
offset future taxable income and expires at various dates through 2024.  A
valuation allowance has been recorded for the entire amount of the net deferred
tax asset due to uncertainty of realization.

NOTE C - STOCK OPTIONS AND WARRANTS

The Company has issued stock options to purchase common stock to directors,
employees and consultants.  Options are granted at no less than fair value at
the date of grant.  Generally, the options vest over no more than three years.
Following is a summary of option transactions for the years ended December 31,
2004 and 2003:


                                     F - 12
<PAGE>
<TABLE>
<CAPTION>
                                                    Weighted
                                                    average
                                                    exercise
                                                   price per
                                        Shares       share
                                      -----------  -----------
<S>                                   <C>          <C>
Outstanding at December 31, 2002       3,955,850   $       0.93

Granted                                        -   $       0.00
Exercised                                      -   $       0.00
Expired or cancelled                  (1,038,350)  $       2.86
                                      -----------
Outstanding at December 31, 2003       2,917,500   $       0.24

Granted                                        -   $       0.00
Exercised                                      -   $       0.00
Expired or cancelled                           -   $       0.00
                                      -----------
Outstanding at December 31, 2004       2,917,500   $       0.24
Exercisable at December 31, 2004       2,917,500   $       0.24
                                      ===========

Exercisable at December 31, 2003       2,917,500   $       0.24
</TABLE>

The following table summarizes other information regarding stock options at
December 31, 2004:

<TABLE>
<CAPTION>
                                 Weighted-average   Weighted-
                   Outstanding/      remaining       average
Range of exercise  Exercisable   contractual life    exercise
Prices                Shares        (in years)        price
-----------------  ------------  -----------------  ----------
<S>                <C>           <C>                <C>
$0.20 - $0.26         2,397,500               6.25  $     0.20
$0.27 - $0.40           500,000               6.14  $     0.38
$0.41 - $2.00            20,000               1.49  $     1.94
                  -------------  -----------------  ----------
                      2,917,500                     $     0.24
                  =============  =================  ==========
</TABLE>

No options were granted during the years ended December 31, 2004 or 2003,
therefore no fair value estimate has been presented.

The following summarizes the activity of warrants to purchase common stock for
the years ended December 31, 2004 and 2003.

<TABLE>
<CAPTION>
                                                   Weighted
                                                    average
                                                   exercise
                                        Shares       price
                                      ----------  -----------
<S>                                   <C>         <C>
Outstanding at December 31, 2002      2,351,601   $      3.95

Terminated and cancelled              (2,351,601)        3.95

Exercised                                     -             -
                                      -----------
Outstanding at December 31, 2003              -             -

Terminated and cancelled                      -             -

Exercised                                     -             -
                                      -----------
Outstanding at December 31, 2004              -             -
                                      ===========
</TABLE>


                                     F - 13
<PAGE>
NOTE D - INVESTMENT IN UNCONSOLIDATED AFFILIATES

PARAGO INVESTMENT

From January 1, 2001 through December 12, 2001, the Company accounted for its
investment in Parago under the equity method of accounting.  On December 12,
2001 Parago closed approximately $13.6 million of a $15 million Series E
Preferred Stock issuance (the "Series E Financing").  The additional amount of
approximately $1.4 million was closed in February 2002.  The Company did not
participate in the Series E Financing and as a result, the Company's ownership
percentage in Parago was reduced to less than 1% of the capital stock
outstanding.  Following the Series E Financing the Company accounted for its
investment in Parago under the cost method of accounting.

In May 2001, Parago obtained a term loan from a bank with a principal amount of
$8.0 million. The funds from the term loan were necessary to enable Parago to
continue operations, as Parago's cash resources were depleted. As a condition to
the extension of the term loan, the bank required a guarantee of Parago's
obligations under the term loan from certain affiliates of Parago including the
Company. The Company's share of the guarantee was $2,099,211. The Company was
advanced $692,739 from the CEO of the Company and signed a guaranty for the
remaining $1,406,472. The CEO personally guaranteed the guaranty provided by the
Company. The guarantee was recorded as an adjustment to equity in losses of
$2,099,211 in the quarter ended June 30, 2001. Parago repaid the term loan with
proceeds from the sale of shares of the Series E Financing and the Company's
guarantee was released. Accordingly the adjustment to equity in losses of
$2,099,211 was reversed in the fourth quarter of 2001. In addition, the Company
paid the CEO the money advanced and released their guaranty. In consideration of
certain of its directors' funding of the Company's participation in the Parago
bridge loan, the Company has agreed to permit the CEO to exchange up to
5,000,000 (pre 1:1000 reverse stock split) Parago shares into up to 6,000,000
shares of the Company's common stock. During February 2004, the director
exercised his exchange rights. The CEO agreed to waive his right to receive the
physical stock certificates until authorized shares of CT Holdings become
available.

At December 31, 2004 and 2003 after consideration of the effect to a 1 for 1,000
reverse stock split in 2001, the Company held 25,000 shares of common stock of
Parago and warrants to purchase 28.8749 shares of Series A-3 preferred stock
(convertible into 2,887 shares of common stock).

RIVER LOGIC INVESTMENT

At December 31, 2004 the Company holds an investment in River Logic, a software
company that develops and markets decision support tools. The Company owns
approximately 8% of River Logic and is accounted for using the cost method of
accounting for investments in common stock. The original investment in


                                     F - 14
<PAGE>
River Logic came about through a series of equity and asset transactions with
total value of approximately $3,064,000.

River Logic has a history of operating losses. Since the initial investment in
May 2000, River Logic has raised additional capital through the issuance of
preferred stock and other equity securities. During the year ended December 31,
2002 the Company evaluated the carrying value of its ownership interests in its
investee companies taking into consideration, among other factors, the investee
company's valuation following recent infusions of capital during the year ended
December 31, 2002. The Company views the pricing of recent capital transactions
with unrelated third parties as a measure of the fair value of the investment in
River Logic.

In June 2002 River Logic entered into an equity credit line financing
arrangement at a valuation substantially below the carrying value of the
investment in River Logic. In addition, the Company's potential return of any
proceeds was subordinate to the investors in the equity credit line financing
who first receive $3 million of any proceeds in a liquidity transaction. As a
result of the lower valuation, general information technology industry
conditions and lower operational performance by River Logic, the Company
believed that the net realizable value of the investment has been permanently
impaired, is now zero and accordingly, the Company wrote down its investment in
River Logic to zero at December 31, 2002.

NOTE E - NOTES PAYABLE TO SHAREHOLDERS

The Company has presented $600,000 as "Common stock pending issuance", a
separate Component of Stockholders' Deficit at December 31, 2004 and 2003.  This
represents 2,700,000 shares of CT Holdings that were to be issued upon the
conversion of a note payable to a shareholder in 2003.  Due to the lack of
available authorized shares, the shareholder has waived his right to receive
these shares until such time as the shares become authorized.

The Company has an 8% note payable which was originally due June 30, 2002 for
$9,000 to a shareholder which was in default at December 31, 2004 and 2003 and
continues to bear interest at 8% per annum.

NOTE F - RELATED PARTY TRANSACTIONS

In February 2004, the CEO loaned the Company $30,000 in order for the Company to
exercise the Company's warrants to purchase 28.8749 shares of Series A-3
convertible preferred stock.  The promissory note was paid back plus interest in
May 2004.

In April 2003, CT Holdings obtained $225,000 from Citadel to pay a legal
settlement for an unsecured Note Payable to Citadel due on demand and bearing
interest at 12% per year. The accrued interest on the note payable at December
31, 2004 and 2003, was approximately $49,000 and $21,000, respectively.

On May 24, 2004, the Company was advanced $200,000 by CII pursuant to the Loan
Agreement and evidenced by a Secured Convertible Promissory Note (the "Note").
The note accrues interest at 8% per annum and is due the earlier of May 24, 2006
or demand by CII. This Note is convertible in whole or in part, at the option of
CII, into up to 23,666,667 shares of the Company's common stock (approximately
25% of the Company's common stock on a fully diluted basis), and is secured by a
pledge of all of the Company's assets.

In May 2004, the Company received $55,000 for payment of note receivable from an
officer plus interest of $5,500.  The note receivable was issued upon the
exercise


                                     F - 15
<PAGE>
of stock options by the officer and had been fully reserved.  Accordingly the
Company reversed the $55,000 reserve and recognized $5,500 of interest income.

In October 2004, the Company obtained a $5,000 90-day note, bearing interest
at 5% per year, from the CEO of the Company. This note is outstanding at
December 31, 2004.

Pursuant to the terms of the transition services agreement with Citadel, the
Company has agreed to pay Citadel a monthly fee of $7,500 per month, reduced
from $20,000 in May 2004, for the services of its CEO, CFO and accounting and
information management staff, as well as office rent and indirect overhead
expenses. During the year ended December 31, 2004 the Company recorded $140,000
related to this agreement. In addition, Citadel invoiced the Company $20,000 for
professional services paid by it for the Company's benefit. In October 2004,
Citadel paid a legal settlement on behalf of CT Holdings for $35,000. The amount
was booked as due to Citadel. The Company has been invoiced by Citadel for these
services and has a liability booked for $585,000 and $410,000 for amounts
payable to Citadel at December 31, 2004 and 2003, respectively. The transition
services agreement expires in May 2005 and may be extended by agreement of the
independent directors of Citadel and CT Holdings.

During 2003, as further discussed below, holders of notes payable of an
aggregate principal amount of approximately $525,000 and the Company agreed to
offset the principal of the notes plus accrued interest payable of approximately
$172,000 (as to which the Company was in default) against the principal amount
of notes receivable of $1,107,500 from the same parties. These notes receivable
had previously been fully reserved due to their uncertainty of collection. As a
result the Company has recorded a gain from offset of notes payable against
notes receivable of approximately $697,000 during the year ended December 31,
2003.

Pursuant to an agreement with the Company and an entity related to a former
employee of the Company dated December 31, 2003, a $49,000 note payable and note
receivable were offset.

In June 2001, the Company's CEO and a director funded and guaranteed CT
Holdings' participation in the Parago bridge loan. In consideration for this
funding and guarantees, CT Holdings has agreed to permit the CEO to exchange up
to 5,000,000 (pre 1:1000 reverse stock split) Parago shares into up to 6,000,000
shares of CT Holdings' common stock. The CEO exercised the exchange right in
February 2004. The CEO waived his right to receive the shares of CT Holdings
until the authorized shares become available.

NOTE G - COMMITMENTS AND CONTINGENCIES

In August 1998, Janssen-Meyers Associates L.P. (JMA) filed a lawsuit against the
Company arising out of an alleged 1995 contract with the Company's predecessor
(Old Citadel). The suit alleged that Old Citadel breached a letter of intent
dated September 1995 and/or a Placement Agency Agreement dated November 1995
between JMA and Old Citadel. As its damages, JMA claimed that it was entitled
to, among other things, the cash value of warrants to purchase 1.8 million
shares of CT Holdings common stock at an exercise price of $0.89 per share,
valued during May 1996. According to JMA's valuation of those warrants,
potential damages were alleged to exceed $40 million. The Company vigorously
disputes that it breached either the letter of intent or the Placement Agency
Agreement or that it is liable to JMA. The lawsuit was styled Janssen-Meyers
Associates, L.P. v. Citadel Technology, Inc., and was filed in the Supreme Court
of the State of New York, County of New York. The Company removed the case to
federal court in the Southern District of New York.

Following mediation in July 2000, the Company entered into a settlement term
sheet, to attempt to resolve the disputes between it and JMA, pursuant to which
the Company and JMA agreed in principle to settle the lawsuit for an aggregate
of $3


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million, in a combination of $1.5 million in cash and 300,000 shares of the
Company's common stock with a guaranteed value of $5 per share as of January,
April and October 2001 (with respect to 100,000 of the shares for each period).
The settlement was subject to execution of definitive settlement documents and
approval of the boards of directors of both parties.

However, the Company and JMA were unable to negotiate the final definitive
settlement agreement. The case was dismissed in August 2000 without any
resolution of this issue. On March 27, 2001, JMA attempted to reopen this
matter, but the Court hearing the JMA lawsuit issued a Summary Order denying
JMA's motion to enforce the settlement term sheet and confirmed the prior
dismissal of the lawsuit. The Court further ruled that JMA would either have to
bring an action on the proposed settlement or move to re-open the dismissed
case. The Court stated that it did not express any view with respect to the
merits of the settlement that brought about the dismissal of the case. There was
no activity on the case from March 2001 through August 2001. On August 27, 2001
JMA refiled its lawsuit with a federal court in New York, and the Company filed
its motion to dismiss the case because the plaintiffs lacked the required
diversity jurisdiction to pursue the claims in federal court. On October 31,
2001 the case was dismissed in federal court. In December 2001, the plaintiffs
refiled the lawsuit in the state court seeking to enforce the proposed
settlement term sheet. The case was filed in Supreme Court of New York, that
state's trial court, in a case styled Roan Meyers v. CT Holdings. CT Holdings
has filed counterclaims for breach of the term sheet as well as breach of the
placement agency agreement. Cross motions for partial summary judgments have
been argued but on June 9, 2004 the court entered judgment in favor of
Roan-Meyers in the amount of $3,000,000 and granted interest at the rate of 9%
from October 31, 2000 through the date of final judgment, and thereafter at the
statutory rate allowed by law. The amount for the judgment as well as the
interest from October 2000 through December 31, 2004 of $1,125,738 has been
accrued. The Company has appealed the final judgment. The Company intends to
vigorously defend this case.

In August 2002, PriceWaterhouseCoopers, LLP ("PWC") filed a lawsuit against CT
Holdings seeking payment of $131,816 for services performed pursuant to a
contract with CT Holdings related to the JMA lawsuit described above. The court
ordered that mediation be held by July 2003. The case is styled
PriceWaterhouseCoopers, LLP v. CT Holdings, and was filed in the 192nd District
Court, Dallas County, Texas. In July 2003, PWC obtained a summary judgment
against the Company for damages of $131,816 plus pre-judgment interest of
$57,615, post-judgment interest at 10% and attorneys' fees in the amount of
$8,605. During the year ended December 31, 2003 the Company recorded an accrual
for legal settlement of $207,000 including accrued interest in association with
this judgment. PWC has obtained a garnishment of CT Holdings' bank account and
is seeking to obtain post-judgment discovery. The Company reached a settlement
and in May 2004 paid $42,000 less than the amount that had been accrued.

In January 2003, R.R Donnelly asserted claims against the Company and Steven B.
Solomon alleging non-payment for services provided to CT Holdings by the
plaintiff during the nine months ended September 30, 2002. The plaintiff is
seeking $16,872 from the Company for past due invoices as well as attorney's
fees in the amount of $24,000, court costs and post-judgment interests at the
highest legal rate. The Company reached a settlement in the third quarter of
2004 for approximately $14,000 less than the amount that had been accrued. The
settlement was assumed by Citadel and paid in October 2004.

In April 2003 MWW Group re-filed an old suit styled "MWW Group v. CT Holdings
et.al" in the Superior Court of Bergen County, New Jersey which had been
dismissed for want of prosecution. On July 21, 2003 a default judgment was
entered against CT


                                     F - 17
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Holdings and Steve Solomon. On December 9, 2003, the Court signed an order
vacating the default judgment. The plaintiff alleges damages in the amount of
$91,290. The case was settled for $35,000 in September 2004, which the Company
had previously accrued approximately $54,000 in accounts payable for settlement.
The company paid $15,000 in September 2004.  The Company paid the remaining
$20,000 of the settlement in October 2004 by obtaining a $5,000 90-day note,
bearing interest at 5% per year, from the CEO of the Company.

The Company may become involved from time to time in litigation on various
matters which are routine to the conduct of our business. The Company believes
that none of these actions, individually or in the aggregate, will have a
material adverse effect on our financial position or results of operations,
though any adverse decision in these cases or the costs of defending or settling
such claims could have a material adverse effect on our business.


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