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

                                   FORM 10-KSB

[X]     ANNUAL REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934

                   For the fiscal year ended August 31, 2002

[ ]     TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934
        For the transition period from             to
                                       -----------    ------------

              Commission file number      0-19049
                                     ------------------

                      Fortune Diversified Industries, Inc.
                 ----------------------------------------------
                 (Name of small business issuer in its charter)

           Delaware                                   74-2504501
-------------------------------         ------------------------------------
(State or other jurisdiction of         (I.R.S. Employer Identification No.)
 incorporation or organization)


           6809 Corporate Drive
           Indianapolis, Indiana                             46278
  ----------------------------------------                ----------
  (Address of principal executive offices)                (Zip Code)

                                 (317) 532-1374
                ------------------------------------------------
                (Issuer's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:   None

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

            Common Stock ($0.01 par value per share) ("Common Stock")
            ---------------------------------------------------------
                                (Title of Class)

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

Check if there is no 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 the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year.       $2,342,000
                                                          --------------------

On November 26, 2002 the aggregate market value of the voting stock of the
Company held by non-affiliates of the Company was approximately $380,000.

On November 26, 2002 there were 74,996,629 shares of the Company's Common Stock
outstanding.

              -----------------------------------------------------
<PAGE>

                             Additional Information

For the purpose of calculating the aggregate market value of the Company's
Common Stock held by non-affiliates, it has been assumed that only the
outstanding Common Stock legally or beneficially held by the directors and
executive officers of the Company and the stockholders indicated in "Security
Ownership" with the largest holdings of the Company's Common Stock are held by
affiliates of the Company. However, this should not be deemed to constitute an
admission that all of such persons are, in fact, affiliates or that there are no
other persons who may be deemed to be affiliates of the Company.










                                       2
<PAGE>

                       FORTUNE DIVERSIFIED INDUSTRIES, INC

                         2001 FORM 10-KSB ANNUAL REPORT

                                TABLE OF CONTENTS

                                     PART 1

Item 1.  Description of Business............................................  4

Item 2.  Description of Property............................................ 13

Item 3.  Legal Proceedings.................................................. 14

Item 4.  Submission of  Matters to a Vote of Security Holders............... 14

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters........... 14

Item 6.  Management's Discussion and Analysis or Plan of Operation.......... 15

Item 7.  Financial Statements............................................... 29

Item 8.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure............................................... 29

                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance With Section 16(a) of the Exchange Act.................. 30

Item 10. Executive Compensation............................................. 32

Item 11. Security Ownership of Certain Beneficial Owners and Management and
         Related Stockholder Matters........................................ 34

Item 12. Certain Relationships and Related Transactions..................... 36

Item 13. Exhibits and Reports on Form 8-K................................... 37

SIGNATURES.................................................................. 69


                                       3
<PAGE>

                                     PART I
                                     ------

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains statements that constitute "forward-looking statements"
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and Section 27A of the Securities Act of 1933, as amended. The words
"expect," "estimate," "anticipate," "predict," "believe" and similar expressions
and variations thereof are intended to identify forward-looking statements.
These statements appear in a number of places in this report and include
statements regarding the intent, belief or current expectations of the Company,
its directors or its officers with respect to, among other things, trends
affecting the Company's financial condition or results of operations. The
readers of this report are cautioned that any such forward-looking statements
are not guarantees of future performance and involve risks and uncertainties.
Those risks and uncertainties are discussed under the heading "Management's
Discussion And Analysis Or Plan Of Operation," as well as the information set
forth below. The Company does not ordinarily make projections of its future
operating results and undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. Readers should carefully review the risk factors referred
to above and the other documents filed by the Company with the Securities and
Exchange Commission.

ITEM 1. DESCRIPTION OF BUSINESS

Fortune Diversified Industries, Inc. (formerly known as WOW Entertainment, Inc.
and prior to that American Gaming & Entertainment, Ltd.), is a Delaware
corporation incorporated in 1988. The Company has conducted its business
directly and through wholly-owned subsidiaries. The term "Company" as used
herein refers to Fortune Diversified Industries, Inc. and such subsidiaries
unless the context otherwise requires. The Company is the parent company of
Kingston Sales Corp. (KSC), PDH, Inc. (PDH), Cornerstone Wireless Services, Inc.
and Cornerstone Wireless Construction Services, Inc. (Cornerstone), Telecom
Technology Corp. formerly known as TTC Acquisition, Inc. (TTC), Murphy
Development, Ltd. and Women of Wrestling, Inc. (WOW).

CONTROL GROUP

In order to better understand the Company's business organization and
development, it is important to know that at August 31, 2002, Messrs. Fisbeck,
Fortune and Kingston (collectively, the current "Control Group") were as members
of a group deemed to beneficially own 69,335,131 shares of the Company's common
stock representing 94.3% of the outstanding common stock of the Company. It is
also useful to understand the history of their control.

2000 Change in Control
----------------------

On September 1, 2000, David B. McLane, John F. Fisbeck, Carter M. Fortune
(collectively, the "Control Group") and their assigns collectively purchased
61,318,563 shares of the Company common stock. Of the 61,318,563 shares
purchased, 57,360,255 shares were purchased by the Control Group. The right to
purchase the remainder of the shares was assigned to family members of the
Control Group and employees and consultants of WOW Entertainment, Inc., a
company owned by the Control Group (which company became a wholly-owned
subsidiary of the Company and changed its name to Women of Wrestling, Inc.). In
particular, the Company's distributor of its television program, M/G Perin,
Inc., through its principal shareholder, Richard Perin, purchased 3% of the
61,318,563 shares common stock pursuant to a distribution agreement with the
Company. (MG Perin, Inc. was also entitled to receive a warrant to purchase 1%
of the common stock owned by the Control Group). The source of funds for all
purchases was from personal funds of the Control Group. Collectively, the stock
purchased represented 98.1% of the outstanding share of common stock of the
Company.

The stock was purchased pursuant to two stock purchase agreements dated July 28,
2000. One agreement was with Richard C. Breeden, who is the bankruptcy trustee
(the "Trustee") for the Bennett Funding Group, Inc. et al. (the "Estate") in a
bankruptcy proceeding pending in the United States Bankruptcy Court for the
Northern District of

                                       4
<PAGE>

New York (the "Bankruptcy Court"). This agreement provided for the purchase of
60,348,060 shares (the "Estate Stock") of common stock from the Estate for
$98,200 in cash. The Estate stock included 60,098,060 shares of common stock
that were converted from the Company's Series C cumulative preferred stock,
Series D cumulative preferred stock and Series E preferred stock owned by the
Estate pursuant to a notice of conversion delivered to the Company dated July
21, 2000.

The other agreement was with Shamrock Holdings Group, Inc. ("Shamrock",
collectively with the Estate, the "Sellers") and provided for the purchase of
970,503 shares of common stock (of which 233,260 shares were converted from the
Company's Series A preferred stock owned by Shamrock pursuant to a notice of
conversion delivered to the Company dated July 21, 2000) for $1,800 in cash.

Pursuant to the stock purchase agreements, the Control Group and the Sellers
required that the cash on hand in the Company as of September 1, 2000, less
specified liabilities, be deposited with an escrow agent and, subject to certain
offsets, be distributed to the Sellers on September 30, 2000.

On September 1, 2000, J. Douglas Wellington resigned as the Company's President
and Chief Executive Officer ("CEO") and David McLane was elected President and
Douglas E. May was elected Chief Financial Officer, Vice President of Finance
and Corporate Secretary. Mr. McLane was also appointed to the Board of
Directors. As of such date, the Company entered in a severance and consulting
agreement with Mr. Wellington.

In October 2000, certain actions, which had been approved by written consent of
the Control Group, became effective, including a 1 for 6 reverse stock split
resulting in each share of common stock being reclassified into 0.1667 of a
share of new common stock, $0.01 par value. Except as otherwise noted, all
references to the Company's common stock presented in this Form 10-KSB have been
adjusted for this reverse stock split.

Cancellation of Perin and McLane Ownership Interests
----------------------------------------------------

As of May 22, 2001, the Company and its subsidiary, WOW, executed an Amendment
to its Distribution Agreement with M/G Perin, Inc. and Richard Perin in which
they agreed to terminate their Distribution Agreement dated January 18, 2000 and
enter into a new agreement covering only WOW's free television programs created
through May 22, 2001. Also as part of the agreement, Mr. Perin returned for
cancellation by the Company 1,839,556 restricted shares, which represented all
of his common stock in the Company. All rights to warrants issuable under the
Distribution Agreement were also voided. Perin also received funding from WOW
sufficient to pay certain payables incurred in connection with its
representation of WOW. The funds used to pay Perin were loaned to WOW by Mr.
Fortune.

On June 26, 2001, the Company redeemed all of Mr. McLane's common stock in the
Company (19,007,585 shares). Mr. McLane also resigned as President and a member
of the Board of Directors of the Company, as well as all subsidiaries of the
Company in which he also held said positions on June 26, 2001. Mr. McLane is no
longer part of the Control Group. Messrs. Fisbeck and Fortune continued to be
part of the Control Group.

2001 Capital Restructuring
--------------------------

On June 29, 2001, the Company announced a major capital restructuring, which was
effective July 2, 2001. The restructuring, which was part of several agreements
and commitments between the Company and Mr. Fortune, the Company's largest
shareholder and the holder of certain debt and preferred stock of the Company,
allowed the Company to eliminate its existing debt, acquire Murphy Development,
Ltd. ("Murphy Development"), a commercial and retail real estate development
company 50% owned by Mr. Fortune, and issue new convertible debt to be used to
purchase and operate the Company's existing and future businesses.

As part of the restructuring, Mr. Fortune received $3,250,000 of the Company's
common stock at the June 28, 2001 closing price of $0.20 a share, or 16,250,000
restricted shares, in exchange for his $2,000,000 of WOW preferred stock and in
full satisfaction of his approximately $5,424,000 of WOW debt.

                                       5
<PAGE>

In addition, Mr. Fortune and Julie Fisbeck, who is the sister of John Fisbeck, a
member of the control group, also exchanged their respective 50% ownership
interests in Murphy Development, in exchange for $120,000 of the Company's
common stock at the June 28, 2001 closing price of $0.20 a share. Mr. Fortune
and Julie Fisbeck each received 300,000 restricted shares.

Mr. Fortune also agreed to loan $500,000 to Murphy Development. The loan was
secured by all of the assets of Murphy Development and was convertible at Mr.
Fortune's option into shares of the Company's common stock at $0.407401 a share.
Mr. Fortune exercised the option on August 27, 2001, and received 1,227,292
restricted shares.

Mr. Fortune also agreed to make available to Murphy Development an operating
line of credit of up to $2,250,000, if and as needed. The line of credit was
secured by all of the assets of Murphy Development and convertible at Fortune's
option into shares of the Company's common stock at $0.407401 a share. On August
27, 2001, the Company borrowed $2,250,000 under the line of credit, and Mr.
Fortune exercised the option and received 5,522,814 restricted shares.

Addition of Robert J. Kingston to the Control Group
---------------------------------------------------

Effective July 31,2002, as part of the purchase price for 1,000 shares of the
common stock, no par value, of KSC, constituting all of the outstanding shares
of KSC's capital stock, pursuant to the terms of a Stock Purchase Agreement by
and among the Company, KSC and Robert J. Kingston, Mr. Kingston received
8,000,000 restricted shares of the Company's common stock.

In addition to the 8,000,000 shares of the Company's common stock, Mr. Kingston
also was paid, as part of the purchase price for his KSC shares, $2,400,000
($3,000,000 closing payment less a $600,000 purchase adjustment). Mr. Kingston
received $3,000,000 at closing. Mr. Kingston paid the Company a purchase
adjustment amount of $600,000 based upon certain requirements in the Stock
Purchase Agreement and proposed Amendment to the Stock Purchase Agreement in
November 2002. There is also a $250,000 contingent payment that is part of the
Stock Purchase Agreement due on or before December 15, 2004. The payment of any
or all of the $250,000 to Mr. Kingston, on or before December 15, 2004, is
contingent upon KSC attaining certain cumulative earnings before income tax
(EBIT) requirements, as described in the Stock Purchase Agreement, during the
period September 1, 2002 to August 31, 2004.

Also as part of the Stock Purchase Agreement, subject to the limitations and
restrictions described below, Mr. Kingston may, in his sole discretion, sell any
or all of the Company's common stock to the Company and the Company shall
purchase any of the Company's common stock offered by Mr. Kingston if any of the
following conditions are met (the "Put Option"): 1) If during the period
September 1, 2002 to August 31, 2004, KSC's cumulative earnings before income
tax depreciation and amortization (EBITDA), as defined in the Stock Purchase
Agreement, is greater than $1,600,000: the Company shall have a cash put at
$.125 per share; 2) If during the period September 1, 2002 to August 31, 2004,
KSC's Cumulative EBITDA is greater than $2,000,000: the Company shall have a
cash put at $.175 per share; 3) If during the period September 1, 2002 to August
31, 2004, KSC's cumulative EBITDA is greater than $2,400,000: the Company shall
have a cash put at $.225 per share; 4) If during the period September 1, 2002 to
August 31, 2004, KSC's cumulative EBITDA is greater than $3,000,000: the Company
shall have a cash put at $.300 per share. Mr. Kingston may only exercise the Put
Option during the period October 15, 2004 to November 30, 2004. In addition, Mr.
Kingston may only exercise the Put Option if the average bid price per share
during the period October 1, 2004 to October 31, 2004 is less than the proposed
put price, or if the Company's stock is not listed on the OTC Bulletin Board,
the New York Stock Exchange, NASDAQ or another nationally-recognized securities
market or exchange during the period October 1, 2004 to October 31, 2004. Any
closing on a sale of the Company's Stock to the Company shall occur within
ninety (90) days of the Company's receipt of written notice from Mr. Kingston
requesting exercise of his put option.

Mr. Kingston will continue as president of KSC under the terms of an employment
agreement, dated July 31, 2002 and incorporated into the Stock Purchase
Agreement as an exhibit.

                                       6
<PAGE>

Mr. Kingston is subject to a non-compete agreement, dated July 31, 2002 and
incorporated into the Stock Purchase Agreement as an exhibit.

A Lease was entered into by Kingston Design, LLC, a Company controlled by Mr.
Kingston and KSC. Said lease is for the facility in which KSC currently
operates, and was incorporated into the Stock Purchase Agreement as an exhibit.

Mr. Kingston was elected to the Board of Director's of the Company by
shareholders Messrs. Fisbeck and Fortune without a meeting by written consent
pursuant to Section 228 of the General Corporation Law of the State of Delaware
in lieu of holding a meeting. Such election was agreed to in writing in a
document entitled Voting Agreement, dated July 31, 2002, which is an exhibit of
the Stock Purchase Agreement.

Mr. Kingston was granted Piggy-Back Registration Rights as part of a
Registration Rights Agreement, and an exhibit of the Stock Purchase Agreement,
dated July 31, 2002 by and between Fortune Diversified Industries, Inc. and
Robert J. Kingston.

Mr. Fisbeck entered into a written Guaranty, and an exhibit of the Stock
Purchase Agreement, dated July 31, 2002, in consideration of Mr. Kingston
entering into the Purchase Agreement and agreeing to close the transactions
contemplated therein, to which he guaranteed the Company's payment and
performance of its obligations arising under and with respect to the Put Option.

Mr. Fortune also entered into a written Guaranty, and an exhibit of the Stock
Purchase Agreement, dated July 31, 2002 in consideration of Mr. Kingston
entering into the Purchase Agreement and agreeing to close the transactions
contemplated therein, to which he guaranteed the Company's payment and
performance of its obligations arising under and with respect to the Put Option.

Messrs. Fisbeck and Fortune entered into an arrangement whereby Mr. Fisbeck will
indemnify and hold harmless Mr. Fortune for a percentage of any losses that Mr.
Fortune may suffer as a result of Mr. Fortune's guarantee of the loan held by
the Company with Merrill Lynch Business Financial Services, Inc. Such
indemnification and hold harmless agreement is on a pro-rata basis of the
relative shareholdings in the Company of Mr. Fortune and Mr. Fisbeck.

Although Messrs. Fisbeck, Fortune and Kingston have taken ownership of the
Company's stock in their individual names and Mr. Kingston has individually
supplied his ownership in KSC in consideration for the acquisition of his
Fortune Diversified common stock, Messrs. Fisbeck, Fortune and Kingston may be
considered to be acting together for the purpose of acquiring and holding the
stock since Messrs. Fisbeck and Fortune previously signed Stock Purchase
Agreements to initially acquire control of the Company and Mr. Kingston's
acquisition of shares was not in the ordinary course of his business and may be
deemed to have arisen in a transaction having the purpose or effect of
influencing control of the Company, under Rule 13d-5(b)(2)(ii).

At August 31, 2002, Messrs. Fisbeck, Fortune and Kingston were as members of a
group deemed to beneficially own 69,335,131 shares of the Company's common stock
representing 94.3% of the outstanding common stock of FDVI. Individually, each
person had sole dispositive and voting power over the following shares of common
stock: John F. Fisbeck, 18,852,023 (or 25.6%), Carter M. Fortune, 42,486,793 (or
57.8%) and Robert J. Kingston, 8,000,000 (or 10.9%).


                                       7
<PAGE>

ACQUISITIONS

Women of Wrestling, Inc.
------------------------

On September 1, 2000, the Company purchased for nominal consideration all of the
common stock of Women of Wrestling, Inc. ("WOW"), a company owned by the Control
Group. WOW was incorporated as an Indiana corporation in May 2000, and had no
operating history. This transaction was accounted for in a manner similar to a
pooling of interests. WOW's significant assets included employment, venue and
other production contracts (entered into in the ordinary course of business);
certain intellectual property, including trademark rights in the "WOW Women of
Wrestling" name, logos and character names of performers; rights in characters
portrayed by performers; publicity rights of performers with respect to their
performances; and copyrights in recorded performances, events, programs,
advertisements and promotional materials and capitalized production costs
relating to its syndicated television program.

Murphy Development, LTD
-----------------------

Initiated on June 29, 2001 and effective July 2, 2001, the Company acquired from
Carter Fortune and Julie Fisbeck, who is the sister of John Fisbeck, one of the
members of the Control Group, their ownership interests, 50% each, in Murphy
Development, constituting 100% of the outstanding interests of Murphy
Development, LTD. The acquisition was accounted for using the purchase method of
accounting. The primary assets of Murphy Development, Ltd were pre-acquisition
development costs of a northeast, Ohio commercial development, including several
options to purchase real estate. Murphy Development, Ltd. exercised the options.
However, it did not close on the real estate due to the unavailability of
financing under terms acceptable to Murphy Development, Ltd. and the lack of a
commitment from a major anchor tenant. The options expired at the end of 2001.
The results of operations of Murphy Development have been included in the
accompanying statement of operations from the date of the acquisition in the
Telecom Infrastructure segment. The purchase price was $120,000 of the Company's
common stock at the June 28, 2001 closing price of $0.20 a share. Mr. Fortune
and Ms. Fisbeck each received 300,000 restricted shares.

Cornerstone Wireless Services, Inc.
-----------------------------------

In July 2001, The Company acquired from its incorporator William A. Shoemake 100
shares of the common stock, $.01 par value, of Cornerstone Wireless Services,
Inc., an Indiana Corporation with no assets and no business operations,
constituting all of the outstanding shares of Cornerstone Wireless Services
Inc.'s capital stock. Cornerstone was established to develop a full line of
architectural and engineering services specializing in the telecommunications
industry. The transaction was accounted for using the purchase method of
accounting. The results of operations of Cornerstone have been included in the
accompanying statement of operations from the date of the acquisition. The
purchase price was payable in cash of $10. The aggregate purchase price of the
acquisition was $0, which amount is equal to the excess purchase price over the
value of the net assets acquired.

PDH, Inc. Purchase of Certain DicksonHughes Group, LLC Assets
-------------------------------------------------------------

PDH, Inc. ("PDH"), an Indiana corporation and wholly-owned subsidiary of the
Company, acquired certain assets of DicksonHughes Group, LLC ("DHG"), an Indiana
limited liability company, through an Asset Purchase Agreement dated January 18,
2002 ("DHG Agreement"). The assets were acquired through DHG. Messrs. Thimlar,
Hughes and Dickson were parties to the DHG Agreement for purposes of certain
covenants not to compete and indemnification provisions of the Agreement. There
was no material relationship between the Company or PDH and DHG or Messrs.
Thimlar, Hughes and Dickson. DHG used the physical assets in multiple aspects of
its business; the Company has devoted the physical assets to its existing
Telecom Infrastructure segment. This transaction was considered an acquisition
of productive assets and not considered a business combination. However, some of
the standards of accounting for business combinations, including certain
disclosures, are considered relevant and have been applied whenever practicable.
The results of the assets acquired from DHG have been included in the
accompanying statement of operations from the date of acquisition. The assets
acquired

                                       8
<PAGE>

included certain of the DHG's accounts receivable, work-in-process, prepaid
expenses, software, computer hardware and fixtures, and backlog. The nature and
amount of consideration given for the acquired assets was approximately Seven
Hundred Forty Thousand Dollars ($740,000.00), which was subject to adjustments
as described in the Agreement, however no adjustments were warranted. There were
no liabilities assumed in this transaction.

Kingston Sales Corporation
--------------------------

The Company acquired from Robert J. Kingston 1,000 shares of the common stock,
no par value, of Kingston Sales Corporation (an Indiana Corporation),
constituting all of the outstanding shares of Kingston Sales Corporation's
capital stock, pursuant to the terms of a Stock Purchase Agreement by and among
Fortune Diversified Industries, Inc., Kingston Sales Corporation and Robert J.
Kingston, effective July 31, 2002. KSC is an industry-leading manufacturers'
representative and distributor for prominent national companies in the
electronic, sound, security, and video markets. KSC offers the latest technology
in TVs, sound systems, electronic locking devices, wire, cable and fiber optics,
and intercom systems. The Company intends for KSC, as a wholly-owned subsidiary
of the Company, to continue to operate as it did prior to the acquisition in its
Rep and Distribution segment. The transaction was accounted for using the
purchase method of accounting. The source of funds for the transaction came from
a loan from a financial institution. The purchase price was payable in cash of
$3,000,000 paid at closing less a purchase adjustment amount of $600,000 based
upon certain requirements in the Stock Purchase Agreement and proposed Amendment
to the Stock Purchase Agreement paid to the Company by Mr. Kingston in November
2002. There is also a $250,000 contingent payment that is part of the Stock
Purchase Agreement due on or before December 15, 2004. The payment of any or all
of the $250,000 to Mr. Kingston, on or before December 15, 2004, is contingent
upon KSC attaining certain cumulative earnings before income tax (EBIT)
requirements, as described in the Stock Purchase Agreement, during the period
September 1, 2002 to August 31, 2004. This contingent consideration will be
recorded as an additional cost of the acquisition when the contingency is
resolved, which is anticipated sometime in 2004. The fair market value of the
8,000,000 shares of the Company's common stock of $80,000 (which was based upon
the bid price discounted for various factors, including liquidity) was also
included as part of the purchase price.

ACQUISITIONS SUBSEQUENT TO AUGUST 31, 2002

Telecom Technology Corp.
------------------------

TTC Acquisition Company ("TTC"), an Indiana corporation and wholly-owned
subsidiary of the Company, acquired certain assets and assumed certain
liabilities of Telecom Technology Corp. ("Telecom"), an Indiana corporation, and
Michael W. Grothe, through an Asset Purchase Agreement effective as of September
1, 2002 ("TTC Agreement"). The assets were acquired from Telecom. Mr. Grothe is
party to the TTC Agreement and is subject to an Employment Agreement. Prior to
the TTC Agreement, there was no material relationship between the Company and
Telecom or Mr. Grothe. Telecom provides cable and wiring solutions for
interactive communication and networking data transmission. The Company has
devoted the assets to its existing Telecom Infrastructure segment. The assets
acquired include certain of Telecom's work-in-process, software and related
assets, fixed assets, equipment and machinery, computer hardware and fixtures, a
complete customer list, intellectual property, sales proposals and like
documents and contracts, inventory, accounts receivable, intangible assets,
prepaid expenses, cash and cash equivalents. TTC also only accepted and assumed
$45,000 of specifically identified accounts payable and all of Sellers' rights
and executory obligations under the Assumed Contracts to be performed after the
Closing Date (excluding any obligations or liabilities of Sellers under any
Assumed Contracts that were to have been performed, fulfilled or satisfied on or
prior to the Closing Date). In addition to the assumed liabilities, the
consideration given for the acquired assets was $125,952 cash and 450,000
restricted shares of the Company's common stock, of which 200,000 shares vested
immediately and 250,000 shares are subject to adjustments as described in the
TTC Agreement.

In addition, the Company, through TTC and an Asset Purchase Agreement effective
as of September 1, 2002 ("Hagan Agreement"), acquired the customer lists, and
other business

                                       9
<PAGE>

assets of Pat Hagan, who is being employed by TTC. The assets were acquired
through Telecom. Mr. Hagan is a party to the Hagan Agreement and is subject to
an Employment Agreement. Prior to the Hagan Agreement, there was no material
relationship between the Company and Mr. Hagan. The consideration given for the
acquired assets was $1.00 cash and 250,000 restricted shares of the Company's
common stock, which are subject to adjustments as described in the Hagan
Agreement.

These two transactions were considered together as one transaction and are being
accounted for using the purchase method of accounting. The results of the assets
acquired from Telecom will be included in the future statements of operations
commencing from the date of acquisition.

StarQuest Wireless
------------------

StarQuest Wireless, Inc ("SWI"), an Indiana corporation and wholly-owned
subsidiary of TTC, acquired certain assets of StarQuest Wireless, LLC ("SWL"),
Noel Kaplan and Steve Cochran, through an agreement entered into on October 31,
2002 and effective October 9, 2002 by and among SWI, SWL, Mr. Kaplan and Mr.
Cochran ("SWI Agreement"). The purchased assets and assumed liabilities were
used or useful in connection with the business of selling, installing or
maintaining satellite television systems. The Company has devoted the assets to
its existing Telecom Infrastructure segment. The transaction was accounted for
using the purchase method of accounting. The assets acquired included a complete
list of customers current as of the Closing Date, all accounts receivable, all
sales agency and similar agreements with satellite television providers
(including, but not limited to, DirecTV, Echostar, Pegasus and Musicland), the
telephone numbers used in conjunction with the sellers' operations. The Company
also only accepted and assumed all of sellers' rights and executory obligations
under the assumed contracts to be performed after the Closing Date (excluding
any obligations or liabilities of the sellers under any assumed contracts that
were to have been performed, fulfilled or satisfied on or prior to the Closing
Date). The consideration given for the acquired assets was $1.00 cash and
600,000 (300,000 shares each to Cochran and Kaplan) of restricted shares of the
Company's common stock, which are subject to adjustments as described in the SWI
Agreement.

GENERAL DESCRIPTION OF THE BUSINESS

Through July 2001, the Company's main area of emphasis was in entertainment,
primarily, WOW - Women of Wrestling(R). However, the Company's primary operating
focus has shifted from the entertainment industry. Because of the Company's
change in operating focus and its expanded current and future anticipated
holdings, the Company amended its certificate of incorporation to change its
name from WOW Entertainment, Inc. to Fortune Diversified Industries, Inc. and
changed its stock symbol from WOWI to FDVI, effective August 16, 2001.

The Company's current operating focus is achieved through its Rep and
Distribution Segment (Kingston Sales) and its Telecom Infrastructure Development
Segment (PDH, Inc., Cornerstone Wireless Services, Inc. and Cornerstone Wireless
Construction Services, Inc. subsidiaries and their affiliates).

Rep and Distribution Segment
----------------------------

The Company's Rep and Distribution segment is conducted through its Kingston
Sales Corporation subsidiary, which is a manufacturer's representative and
distributor for prominent national companies in the electronic, sound, security,
and video markets. Kingston Sales Corporation offers the latest technology in
TVs, sound systems, electronic locking devices, wire, cable and fiber optics,
and intercom systems.

Kingston Sales Corporation's role as an independent manufacturer's
representative is to serve as the mutually beneficial link between the customer
and the manufacturer. By working closely with each, the customer receives
strong, personal support, and the manufacturer receives a highly effective, yet
economical, sales team.

Kingston Sales Corporation strives to be the sales representative that dealers
think of first for the best service and the latest technology. Products and
manufacturers'

                                       10
<PAGE>

represented include, but are not limited to, Dedicated Micros (Video
Multiplexers & Digital Video Recorders); Lowell Manufacturing (Speakers,
cabinets, and accessories); Lucasey (Mounts and television accessories); Net TV
(Multimedia Digital Displays); Panasonic Presentation (LCD Projectors & Plasma);
R.L. Drake (Video distribution products); RCA Commercial Products (Television
and Satellite products); Securitron Maganlock Corp.(Electromagnetic door locking
systems); TOA Electronics, Inc. (Sound, paging, and background music products);
Video Alarm CCT (Housing and mounts); West Penn Wire (Wire, cable, connectors,
and fiber optics)

Telecom Infrastructure Segment
------------------------------

The Company's Telecom Infrastructure segment is conducted through its PDH, Inc.
(PDH), Cornerstone Wireless Services, Inc. and Cornerstone Wireless Construction
Services, Inc. subsidiaries and their affiliates. The Company can assist its
customers with the telecom site development process from network infrastructure
real estate planning through infrastructure construction, as well as marketing
and management including: Site acquisition (e.g., raw land property, building
rooftop, or antenna structure for co-location); Architectural and engineering
analysis and drawings (e.g., analysis of existing cell tower or construction
drawings of cell towers and switches); Site construction, and; Existing site
marketing and management.

PDH's business strategy is to offer a full range of network infrastructure real
estate development services to the telecommunications industry, among other
types of real estate network critical industries. PDH intends to provide its
clients with the most experienced personnel and deliver the highest level of
services, systems and support necessary to achieve its clients' goals and
objectives on a local, regional or national basis. PDH's focus is to meet the
demanding timelines associated with the development of a network by ensuring
that each individual site reaches the construction phase as quickly as possible.
This is achieved by avoiding costly delays up-front through effective management
of the site acquisition process with its site development real estate
professionals. PDH's full service list of network real estate development
services includes program management, site acquisition, zoning and permitting,
architectural & engineering design, construction management, co-location
facilitation, environmental services, lease capitalization, lease renegotiation,
site marketing and asset management.

Cornerstone specializes in engineering and architectural services for the
telecommunications and the traditional real estate development industries. The
telecommunications industry includes cellular, personal communication services
(PCS), specialized mobile radio (SMR), enhanced specialized mobile radio (ESMR),
microwave systems, fixed wireless, broadband and fiber optics technologies for
carriers, tower consolidators and utilities. Detailed services for the
telecommunications industry include site surveys, site layout drawings,
architectural aesthetic designs, foundation designs, antenna mount designs,
geo-technical investigation and reports, structural analysis and environmental
assessments. Cornerstone also offers construction management of
telecommunications infrastructure.

Traditional real estate development is comprised of architectural, structural
and civil engineering, mechanical engineering, electrical engineering and
project management. These disciplines are used in residential, commercial and
industrial markets. Traditional real estate development engineering includes
interior design/space planning, exterior design, remodel and additions, tenant
build-out improvements; structural design/analysis, site
utilities/grading/drainage, site design/development, landscape design; HVAC
systems analysis, plumbing design, building systems criteria; power distribution
design, interior/exterior lighting design, video/data/telecommunication systems,
security/life safety systems and all areas covering project management.
Cornerstone is pursuing assignments and projects anywhere within the United
States.

Murphy Development, Ltd., is a commercial and retail real estate development
company. On July 2, 2001, the Company purchased Murphy Development, Ltd. from
Carter Fortune, the Company's largest shareholder, and Julie Fisbeck, who is the
sister of John Fisbeck, one of the members of the Control Group. The primary
assets of Murphy Development, Ltd the past fiscal year were pre-acquisition
development costs of a northeast, Ohio commercial development, including several
options to purchase real

                                       11
<PAGE>

estate. In August, 2001, Murphy Development, Ltd. exercised the options.
However, it did not close on the real estate due to the unavailability of
financing under terms acceptable to Murphy Development, Ltd. and the lack of a
commitment from a major anchor tenant. The options expired at the end of 2001.
Starting the reporting period ended February 28, 2002, the company consolidated
its Murphy Development financial information in with its telecom site
development segments.

Entertainment
-------------

WOW was organized in May, 2000, began production of its weekly syndicated
television series, WOW - Women of Wrestling(R) in September, 2000 and began
airing the programs in the United States and marketing them internationally in
October, 2000. In February 2001, WOW completed production of its first season of
over-the-air syndicated shows and began re-airs of its original episodes in
March 2001. After assessing the syndication, cable and network television
markets for the 2001 season, WOW decided as of June, 2001 not to produce future
episodes of its WOW-Women of Wrestling(R) program and discontinued related
activities.

In July 2001, WOW agreed in principle to general terms for licensing the WOW -
Women of Wrestling(R) property to David McLane Enterprises, Inc. ("DME") for a
minimum monthly dollar amount plus a percentage of certain revenues for three
and one half years. DME is owned by David McLane, who was until June, 2001, the
president, a director and one of the controlling shareholders of the Company.
When a licensing agreement is concluded, the Company also plans to grant an
option to DME to purchase the WOW - Women of Wrestling(R) property at the end of
the license. As of the date of this report, a licensing agreement with DME has
not been finalized and it is uncertain whether any licensing agreement will be
entered into with DME.

COMPETITION

The markets in which the Company operates are highly competitive, requiring
substantial resources and skilled and experienced personnel. The Company
competes with other independent contractors, other manufacturer's rep and
distributor firms in most of the geographic markets in which it operates, and
several of its competitors are large companies that have greater financial,
technical and marketing resources than the Company does. In addition, there are
relatively few barriers to entry into the industries in which the Company
operates and, as a result, any organization that has adequate financial
resources and access to technical expertise may become a competitor. Management
believes that a significant portion of the Company's revenue will be derived
from direct bidding on products as well as unit price agreements, and price will
often be an important factor in the award of such business and agreements.
Accordingly, the Company could be underbid by its competitors in an effort by
them to procure such business. The Company believes that as demand for its
products and services increases, customers will increasingly consider other
factors in choosing a representative and service provider, including technical
expertise and experience, financial and operational resources, nationwide
presence, industry reputation and dependability, which management of the Company
believes will benefit it. There can be no assurance, however, that the Company's
competitors will not develop the expertise, experience and resources to provide
services that are superior in both price and quality to the Company's services,
or that the Company will be able to maintain or enhance its competitive
position. The Company may also face competition from the in-house service
organizations of its existing or prospective customers that employ personnel who
perform some of the same types of services as those provided by the Company.
Although a significant portion of these services are currently outsourced, there
can be no assurance that its existing or prospective customers will continue to
outsource services in the future.

INTELLECTUAL PROPERTY

The Company's subsidiary Kingston Sales Corp. is engaged in the business of
being an independent sales representative firm for consumer and commercial
electronic products. Kingston is a party to distribution agreements with certain
suppliers, but is not otherwise a party to any agreement which would constitute
a franchise, concession or royalty agreements.

                                       12
<PAGE>

The Company owns, controls or claims ownership of key intellectual properties
associated with its business, including trademark rights in the "WOW Women of
Wrestling" name (which is the subject of a U.S. service mark registration) and
in the Company's logos and character names of performers (for which a number of
applications for federal registration have been filed); rights in characters
portrayed by performers; publicity rights of performers with respect to their
performances; and copyrights in recorded performances, events, programs,
advertisements and promotional materials. The Company also claims a proprietary
interest in all confidential or trade secret information relating to its
businesses. The Company does not have any patents or patent rights.

REGULATION

The Company's operations are subject to various federal, state and local laws
and regulations including:

-    licensing requirements applicable to architects, engineers and other
     professionals;

-    building and electrical codes;

-    permitting and inspection requirements applicable to construction projects;

-    Federal Communication Commission and Federal Aviation Administration
     regulations and requirements;

-    regulations relating to worker safety and environmental protection; and

-    special bidding and procurement requirements on government projects.

The Company believes that it has all the licenses required to conduct its
operations and that it is in substantial compliance with applicable regulatory
requirements. The failure of the Company to comply with applicable regulations
could result in substantial fines or revocation of its operating licenses. Many
state and local regulations governing many of its products, such as construction
drawings, require permits and licenses to be held by individuals who have passed
an examination or met other requirements.

EMPLOYEES

As of October, 2002, the Company had forty-nine full-time employees of which
thirty-six were primarily engaged at the Telecom Infrastructure Development
segment ten were engaged in the Rep and Distribution segment, three were
primarily engaged at the Holding Company segment. The Company anticipates that
it will increase its staff within all of the segments in the coming year. The
Company's in-house staff is supplemented with contract personnel on an as-needed
basis. The Company believes that its relationships with its employees are
generally satisfactory. None of its employees are represented by a union.

ITEM 2. DESCRIPTION OF PROPERTY

The Company leases one of its office and warehouse facilities from a limited
liability company in which one of the members of the control group, during the
reporting period covered, was a member. The agreement expires in April 2022. The
agreement includes a renewal option, which allows the Company to extend the
lease term for an additional six years. In addition to base monthly rent, the
agreement requires the Company to pay its proportionate share of real estate
taxes, insurance, and common area maintenance expenses. The Company leases a
second premise under an agreement that expires August 2005. In addition to base
monthly rent, that agreement requires the Company to pay its proportionate share
of common area maintenance expenses.

In September the Company entered into a lease for a third office and warehouse
facility under an agreement that expires November 2004. In addition to base
monthly rent, that agreement requires the Company to pay its proportionate share
of common

                                       13
<PAGE>

area maintenance expenses. The properties are sufficient for the Company's
current administrative and known operating needs, and there is room to expand
within the current space to meet the Company's expected needs in the market for
the coming year. The Company frequently evaluates its space needs. Future growth
can be accommodated by leasing new or additional space if necessary.

ITEM 3. LEGAL PROCEEDINGS

The Company is not involved in any legal proceedings or claims that management
believes will have a material adverse effect on the Company's business or
financial condition.

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

Not Applicable. The last annual meeting of stockholders of the Company was held
on October 12, 1995. No meeting of stockholders has been held since such date
and the Company has no present intention of holding a meeting of stockholders in
2002.


                                     PART II
                                     -------

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a) Market Information. From 1998 through October 4, 1999 and from June 21, 2000
through October 16, 2000, the Common Stock traded under the symbol "AGEL" on the
OTC Bulletin Board (from October 4, 1999 through June 21, 2000 the Common Stock
traded under the symbol "AGELE" on the OTC Bulletin Board). From October 16,
2000 through August 16, 2001, the Common Stock traded under the symbol "WOWI" on
the OTC Bulletin Board. Effective after the close of business, August 16, 2001,
the Common Stock has traded under the symbol "FDVI" on the OTC Bulletin Board.

The following table sets forth, for the fiscal periods indicated, the high and
low bid prices (which prices are interdealer prices without retail markup,
markdown or commissions, and may not necessarily represent actual transactions).


                                                     Bid Price Per Share (1)
                                                     -----------------------

Calendar Periods                                       High             Low
----------------                                       ----             ---
2001
       First Quarter............................      $1.30            $0.25
       Second Quarter...........................       2.50             0.81
       Third Quarter............................       1.03             0.25
       Fourth Quarter...........................       0.51             0.20
2002
       First Quarter............................      $0.40            $0.21
       Second Quarter...........................       0.30             0.13
       Third Quarter............................       0.20             0.12
       Fourth Quarter...........................       0.23             0.12


(1) The prices per share have been restated to reflect the 1 for 6 reverse stock
split which became effective on October 13, 2000.

(b) Holders. At November 26, 2001, there were approximately 300 holders of
record of the Common Stock.

(c) Dividends. The Company has never declared or paid any dividends on its
Common Stock. The Board of Directors presently intends to retain any and all
earnings for use in the Company's business and therefore does not anticipate
paying any cash dividends on the Common Stock in the foreseeable future.


                                       14
<PAGE>


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following analysis of the results of operations and financial condition of
the Company should be read in conjunction with the Company's financial
statements, including the notes thereto, contained elsewhere in this report.

Fortune Diversified Industries, Inc. (formerly known as WOW Entertainment, Inc.
and prior to that American Gaming & Entertainment, Ltd.), is a Delaware
corporation incorporated in 1988. The Company has conducted its business
directly and through wholly-owned subsidiaries. The term "Company" as used
herein refers to Fortune Diversified Industries, Inc. and such subsidiaries
unless the context otherwise requires. The Company is the parent company of
Kingston Sales Corp. (KSC), PDH, Inc. (PDH), Cornerstone Wireless Services, Inc.
and Cornerstone Wireless Construction Services, Inc. (Cornerstone), Murphy
Development, Ltd. and Women of Wrestling, Inc. (WOW).

Through July 2001, the Company's main area of emphasis was in entertainment,
primarily, WOW - Women of Wrestling(R). However, the Company's primary operating
focus has shifted from the entertainment industry. Because of the Company's
change in operating focus and its expanded current and future anticipated
holdings, the Company amended its certificate of incorporation to change its
name from WOW Entertainment, Inc. to Fortune Diversified Industries, Inc. and
changed its stock symbol from WOWI to FDVI, effective August 16, 2001.

The Company's current operating focus is achieved through its Rep and
Distribution Segment (Kingston Sales) and its Telecom Infrastructure Development
Segment (PDH, Inc., Cornerstone Wireless Services, Inc. and Cornerstone Wireless
Construction Services, Inc. subsidiaries and their affiliates).

Rep and Distribution Segment
----------------------------

The Company's Rep and Distribution segment is conducted through its Kingston
Sales Corporation subsidiary, which is a manufacturer's representative and
distributor for prominent national companies in the electronic, sound, security,
and video markets. Kingston Sales Corporation offers the latest technology in
TVs, sound systems, electronic locking devices, wire, cable and fiber optics,
and intercom systems.

Kingston Sales Corporation's role as an independent manufacturer's
representative is to serve as the mutually beneficial link between the customer
and the manufacturer. By working closely with each, the customer receives
strong, personal support, and the manufacturer receives a highly effective, yet
economical, sales team.

Kingston Sales Corporation strives to be the sales representative that dealers
think of first for the best service and the latest technology. Products and
manufacturers' represented include, but are not limited to, Dedicated Micros
(Video Multiplexers & Digital Video Recorders); Lowell Manufacturing (Speakers,
cabinets, and accessories); Lucasey (Mounts and television accessories); Net TV
(Multimedia Digital Displays); Panasonic Presentation (LCD Projectors & Plasma);
R.L. Drake (Video distribution products); RCA Commercial Products (Television
and Satellite products); Securitron Maganlock Corp.(Electromagnetic door locking
systems); TOA Electronics, Inc. (Sound, paging, and background music products);
Video Alarm CCT (Housing and mounts); West Penn Wire (Wire, cable, connectors,
and fiber optics)

Telecom Infrastructure Segment
------------------------------

The Company's Telecom Infrastructure segment is conducted through its PDH, Inc.
(PDH), Cornerstone Wireless Services, Inc. and Cornerstone Wireless Construction
Services, Inc. subsidiaries and their affiliates. The Company can assist its
customers with the telecom site development process from network infrastructure
real estate planning through infrastructure construction, as well as marketing
and management including: Site acquisition (e.g., raw land property, building
rooftop, or antenna structure for co-location); Architectural and engineering
analysis and drawings (e.g., analysis of existing cell tower or construction
drawings of cell towers and switches); Site construction, and; Existing site
marketing and management.

                                       15
<PAGE>

PDH's business strategy is to offer a full range of network infrastructure real
estate development services to the telecommunications industry, among other
types of real estate network critical industries. PDH intends to provide its
clients with the most experienced personnel and deliver the highest level of
services, systems and support necessary to achieve its clients' goals and
objectives on a local, regional or national basis. PDH's focus is to meet the
demanding timelines associated with the development of a network by ensuring
that each individual site reaches the construction phase as quickly as possible.
This is achieved by avoiding costly delays up-front through effective management
of the site acquisition process with its site development real estate
professionals. PDH's full service list of network real estate development
services includes program management, site acquisition, zoning and permitting,
architectural & engineering design, construction management, co-location
facilitation, environmental services, lease capitalization, lease renegotiation,
site marketing and asset management.

Cornerstone specializes in engineering and architectural services for the
telecommunications and the traditional real estate development industries. The
telecommunications industry includes cellular, personal communication services
(PCS), specialized mobile radio (SMR), enhanced specialized mobile radio (ESMR),
microwave systems, fixed wireless, broadband and fiber optics technologies for
carriers, tower consolidators and utilities. Detailed services for the
telecommunications industry include site surveys, site layout drawings,
architectural aesthetic designs, foundation designs, antenna mount designs,
geo-technical investigation and reports, structural analysis and environmental
assessments. Cornerstone also offers construction management of
telecommunications infrastructure.

Traditional real estate development is comprised of architectural, structural
and civil engineering, mechanical engineering, electrical engineering and
project management. These disciplines are used in residential, commercial and
industrial markets. Traditional real estate development engineering includes
interior design/space planning, exterior design, remodel and additions, tenant
build-out improvements; structural design/analysis, site
utilities/grading/drainage, site design/development, landscape design; HVAC
systems analysis, plumbing design, building systems criteria; power distribution
design, interior/exterior lighting design, video/data/telecommunication systems,
security/life safety systems and all areas covering project management.
Cornerstone is pursuing assignments and projects anywhere within the United
States.

Management believes that the need for its telecom services in the coming years
will be significant, and expects that cell site density will need to increase
four to eight fold in the coming years in order to meet the bandwidth and usage
requirements of consumers for second generation to third generation wireless
data applications (commonly referred to as 2G, 2.5G and 3G). In addition to the
build-out of additional sites, as usage changes occur, existing tower and base
station configurations will also need to change. Wired broadband needs also
require increasing infrastructure build-out, particularly with fiber optics
technologies. The Company is positioned to and believes it will be able to
provide the real estate development, engineering and design services necessary
to meet the evolving needs of the industry. The Company also is pursuing
non-telecom opportunities that utilize its highly skilled professionals, which
the company believes will help to maximize its operational capacity while
diversifying its revenue sources.

The past year has seen a significant downturn in the economy, and management
witnessed many companies in the telecommunications industry significantly
curtailing their operations. Management observed capital expenditures for
infrastructure within the industry decline in conjunction with the economy. This
slowdown in capital expenditures was particularly noticeable in the Company's
second and third quarter as it observed the number of projects awarded in
comparison to prior years declined substantially and many existing projects
reduced or postponed.

While the capital expenditures within the telecommunications industry declined
in conjunction with the economy, the infrastructure capacity needs did not. When
the industry resumes the infrastructure build out for 2G to 2.5G to 3G and
beyond, management believes that the Company will be positioned as a recognized
provider with the capacity to meet and exceed the industry's needs.

                                       16
<PAGE>

Murphy Development, Ltd., is a commercial and retail real estate development
company. On July 2, 2001, the Company purchased Murphy Development, Ltd. from
Carter Fortune, the Company's largest shareholder, and Julie Fisbeck, who is the
sister of John Fisbeck, one of the members of the Control Group. The primary
assets of Murphy Development, Ltd the past fiscal year were pre-acquisition
development costs of a northeast, Ohio commercial development, including several
options to purchase real estate. In August, 2001, Murphy Development, Ltd.
exercised the options. However, it did not close on the real estate due to the
unavailability of financing under terms acceptable to Murphy Development, Ltd.
and the lack of a commitment from a major anchor tenant. The options expired at
the end of 2001. Starting the reporting period ended February 28, 2002, the
company consolidated its Murphy Development financial information in with its
telecom site development segments.

Entertainment
-------------

WOW was organized in May, 2000, began production of its weekly syndicated
television series, WOW - Women of Wrestling(R) in September, 2000 and began
airing the programs in the United States and marketing them internationally in
October, 2000. In February 2001, WOW completed production of its first season of
over-the-air syndicated shows and began re-airs of its original episodes in
March 2001. After assessing the syndication, cable and network television
markets for the 2001 season, WOW decided as of June, 2001 not to produce future
episodes of its WOW-Women of Wrestling(R) program and discontinued related
activities.

In July 2001, WOW agreed in principle to general terms for licensing the WOW -
Women of Wrestling(R) property to David McLane Enterprises, Inc. ("DME") for a
minimum monthly dollar amount plus a percentage of certain revenues for three
and one half years. DME is owned by David McLane, who was until June, 2001, the
president, a director and one of the controlling shareholders of the Company.
When a licensing agreement is concluded, the Company also plans to grant an
option to DME to purchase the WOW - Women of Wrestling(R) property at the end of
the license. As of the date of this report, a licensing agreement with DME has
not been finalized and it is uncertain whether any licensing agreement will be
entered into with DME.

CRITICAL ACCOUNTING POLICIES

The Company has identified the following policies as critical to its business
and the understanding of its results of operations. The impact of these policies
is discussed throughout Management's Discussion and Analysis of Financial
Condition and Results of Operations where these policies affect reported and
anticipated financial results. For a detailed discussion on the application of
these and other accounting policies see the Notes to the Consolidated Financial
Statements. Preparation of this report requires the Company's use of estimates
and assumptions that affect the reported amounts of assets, liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported revenue and expense amounts for the periods being
reported. There can be no assurance that the Company's actual results will not
differ from these estimates.

Revenue Recognition: In the Company's Rep and Distribution segment, revenue from
the sale of products is recognized according to the terms of the sales
arrangement, which is generally upon shipment. Commission revenue is recognized
when realizable and earned, which is typically upon receipt of the commission
payment. Payments received where there are delivery elements required to be met
in order to retain those payments are recorded as deferred revenue under current
or long-term liabilities, as appropriate, and taken into income when the
criteria are met.

In its Telecom Infrastructure Development segment, the Company enters into
contracts principally on the basis of competitive bids, the final terms and
prices of which are frequently negotiated with the customer. Although the terms
of its contracts vary considerably, most are made on a unit price basis in which
the Company agrees to do the work for units of work performed. The Company also
performs services on a cost-plus or time and materials basis. The Company
completes most projects within one year. The Company generally recognizes
revenue utilizing output measures, such as when services are performed, units
are delivered or when contract milestones are reached.

                                       17
<PAGE>

Within its entertainment segment, the Company recognizes revenue from the direct
distribution, exploitation, and licensing of film and television programs before
deduction for any of the Company's direct costs of distribution. For markets and
territories in which the Company's fully or jointly-owned films and television
programs are distributed by third parties, revenue is the net amounts payable to
the Company by third party distributors.

Revenue is reduced by appropriate allowances, estimated returns, price
concessions, and similar adjustments, as applicable.

Cost of Revenues: Cost of revenues within the Company's Rep and Distribution
segment consist primarily of purchases of goods that are resold to customers,
but also consist of salaries, wages and benefits to employees, fuel and other
vehicle expenses, equipment rentals, subcontracted services, insurance,
facilities expenses, and supplies.

Cost of Revenues within the Company's other segments consist primarily of
salaries, wages and benefits to employees, fuel and other vehicle expenses,
equipment rentals, subcontracted services, insurance, materials and parts and
supplies.

Selling, General and Administrative Expenses: Selling, general and
administrative expenses consist primarily of compensation and related benefits
to management, administrative salaries and benefits, marketing, office rent and
utilities, communications and professional fees.

Cash and Equivalents: Cash and equivalents may include money market fund shares,
bank time deposits and certificates of deposits, and other instruments with
original maturities of three months or less. The Company maintains its cash in
bank deposit accounts, which, at times, may exceed federally insured limits. The
Company has never experienced any losses in such accounts.

Marketable Securities: Marketable securities include common stocks classified as
"available for sale". The securities are carried at fair value based on current
market quotations. Unrealized holding gains and losses are not included in "net
income", but are accounted for as "other comprehensive income" and reflected as
a separate component of the change in stockholders' equity. The Company did not
have any marketable equity securities or accumulated other comprehensive gains
or losses at August 31, 2002 and 2001. The cost of securities used to compute
realized gains and losses is based on specifically-identified securities.

Inventories: Inventories are recorded at the lower of cost (primarily first-in,
first-out) or market value and consist of entirely goods purchased for resale.

Shipping and Handling: Costs incurred for shipping and handling are included in
the Company's financial statements as a component of costs of revenue.

Property, Equipment, and Depreciation: Property and equipment are carried at
cost and includes expenditures for new additions and those, which substantially
increase the useful lives of existing assets. Depreciation is computed at
various rates by use of the straight-line method and certain accelerated
methods. Depreciable lives are generally ranging from 3 to 39 years.

Expenditures for normal repairs and maintenance are charged to operations as
incurred. The cost of property or equipment retired or otherwise disposed of and
the related accumulated depreciation are removed from the accounts in the year
of disposal with the resulting gain or loss reflected in earnings or in the cost
of the replacement asset.

The provision for depreciation amounted to $44,000 and $6,000 for the years
ended August 31, 2002 and 2001, respectively.

Production Costs: The Company has implemented Statement of Position (SOP) 00-2,
"Accounting by Producers or Distributors of Films", which requires special
accounting

                                       18
<PAGE>

for production costs relating to episodic television series. Specifically, SOP
00-2 requires a company to demonstrate through its experience and industry norms
that the number of episodes already produced, plus those for which a firm
commitment exists and the entity expects to deliver, can be licensed in the
secondary market before an episodic television series can implement the
individual-film-forecast-computation method to amortize production costs. SOP
00-2 further stipulates that until an entity can establish estimates of
secondary market revenue, capitalized costs for each episode produced should not
exceed an amount equal to the amount of revenue contracted for that episode, the
entity should expense as incurred production costs in excess of this limitation
on an episode-by-episode basis, and the entity should expense all capitalized
costs for each episode as it recognizes the related revenue for each episode.
The Company follows the more conservative episode-by-episode basis versus the
individual-film-forecast-computation method. Furthermore, as the Company had
effectively recognized revenues from the initial airing of all of the episodes
produced through the year-ended August 31, 2001, all production costs as of
August 31, 2001, were expensed. As such, the Company did not have any
capitalized production costs as of August 31, 2002 and 2001.

Goodwill and Other Intangible Assets: The Company has adopted Statement of
Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible
Assets". With the adoption of SFAS No. 142, goodwill is no longer amortized but
instead is assessed for impairment at least as often as annually and as
triggering events occur. In making this assessment, management relies on a
number of factors including operating results, business plans, economic
projections, anticipated future cash flows, and transactions and market place
data. There are inherent uncertainties related to these factors and management's
judgment in applying them to the analysis of goodwill impairment. Since
management's judgment is involved in performing goodwill and other intangible
assets valuation analyses, there is risk that the carrying value of our goodwill
and other intangible assets may be overstated or understated. We have determined
that there is no impact of adopting this new standard under the transition
provisions of SFAS No. 142.

Long-lived Assets: Long-lived assets including the Company's property, plant and
equipment, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability is measured by comparison of the carrying amount to
future net undiscounted cash flows expected to be generated by the related
asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount exceeds the
fair market value of the assets.

Advertising and Exploitation Costs: Advertising and exploitation costs including
marketing, advertising, publicity, promotion and other distribution costs, are
expensed as incurred and totaled $29,000 and $1,299,000 for the years ended
August 31, 2002 and 2001, respectively.

Fair Value of Financial Instruments: The fair value of financial instruments is
estimated using relevant market information and other assumptions. Fair value
estimates involve uncertainties and matters of significant judgment regarding
interest rates, prepayments, and other factors. Changes in assumptions or market
conditions could significantly affect these estimates. The amounts reported in
the consolidated balance sheets for cash and equivalents, marketable securities,
receivables, and payables approximate fair value.

Stock-based Compensation: The Company accounts for all stock based compensation
under the provision of SFAS No. 123, "Accounting for Stock-Based Compensation",
which uses the term "compensation" in its broadest sense to refer to
consideration paid for goods and services, regardless of whether the supplier is
an employee or not. The Company values stock options and warrants issued based
upon an option-pricing model and recognizes this value as an expense over the
period in which the option vests.

Income (Loss) Per Common Share: Income (loss) per share has been computed in
accordance with SFAS No. 128, "Earnings Per Share." Under SFAS No. 128, basic
income (loss) per share is computed based on net income (loss) applicable to
common stock divided by the weighted average number of common shares outstanding
for the period.

                                       19
<PAGE>

Diluted income (loss) per share is computed based on net income (loss)
applicable to common stock divided by the weighted average number of shares of
common stock outstanding during the period after giving effect to securities
considered to be dilutive common stock equivalents.

Income Taxes: The Company accounts for income taxes under the provisions of SFAS
No. 109, "Accounting for Income Taxes." Accordingly, deferred tax assets and
liabilities are determined based on differences between the financial reporting
and tax basis of assets and liabilities and are measured using the enacted tax
rates.

New Accounting Pronouncements: In June 2001, the Financial Accounting Standards
Board ("FASB") issued SFAS No. 141, "Business Combinations". SFAS No. 141
eliminates the use of the pooling-of-interests method of accounting for business
combinations and establishes the purchase method of accounting as the only
acceptable method for all business combinations initiated after June 30, 2001.

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." This statement modifies existing generally accepted accounting
principles related to the amortization and impairment of goodwill and other
intangible assets. Upon adoption of the new standard, goodwill, including
goodwill associated with equity method investments, will no longer be amortized.
For the years ended August 31, 2002 and 2001, there was no goodwill
amortization. In addition, goodwill, other than goodwill associated with equity
method investments, must be assessed at least annually for impairment using a
fair-value based approach. The Company adopted the provisions of this statement
effective September 1, 2001 and there was no material impact on the consolidated
financial statements.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 addresses accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. This statement is effective for fiscal years beginning
after June 15, 2002. Management is currently assessing the impact of this new
standard. However, we do not expect the impact to be material.

In July 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," which is effective for fiscal years beginning
after December 15, 2001. The provisions of this statement provide a single
accounting model for impairment of long-lived assets. Management is currently
assessing the impact of this new standard.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections,"
which is effective for fiscal years beginning after May 15, 2002. This statement
rescinds the indicated statements and amends other existing authoritative
pronouncements to make various technical corrections, clarify meanings, or
describe their applicability under changed conditions. Management is currently
assessing the impact of this new standard. However, we do not expect the impact
to be material.

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which is effective for exit or disposal
activities that are initiated after December 31, 2002. This statement nullifies
Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)." This statement requires that
liabilities associated with exit or disposal activities be recognized and
measured at fair value when incurred as opposed to at the date an entity commits
to the exit or disposal plans. Management is currently assessing the impact of
this new standard.


                                       20
<PAGE>

RESULTS OF OPERATIONS:  YEAR ENDED AUGUST 31, 2002 AND AUGUST 31, 2001

Summarized financial information concerning the Company's reportable segments is
shown in the following table:

<TABLE>
<CAPTION>
                                                Telecom
                                 Rep and     Infrastructure                   Holding        Segment
                               Distribution    Development  Entertainment     Company        Totals
<S>                              <C>             <C>         <C>            <C>             <C>
Year ended August 31, 2002

Net revenues                     1,529,000       813,000            -0-            -0-      2,342,000
Cost of revenues                 1,233,000       874,000            -0-            -0-      2,107,000
                                 ---------    ----------     ----------     ----------     ----------
Gross profit (loss)                296,000       (61,000)           -0-            -0-        235,000
Operating expenses
 Selling, general and admin        236,000       854,000          6,000        526,000      1,622,000
 Depreciation                       14,000        33,000            -0-          4,000         51,000
                                 ---------    ----------     ----------     ----------     ----------
  Total operating expenses         250,000       887,000          6,000        530,000      1,673,000
                                 ---------    ----------     ----------     ----------     ----------
Total operating income (loss)       46,000      (948,000)        (6,000)      (530,000)    (1,438,000)
                                 =========    ==========     ==========     ==========     ==========

As of August 31, 2002

Total segment assets             4,262,000       628,000          1,000        971,000      5,862,000

Year ended August 31, 2001

Net revenues                           -0-           -0-        425,000            -0-        425,000
Cost of revenues                       -0-       175,000      5,260,000            -0-      5,381,000
                                 ---------    ----------     ----------     ----------     ----------
Gross profit (loss)                    -0-      (175,000)    (4,781,000)           -0-     (4,956,000)
Operating expenses
 Selling, general and admin            -0-        80,000      1,402,000        521,000      2,003,000
 Depreciation                          -0-         5,000            -0-          1,000          6,000
                                 ---------    ----------     ----------     ----------     ----------
  Total operating expenses             -0-        85,000      1,402,000        522,000      2,009,000
                                 ---------    ----------     ----------     ----------     ----------
Total operating income (loss)          -0-      (260,000)    (6,183,000)      (522,000)    (6,965,000)
                                 =========    ==========     ==========     ==========     ==========

As of August 31, 2001

Total segment assets                   -0-       344,000         35,000      2,937,000      3,316,000
</TABLE>

Rep and Distribution
--------------------

Revenues

Revenues for the year ended August 31, 2002 were $1,529,000, compared to zero
for the year ended August 31, 2001, an increase of $1,529,000. The increase in
revenues was the result of the Company acquiring KSC July 31, 2002. KSC
represents the entire segment for both periods, as such there were no reportable
operations during the fiscal year ended August 31, 2001. The results of
operations for the year ended August 31, 2002 only represent one-month.

Cost of Revenues

Cost of revenues for the year ended August 31, 2002 were $1,233,000, compared to
zero for the year ended August 31, 2001, an increase of $1,233,000. The increase
in cost of revenues was the result of the Company acquiring KSC July 31, 2002.
KSC represents the entire segment for both periods, as such there were no
reportable operations during the fiscal year ended August 31, 2001. The results
of operations for the year ended August 31, 2002 only represent one-month.

Gross Profit (Loss)

Gross profit for the year ended August 31, 2002 was $296,000 representing 19% of
sales, compared to zero for the year ended August 31, 2001, an increase of
$296,000. The increase in gross profit was the result of the Company acquiring
KSC July 31, 2002. KSC represents the entire segment for both periods, as such
there were no reportable operations during the fiscal year ended August 31,
2001. The results of operations for the year ended August 31, 2002 only
represent one-month.

                                       21
<PAGE>

Operating Expenses

Operating expenses for the year ended August 31, 2002 were $250,000, compared to
zero for the year ended August 31, 2001, an increase of $250,000. The increase
in operating expenses was the result of the Company acquiring KSC July 31, 2002.
KSC represents the entire segment for both periods, as such there were no
reportable operations during the fiscal year ended August 31, 2001. The results
of operations for the year ended August 31, 2002 only represent one-month.

Operating Income (Loss)

Operating income for the year ended August 31, 2002 was $46,000, compared to
zero for the year ended August 31, 2001, an increase of $46,000. The increase in
operating income was the result of the Company acquiring KSC July 31, 2002. KSC
represents the entire segment for both periods, as such there were no reportable
operations during the fiscal year ended August 31, 2001. The results of
operations for the year ended August 31, 2002 only represent one-month.

Telecom Infrastructure Development
----------------------------------

Revenues

Revenues for the year ended August 31, 2002 were $813,000, compared to zero for
the year ended August 31, 2001, an increase of $813,000. The increase in
revenues primarily resulted from the Company beginning operations in the segment
in July 2001. after the acquisition of Murphy Development and Cornerstone. As
such, for the fiscal year end August 31, 2001, revenues only represented a
little more than one-month of operations within the segment. On January 18, 2001
the Company acquired approximately $740,000 of operating assets from DHG
including $137,000 of work-in-process. While the Company experienced an increase
in revenue as a result of the commencement of operations and related asset
purchases, the telecom sector was extremely soft during fiscal year 2002.

Cost of Revenues

Cost of revenues for the year ended August 31, 2002 were $874,000, compared to
$175,000 for the year ended August 31, 2001, an increase of $699,000. The
increase in the cost of revenues primarily resulted from the Company beginning
operations in the segment in July 2001 after the acquisition of Murphy
Development and Cornerstone. As such, for the fiscal year end August 31, 2001,
cost of revenues only represented a little more than one-month of operations
within the segment. Also on January 18, 2001 the Company acquired $740,000 of
operating assets from DHG and hired nine agents at or around the same time. The
principal cost of revenues within this segment is the salaries and benefits of
our site acquisition real estate agents and design and engineering
professionals. Because of the beginning nature of the segment and the soft
economy and related sales within the sector, the segment experienced below break
even capacity for much of the fiscal year 2002 in terms of utilization of its
direct labor professionals. The cost of revenue in fiscal 2001 was primarily
related to the expensing of approximately $154,000 of previously capitalized
pre-acquisition development costs associated with a real estate development that
the Company did not close on due to the unavailability of acceptable financing
terms and the lack of a commitment from a major anchor tenant.

Gross Profit (Loss)

Gross profit (loss) for the year ended August 31, 2002 was $(61,000)
representing -8% of sales, compared to $(175,000) representing -100% of sales
for the year ended August 31, 2001, a decrease of $296,000. The decrease in
gross loss was primarily related to a real estate development that the Company
did not close on due to the unavailability of acceptable financing terms and the
lack of a commitment from a major anchor tenant, which resulted in the Company
not recognizing any revenue from the development and expensing approximately
$154,000 of previously capitalized pre-acquisition development costs at the end
of fiscal 2001. The negative gross margin in fiscal 2002 was the result of the
beginning nature of the segment coupled with the soft sales within the sector
causing the segment to experience below break even capacity for much of the

                                       22
<PAGE>

fiscal year in terms of utilization of its direct labor professionals. The
Company has marginally reduced over the past fiscal year its direct labor costs
in conjunction with anticipated continued weakness within the segment. The
Company is committed to running at or above breakeven capacity in fiscal 2003.

Operating Expenses

Operating expenses for the year ended August 31, 2002 were $887,000, compared to
$85,000 for the year ended August 31, 2001, an increase of $802,000. The
increase in operating expenses resulted from the Company beginning operations in
the segment in July 2001 after the acquisition of Murphy Development and
Cornerstone. As such, for the fiscal year end August 31, 2001, operating
expenses only represented a little more than one-month of operations within the
segment. Also on January 18, 2001 the Company acquired $740,000 of operating
assets from DHG and hired some additional administrative and sales personnel at
the same time. Operating expenses primarily consist of employee compensation and
benefits, legal, accounting and consulting fees.

Operating Income (Loss)

Operating income (loss) for the year ended August 31, 2002 was $(948,000),
compared to $(260,000) for the year ended August 31, 2001, an increase of
$(688,000). The increase in operating loss was the result of the Company
beginning operations in the segment in July 2001 after the acquisition of Murphy
Development and Cornerstone. As such, for the fiscal year end August 31, 2001,
operating income only represented a little more than one-month of operations
within the segment. Coupled with the January 18, 2002 acquisition of $740,000 of
operating assets from DHG, the costs associated with those acquisitions, and the
very soft economy.

Entertainment
-------------

Revenues

Revenues for the year ended August 31, 2002 were zero, compared to $425,000 for
the year ended August 31, 2001, a decrease of $425,000. The decrease in revenues
was the result of the Company significantly scaling back operations, which was a
result of the Company not producing and distributing the television show WOW
Women of Wrestling and related pay-per-view events for the 2001 and 2002 season.

Cost of Revenues

Cost of revenues for the year ended August 31, 2002 were zero, compared to
$5,206,000 for the year ended August 31, 2001, a decrease of $5,206,000. The
decrease was the result of the Company not producing and distributing the
television show WOW Women of Wrestling and related pay-per-view events for the
2001 and 2002 season.

Gross Profit (Loss)

Gross profit (loss) for the year ended August 31, 2002 was zero, compared to
$(4,781,000) for the year ended August 31, 2001, a decrease in gross losses of
$4,781,000. The decrease was the result of the Company not producing and
distributing the television show WOW Women of Wrestling and related pay-per-view
events for the 2001 and 2002 season.

Operating Expenses

Operating expenses for the year ended August 31, 2002 were $6,000, compared to
$1,402,000 for the year ended August 31, 2001, a decrease of $1,396,000. This
decrease was primarily the result of the Company significantly scaling back
operations in the segment for the comparable periods. Also there were legal and
accounting and consulting fees related to the Company's change in control that
occurred in September, 2000 and allocated to the segment.

                                       23
<PAGE>

Operating Income (Loss)

Operating income (loss) for the year ended August 31, 2002 was $(6,000),
compared to $(6,183,000) for the year ended August 31, 2001, a decrease of
$(6,177,000). This decrease was primarily the result of the Company
significantly scaling back operations in the segment for the comparable periods.

Holding Company
---------------

Within the Holding Company there are not any income producing operating assets.
As such operating loss is equal to operating expenses. Operating expenses
consist primarily of employee compensation and benefits, legal, accounting and
consulting fees. Operating expenses for the year ended August 31, 2002 were
$530,000, compared to $522,000 for the year ended August 31, 2001, an increase
of $8,000. This slight increase is primarily related to an increase in accrued
accounting and legal fees as a result of end of year acquisitions.

Interest income for the year ended August 31, 2002 was approximately $51,000,
which was primarily related to funds held in money market accounts and accrued
interest income from employee-held recourse promissory notes. Interest income
for the year ended August 31, 2001 was approximately $20,000, primarily related
to interest accrued on the distribution commission advance to the Company's
distributor.

Interest expense for the year ended August 31, 2002 was approximately $23,000 of
which approximately $13,000 was from a margin balance. The majority of the
remaining balance is attributable to the one months interest on the $3,000,000
borrowed to fund the Kingston Sales Corp acquisition. Interest expense for the
year ended August 31, 2001 was approximately $180,000 from a line of credit. The
line of credit expired during the year ended August 31, 2001.

Losses on investments in marketable securities, net for the year ended August
31, 2002 was approximately $597,000. No such loss was recorded for the year
ended August 31, 2001.

Net loss on sale of assets for the year ended August 31, 2002 was approximately
$23,000 from the sale of fixed assets. No such loss was recorded for the year
ended August 31, 2001.

Extraordinary credit-extinguishment of debt for the year ended August 31, 2001
was approximately $4,174,000. The credit is the result of a major capital
restructuring, which was effective July 2, 2001. As part of the restructuring,
Mr. Fortune agreed to a settlement in which he received $3,250,000 of the
Company's common stock at the June 28, 2001 closing price of $0.20 a share, or
16,250,000 restricted shares, in exchange for his $2,000,000 of WOW preferred
stock and in full satisfaction of his approximately $5,424,000 of WOW debt.

LIQUIDITY AND CAPITAL RESOURCES

As of August 31, 2002 the Company had working capital of approximately $939,000
composed primarily of cash and equivalents, net accounts receivable and net
inventory. The Company's principal sources of liquidity include $292,000 in cash
and cash equivalents, a $600,000 purchase adjustment receivable that was paid to
the Company in November 2002, a $1,500,000 line of credit available through July
31, 2003 of which $233,000 was available as of August 31,2002, and a $250,000,
unsecured line of credit with a stockholder of which all $250,000 was available
as of August 31, 2002.
The $1,500,000 line of credit is secured by the business assets of KSC, with a
second lien on assets pledged by a shareholder. Interest on the line is charged
at 2.40% plus the one-month London Interbank Offered Rate (one-month LIBOR).
Interest on the $250,000, unsecured line of credit with a stockholder is charged
at 5%.

For the year ended August 31, 2002 cash flows used for operating activities were
$1,534,000, as compared to cash flows used for operating activities of
$6,318,000 for the year ended August 31, 2001. The change is primarily related
to a decrease in net losses associated with the Company's Women of Wrestling
operations that amounted to $4,174,000. This decrease was augmented by an
increase in accounts receivable of $245,000 over the prior year as a result of
increased sales, as well as a decrease in accounts payable of $264,000. These
amounts were partially offset by net realized

                                       24
<PAGE>

losses from the sale of available for sale securities. The majority of the net
cash flows used for operating activities in fiscal 2002 occurred in the first
three quarters of the fiscal year.

For the year ended August 31, 2002, cash flows used for investing activities
were $4,369,000, as compared to $19,000 for the year ended August 31, 2001. The
increase in cash flows used in this period is primarily due to an the $3,000,000
used to acquire KSC, $740,000 used to acquire the productive assets of DHG and
an increase in the net investments in marketable securities.

For the year ended August 31, 2002, cash flows provided by financing activities
were 3,656,000 as compared to $8,581,000 for the year ended August 31, 2001. The
decrease was primarily related to a reduction in net cash inflows from preferred
stock and line of credit borrowings which were offset by the $3,000,000 five
year loan borrowed to purchase KSC.

On September 1, 2002, TTC, a wholly owned subsidiary of the Company, acquired
certain assets, including tangible assets of approximately $126,000, and assumed
certain liabilities of approximately $45,000 of Telecom Technology Corp.
("Telecom"), an Indiana corporation, Michael W. Grothe, and Pat Hagan. The
Company has devoted the assets to its existing Telecom Infrastructure segment.
In addition to the assumed assets the consideration given for the acquired
assets was $125,953 cash and 700,000 restricted shares of the Company's common
stock, which are subject to adjustments.

StarQuest Wireless, Inc ("SWI"), an Indiana corporation and wholly-owned
subsidiary of TTC, acquired certain assets of StarQuest Wireless, LLC ("SWL"),
Noel Kaplan and Steve Cochran, through an agreement entered into on October 31,
2002 and effective October 9, 2002. The Company has devoted the assets to its
existing Telecom Infrastructure segment. The consideration given for the
acquired assets was $1.00 cash and 600,000 (300,000 shares each to Cochran and
Kaplan) of restricted shares of the Company's common stock, which are subject to
adjustments.

The Company reviews, as opportunities arise, the potential acquisition and/or
operation of other businesses. Any such action will be based upon management's
analysis of the specific business and the respective industry, as well as the
Company's ability to utilize a capital structure that is beneficial to the
Company's shareholders.

The Company's short and long term capital requirements will depend upon many
factors, including whether it acquires and/or operates other businesses, the
operating success of its current operating segments and the potential license of
the WOW - Women of Wrestling(R) property. Many of these and other factors are
beyond the Company's control.

Following the conclusion of its first season of production of WOW-Women of
Wrestling(R), the Company terminated its agreements with its performers and
terminated much of its production staff. As of the date of this report, the
Company does not have any employees in its Entertainment segment.

Over the next 12 months, the Company plans to hire additional employees in its
Rep and Distribution segment and its Telecom Infrastructure segment; however,
the hiring of these employees will be approximately correlated with an increase
in operating revenue.

The Company expects to fund current operations and other cash expenditures
through the use of available cash, cash from operations, funds available under
its credit facilities and possible new debt or equity sources. Management
believes that there will be sufficient funds from current cash, operations and
available financing to fund operations and cash expenditures for the foreseeable
future.

RISK FACTORS

The Company's businesses are subject to a variety of risks, including the risks
described below. The risks and uncertainties described below are not the only
ones facing the Company. Additional risks and uncertainties not known to
management of the

                                       25
<PAGE>

Company or that management of the Company currently considers to be immaterial
may also impair its business operations. If any of the following risks actually
occur, the Company's business, financial condition and results of operations
could be materially and adversely affected.

The industries the Company serves are subject to rapid technological and
structural changes that could reduce the demand for the services the Company
provides. The telecommunications industry is undergoing rapid change as a result
of technological advances and deregulation that could in certain cases reduce
the demand for the Company's services or otherwise adversely affect its
business. Improvements in existing technology may allow telecommunications
companies to significantly improve their networks without physically upgrading
them. In addition, consolidation in the telecommunications industry may result
in the loss of one or more customers.

The Company may be unsuccessful at generating internal growth. The Company's
ability to generate internal growth will be affected by, among other factors,
its ability to:

-    expand the range of services it offers to customers to address their
     evolving needs;

-    attract new customers;

-    increase the number of projects performed for existing customers;

-    hire and retain employees; - open additional facilities; and

-    reduce its operating and overhead expenses.

In addition, the Company's customers may reduce the number or size of projects
available to the Company due to their inability to obtain capital. Many of the
factors affecting the Company's ability to generate internal growth may be
beyond its control, and the Company cannot be certain that its strategies will
be successful or that it will be able to generate cash flow sufficient to fund
its operations and to support internal growth. Its inability to achieve internal
growth could materially and adversely affect its business, financial condition
and results of operations.

An economic downturn may lead to less demand for the Company's services. If the
general level of economic activity slows, the Company's customers may delay or
cancel new projects. A number of other factors, including financing conditions
for the industries the Company serve, could adversely affect its customers and
their ability or willingness to fund capital expenditures in the future.

The Company may be unsuccessful at integrating companies that it acquires.
Management of the Company cannot be sure that it can successfully integrate its
acquired companies with its existing operations without substantial costs,
delays or other operational or financial problems. Failure to implement proper
overall business controls could result in inconsistent operating and financial
practices at the companies the Company acquires, and its overall profitability
could be adversely affected. Integrating its acquired companies involves a
number of special risks which could materially and adversely affect the
Company's business, financial condition and results of operations, including:

-    failure of acquired companies to achieve the results management expects;

-    diversion of management's attention from operational matters;

-    difficulties integrating the operations and personnel of acquired
     companies;

-    inability to retain key personnel of the acquired companies;

                                       26
<PAGE>

-    risks associated with unanticipated events or liabilities;

-    the potential disruption of business; and

-    the difficulty of maintaining uniform standards, controls, procedures and
     policies.

If one of the acquired companies suffers customer dissatisfaction or performance
problems, the reputation of the entire company could be materially and adversely
affected.

The Company may not have access in the future to sufficient funding to finance
desired growth. If it cannot secure additional financing from time to time in
the future on acceptable terms, the Company may be unable to support its growth
strategy. Management of the Company cannot readily predict the timing, size and
success of its acquisition efforts and therefore the capital it will need for
these efforts. Using cash for acquisitions limits its financial flexibility and
makes the Company more likely to seek additional capital through future debt or
equity financings. If the Company seeks additional debt or equity financing, it
may have to agree to additional covenants that limit its operational and
financial flexibility. When it seeks additional debt or equity financings, it
cannot be certain that additional debt or equity will be available to it at all
or on terms acceptable to it.

The Company's operating results may vary significantly from quarter-to-quarter.
During the winter months, demand for its services may be lower due to inclement
weather. Additionally, its quarterly results may also be materially affected by:

     -    the timing and volume of work under new agreements;

     -    regional or general economic conditions;

     -    the budgetary spending patterns of customers;

     -    variations in the margins of projects performed during any particular
          quarter;

     -    the termination of existing agreements;

     -    costs the Company incurs to support growth internally or through
          acquisitions or otherwise;

     -    losses experienced in its operations not otherwise covered by
          insurance;

     -    a change in the mix of our customers, contracts and business;

     -    increases in design costs;

     -    the timing of acquisitions; and

     -    the timing and magnitude of acquisition assimilation costs.

Accordingly, the Company's operating results in any particular quarter may not
be indicative of the results that can be expected for any other quarter or for
the entire year.

Many of the Company's contracts may be canceled on short notice and the Company
may be unsuccessful in replacing the contracts as they are completed or expire.
The Company could experience a material adverse effect on its revenue, net
income and liquidity if any of the following occur:

                                       27
<PAGE>

     -    its customers cancel a significant number of contracts;

     -    its fails to win a significant number of its existing contracts upon
          re-bid; or

     -    it completes the required work under a significant number of
          non-recurring projects and cannot replace them with similar projects.

The Company's business growth could outpace the capability of its corporate
management infrastructure. The Company cannot be certain that its systems,
procedures and controls will be adequate to support its operations as they
expand. Future growth also will impose significant additional responsibilities
on members of the Company's senior management, including the need to recruit and
integrate new senior level managers and executives. The Company cannot be
certain that it can recruit and retain such additional managers and executives.
To the extent that it is unable to manage its growth effectively, or are unable
to attract and retain additional qualified management, the Company's financial
condition and results of operations could be materially and adversely affected.

The departure of key personnel could disrupt the Company's business. The Company
depends on the continued efforts of its executive officers and on senior
management of the businesses it acquires. Although the Company intends to enter
into an employment agreement with each of its executive officers and certain
other key employees, it cannot be certain that any individual will continue in
such capacity for any particular period of time. The loss of key personnel, or
the inability to hire and retain qualified employees, could adversely affect the
Company's business, financial condition and results of operations. The Company
does not carry key-person life insurance on any employees.

The Company's business is labor intensive and it may be unable to attract and
retain qualified employees. The Company's ability to increase productivity and
profitability will be limited by its ability to employ, train and retain skilled
personnel necessary to meet its requirements. The Company cannot be certain that
it will be able to maintain an adequate skilled labor force necessary to operate
efficiently and to support its growth strategy or that its labor expenses will
not increase as a result of a shortage in the supply of skilled personnel. Labor
shortages or increased labor costs could have a material adverse effect on the
Company's ability to implement its growth strategy and its operations.

The telecommunications industry is highly competitive and is served by numerous
small, owner-operated private companies, a few public companies and several
large regional companies. In addition, relatively few barriers prevent entry
into the telecommunications industry. As a result, any organization that has
adequate financial resources and access to technical expertise may become one of
the Company's competitors. Competition in the industry depends on a number of
factors, including price. Certain of the Company's competitors may have lower
overhead cost structures and may, therefore, be able to provide their services
at lower rates than the Company is able to provide. In addition, some of the
Company's competitors are larger and have greater resources than the Company
does. Management of the Company cannot be certain that its competitors will not
develop the expertise, experience and resources to provide services that are
superior in both price and quality to the Company's services. Similarly,
management of the Company cannot be certain that it will be able to maintain or
enhance the Company's competitive position within its industry. The Company may
also face competition from the in-house service organizations of existing or
prospective customers. Telecommunication companies usually employ personnel who
perform some of the same types of services the Company does. The Company cannot
be certain that its existing or prospective customers will continue to outsource
services in the future.

The Company's results of operations could be adversely affected as a result of
goodwill amortization. When it acquires a business, the Company records an asset
called goodwill equal to the excess amount it pays for the business, including
liabilities assumed, over the fair value of the tangible assets of the business
it

                                       28
<PAGE>

acquired. Pursuant to generally accepted accounting principles, the Company
amortizes this goodwill over its estimated useful life of 40 years following the
acquisition, which directly impacts its earnings in those years. Furthermore, it
continually evaluates whether events or circumstances have occurred that
indicate that the remaining useful life of goodwill may warrant revision or that
the remaining balance may not be recoverable. Should the Company be required to
accelerate the amortization of goodwill or write it off completely because of
impairments or changes in generally accepted accounting principles, its results
from operations may be materially adversely affected.

The Company could have potential exposure to environmental liabilities. The
Company's operations are subject to various environmental laws and regulations.
As a result, management cannot be certain that it will be able to identify or be
indemnified for all potential environmental liabilities relating to any acquired
business, property or assets.

The Company may not be able to protect its intellectual property rights which
could impair its ability to compete in the sports entertainment market.

The Control Group, which owns a substantial majority of the Company's common
stock, could through the exercise of its voting rights affect decisions which
could conflict with the interests of the public shareholders.

ITEM 7.  FINANCIAL STATEMENTS

See pages F-1 through F-29 following Item 13 below.

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

The Company's prior independent certified public accountants, Katz Sapper &
Miller, LLP, ("KSM") elected to cease performing audits of publicly traded
companies and to focus on serving the unique needs of entrepreneurial companies.
KSM resigned as the Company's auditors effective July 31, 2002. KSM's report on
the financial statements for either of the past two years did not contain an
adverse opinion or disclaimer of opinion. KSM's report was not modified as to
uncertainty, audit scope, or accounting principles, and also describe the nature
of each such adverse opinion, disclaimer of opinion or modification. The
decision to accept KSM's resignation was approved by the Company's board of
directors. There were no disagreements with the former accountant on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which, if not resolved to the former accountant's
satisfaction, would have caused it to make reference to the subject matter of
the disagreement(s) in connection with its report.

The Company appointed Whipple & Company, PC as the Registrant's independent
certified public accountants and such firm accepted such appointment effective
as of August 31, 2002.




                                       29
<PAGE>

                                    PART III
                                    --------

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

(a)      Executive Officers and Directors

The executive officers and directors of the Company are as follows:
--------------------------------------------------------------------------------
                              DIRECTOR
NAME                   AGE     SINCE     POSITION

Carter M. Fortune       59      2002     Chief Executive Officer, Chairman of
                                         the Board

Robert J. Kingston      45      2002     President of Kingston Sales Corp.,
                                         Director

Douglas E. May          35      2000     Chief Financial Officer, Vice President
                                         of Finance and Secretary, Director

David A. Berry          48      2002     Director
--------------------------------------------------------------------------------

The Company's current directors serve until the next annual meeting of
stockholders and until their respective successors are duly elected and
qualified.

In January, 2002, the Company appointed Carter M. Fortune as its Chief Executive
Officer. Mr. Fortune also became a director and Chairman of the Board of the
Company as of January, 2002. Mr. Fortune replaced Jeffrey J. Lewis who resigned
his position as CEO and director. Mr. Lewis's resignation was not as a result of
any dispute with the Company. Mr. Fortune is also a member of the Control Group.
Mr. Fortune, who has a BBA in Marketing from the University of Cincinnati. He
began his professional career at a leading national food brands company where
after five years he had ascended to the position of Regional Marketing Manager.
He was then hired as Director of Marketing for a leading Insurance and Actuarial
services provider where he served for three years. Mr. Fortune then began a
period of about fifteen years where he was the owner and operator of a chain of
retail stores. Concurrently and through today he began investing, owning and
operating numerous commercial and residential real estate developments. Over the
years, Mr. Fortune has served on numerous Boards of Directors and Advisory
panels.

As of July 31, 2002, Robert J. Kingston was elected to the Board of Directors
and remained as president of Kingston Sales. Mr. Kingston has been leading KSC
since 1978, when he took over the business from his father after his father
suffered an unexpected stroke. Mr. Kingston has represented almost every major
line and sales have steadily increased year over year under his leadership.

Douglas E. May was elected to the Board of Directors and became Vice President
of Finance and Secretary on October 2, 2000. He was previously elected the Chief
Financial Officer of the Company in September, 2000. Mr. May, who is a certified
public accountant and certified financial planner, was a financial advisor with
Merrill Lynch in Indianapolis, Indiana from August, 1995 until August, 2000.
Prior to joining Merrill Lynch, Mr. May was with Price Waterhouse, LLP in New
York, New York from 1990 to 1995. While at Price Waterhouse, Mr. May worked in
both the Audit division and the "Capital Markets and Treasury" group of the
Management Consulting Services Division. Mr. May is also an Officer in the
United States Army Reserve. Mr. May received a degree in Accounting and Finance
from Indiana University.

David A. Berry was elected to the Board of Directors, November 1, 2002. Mr.
Berry also serves on the audit committee. Mr. Berry began his professional
career by starting his own underground utility trenching company in 1978, for
which he had grown

                                       30
<PAGE>

into a national company when he sold it in 1984. Mr. Berry then worked as an
operations manager for two years for a major national telecommunications utility
until he started OSP Engineering, an outside telephone and cable systems
contractor. Mr. Berry again grew OSP into a national company, with customers
from Maine to California, until he sold it in 1990. Mr. Berry then was one of
the founding members of Citimark Communications, another wire infrastructure
development company, until he sold his interest to his partners and formed
Shared Telecom Services in 1995. Mr. Berry grew Shared Telecom Services into a
leading regional Competitive Local Exchange Carrier (CLEC) and shared tenant
provider, when he sold it in 2000 to a large national utility.

(b)      Significant Employees. None

(c)      Family Relationships.  None.

(d)      Involvement in Certain Legal Proceedings.  None.

SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE REPORT

Section 16(a) of the Exchange Act requires the Company's officers and directors,
and persons who own more than 10% of a registered class of the Company's equity
securities, to file an initial report of ownership of such securities on Form 3
and changes in ownership of such securities on Form 4 or 5 with the Commission.
Such officers, directors and 10% stockholders are required to furnish the
Company with copies of all Section 16(a) forms they file with the Commission.

Based solely on its review of the copies of such forms received by it, or
written representations from certain such reporting persons that no Form 5's
were required for such persons, the Company believes that, for the year ended
August 31, 2001, its officers, directors and 10% stockholders complied with all
applicable Section 16(a) filing requirements.


                                       31
<PAGE>

ITEM 10.  EXECUTIVE COMPENSATION

The following tables set forth certain information respecting the compensation
awarded to, earned by, or paid to the individuals serving as the Company's
executive officers during the period ended August 31, 2002. No other individual
had a total annual compensation exceeding $100,000 for the period ended August
31, 2002.

<TABLE>
<CAPTION>
                                         SUMMARY COMPENSATION TABLE

Name and Principal        Year     Salary ($)  Bonus ($)   Other Annual     Long Term             All Other
Position                                                   Compensation     Compensation Awards   Compensation ($)
                                                           ($)              Securities
                                                                            Underlying Options
                                                                            (#)
<S>                       <C>      <C>         <C>         <C>              <C>                  <C>
J. Douglas Wellington,    2002       ---       ---         ---              ---                   ---
CEO                       2001       ---       ---         ---              ---                   64,000 (1)(2)
                          2000     83,654      ---         ---              ---                   9,608 (3)

Jeffery J. Lewis, CEO     2002      4,000      ---         ---              ---                   ---
                          2001     67,000      ---         ---              200,000               ---

Carter M. Fortune, CEO    2002       ---       ---         ---              ---                   ---
and President

Douglas E. May, CFO,      2002     76,800      ---         ---              ---                   ---
Vice President of         2001     75,000      ---         ---              ---                   ---
Finance and Secretary     2000     12,500 (4)  ---         ---              ---                   ---

Robert J. Kingston,       2002     7,500 (5)   ---         ---              ---                   1,000 (6)
President of Kingston
Subsidiary
</TABLE>

(1) Pursuant to consulting agreement.
(2) The Company paid Mr. Wellington one-half of a severance payment in the
amount of $62,500 pursuant to a Severance and Consulting Agreement plus a $1,500
car and rent allowance. Mr. Wellington resigned as CEO on September 1, 2000.
(3) Consists of $4,808 for accrued vacation and sick time, $4,000 for car
allowance and $800 for home office expenses.
(4) For the transition period ended August 31, 2000.
(5) For the period ended August 31, 2002.
(6) Consists of a car allowance through period ended August 31, 2002.

<TABLE>
<CAPTION>
       AGGREGATED OPTION EXERCISES IN THE PERIOD ENDED AUGUST 31, 2001 AND
                            PERIOD-END OPTION VALUES
-------------------------------------------------------------------------------------------
                                                                               Value of
                                                            Number of         Unexercised
                                                           Unexercised        in-the-money
                                                             Options           Options at
                                                           At TP-End (#)       TP-End ($)
                  Shares Acquired on    Value Realized     Exercisable /     Exercisable /
      Name           Exercise (#)             ($)          Unexercisable     Unexercisable
<S>                       <C>                 <C>          <C>               <C>
Jeffrey L. Lewis          0                   $0           200,000/0 (1)     $2,000/$0 (1)
-------------------------------------------------------------------------------------------
</TABLE>

                                       32
<PAGE>


(1)      On January 12, 2001, the Company hired a Mr. Lewis as its CEO. In
         connection with this hiring, he was granted an option to purchase
         1,200,000 shares of common stock of an aggregate purchase price of
         $12,000. The options vest at a rate of 200,000 shares every six months
         beginning July 12, 2001. The Company entered into an agreement to
         cancel the options to purchase 1,000,000 shares of common stock
         previously granted to Mr. Lewis. This agreement was agreed to in
         principle by the Company and Mr. Lewis in August 2001, and formally
         executed in November 2001.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT

The Company and Mr. Wellington executed an employment agreement dated as of
December 31, 1999 (the "Employment Agreement") in connection with the execution
of the Letter Agreement. The Employment Agreement had a term of thirteen months,
and provided for compensation payable to Mr. Wellington of $135,417. The
Employment Agreement also provided for a severance payment of $125,000 to be
paid to Mr. Wellington from a reserve account set aside and controlled by
Shamrock upon the occurrence of certain events.

On September 1, 2000, the Company, WOW, the Control Group and Mr. Wellington
entered into a Severance and Consulting Agreement. Pursuant to such agreement,
(a) Mr. Wellington received his severance payment on January 31, 2001 (pursuant
to the Letter Agreement, one-half of such amount will be paid by Shamrock, see
"Description of Business - Change in Control and - 1999 Restructuring"), (b) the
Company paid Mr. Wellington his base salary under the Employment Agreement
through September 30, 2000, (c) the Company paid Mr. Wellington the remainder of
his base salary under the Employment Agreement, and (d) the Company paid Mr.
Wellington $1,500 for car and rent allowances through January 31, 2001. The
Company engaged Mr. Wellington as a consultant through January 31, 2002 and has
agreed to grant Mr. Wellington warrants to purchase 50,000 shares of Common
Stock at $1.00 per share on June 30, 2002, exercisable immediately after grant,
for a period of six years. The Company also gave Mr. Wellington two computers
owned by the Company (with an aggregate net book value of approximately $4,000).

Effective as of July 20, 2001 and July 30, 2001, Cornerstone Wireless Services,
Incorporated, a wholly owned subsidiary of the Company, entered into Employment
Agreements with William A. Shoemake and Anthony Sutton as the President and CEO
and Executive Vice President, respectively, of Cornerstone. Each agreement was
for an initial term of three years, provided for a base salary plus a bonus
based upon the performance of Cornerstone. Messrs. Shoemake and Sutton each
purchased certain stock in the Company (see "Security Ownership of Management".
In April of 2002, a settlement of termination was reached with both Mr. Shoemake
and Mr. Sutton. Neither Mr. Sutton nor Mr. Shoemake were employed by the Company
at August 31, 2002 or eligible for any future compensation.

Effective July 31, 2002, as part of the acquisition of Kingston Sales
Corporation, the Company entered into an Employment Agreement with Robert J.
Kingston. The agreement is for an initial term of two years with an associated
non-compete agreement that has a termination period of at least two years after
the termination of the employment agreement. There is also a $250,000 contingent
payment that is part of the Stock Purchase Agreement due on or before December
15, 2004. The payment of any or all of the $250,000 to Mr. Kingston, on or
before December 15, 2004, is contingent upon KSC attaining certain cumulative
earnings before income tax (EBIT) requirements, as described in the Stock
Purchase Agreement, during the period September 1, 2002 to August 31, 2004.

COMPENSATION OF DIRECTORS

Directors who are employed by the Company receive no compensation. Mr. Berry
received 200,000 shares of the Company's common stock upon being appointed and
also receives $1,000 a month. Every director is reimbursed for out-of-pocket
expenses incurred in connection with attendance at meetings of the Board of
Directors and other Company business.

                                       33
<PAGE>

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

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth information as of October 31, 2002 with respect
to the only persons or groups known to the Company who may be deemed to own
beneficially more than 5% of the Company's voting securities (i.e. Common
Stock). Unless otherwise noted, each holder has sole voting and investment power
with respect to the shares of the listed securities.

<TABLE>
<CAPTION>
Title of Class    Name and Address of Beneficial Owner  Amount and Nature of        Percent of Class
                                                        Beneficial Ownership (1)
<S>               <C>                                   <C>                         <C>
Common Stock      John F. Fisbeck                       69,335,131 (2)(3)           94.3
                  6809 Corporate Drive
                  Indianapolis, IN 46278

Common Stock      Carter M. Fortune                     69,335,131 (2)(3)           94.3
                  6809 Corporate Drive
                  Indianapolis, IN 46278
Common Stock      Jeffrey Kingston                      69,335,131 (2)(3)           94.3
                  6809 Corporate Drive
                  Indianapolis, IN 46278
</TABLE>

(1) As used in this table, "beneficial ownership" of securities means the sole
or shared power to vote, or to direct the voting of, such securities, or the
sole or shared investment power with respect to such securities, including the
power to dispose of, or to direct the disposition of, such securities. In
addition, for purposes of this table, a person is deemed to have "beneficial
ownership" of any security that such person had the right to acquire within 60
days after October 31, 2002.

(2) As the Control Group, Messrs. John F. Fisbeck, Carter M. Fortune and Jeffrey
Kingston beneficially own 69,335,131 shares of Common Stock. Individually, each
person has sole dispositive and voting power over the following shares of Common
Stock: John F. Fisbeck, 18,852,023 (25.6%); Carter M. Fortune, 42,486,793
(57.8%); and Jeffrey Kingston, 8,000,000 (10.9%).

(3) As part of the Stock Purchase Agreement to acquire KSC, subject to the
limitations and restrictions described below, Mr. Kingston may, in his sole
discretion, sell any or all of the Company's common stock to the Company and the
Company shall purchase any of the Company's common stock offered by Mr. Kingston
if any of the following conditions are met (the "Put Option"): 1) If during the
period September 1, 2002 to August 31, 2004, KSC's cumulative earnings before
income tax depreciation and amortization (EBITDA), as defined in the Stock
Purchase Agreement, is greater than $1,600,000: the Company shall have a cash
put at $.125 per share; 2) If during the period September 1, 2002 to August 31,
2004, KSC's Cumulative EBITDA is greater than $2,000,000: the Company shall have
a cash put at $.175 per share; 3) If during the period September 1, 2002 to
August 31, 2004, KSC's cumulative EBITDA is greater than $2,400,000: the Company
shall have a cash put at $.225 per share; 4) If during the period September 1,
2002 to August 31, 2004, KSC's cumulative EBITDA is greater than $3,000,000: the
Company shall have a cash put at $.300 per share. Mr. Kingston may only exercise
the Put Option during the period October 15, 2004 to November 30, 2004. In
addition, Mr. Kingston may only exercise the Put Option if the average bid price
per share during the period October 1, 2004 to October 31, 2004 is less than the
proposed put price, or if the Company's stock is not listed on the OTC Bulletin
Board, the New York Stock Exchange, NASDAQ or another nationally-recognized
securities market or exchange during the period October 1, 2004 to October 31,
2004. Any closing on a sale of the Company's Stock to the Company shall occur
within ninety (90) days of the Company's receipt of written notice from Mr.
Kingston requesting exercise of his put option.

                                       34
<PAGE>

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth information as of October 31, 2002 with respect
to (i) each director, (ii) all individuals serving as the Company's executive
officers during the period ended August 31, 2002, and (iii) all directors and
all such executive officers as a group. Unless otherwise noted, each holder has
sole voting and investment power with respect to the shares of the listed
securities. An asterisk (*) indicates beneficial ownership of less than 1%.

<TABLE>
<CAPTION>
Title of Class    Name and Address of             Amount and Nature of        Percent of Class
                  Beneficial Owner                Beneficial Ownership (1)
<S>               <C>                             <C>                         <C>
Common Stock      Carter M. Fortune               69,335,131 (2)(3)           94.3
                  6809 Corporate Drive
                  Indianapolis, IN 46278
Common Stock      Jeffrey Kingston                69,335,131 (2)(3)           94.3
                  6809 Corporate Drive
                  Indianapolis, IN 46278
Common Stock      Douglas E. May                  300,000 (4)                 *
                  6809 Corporate Drive
                  Indianapolis, IN 46278
Common Stock      J. Douglas Wellington, CEO      83,033                      *
</TABLE>

(1) As used in this table, "beneficial ownership" of securities means the sole
or shared power to vote, or to direct the voting of, such securities, or the
sole or shared investment power with respect to such securities, including the
power to dispose of, or to direct the disposition of, such securities. In
addition, for purposes of this table, a person is deemed to have "beneficial
ownership" of any security that such person had the right to acquire within 60
days after October 31, 2002.

(2) As the Control Group, Messrs. John F. Fisbeck, Carter M. Fortune and Jeffrey
Kingston beneficially own 69,335,131 shares of Common Stock. Individually, each
person has sole dispositive and voting power over the following shares of Common
Stock: John F. Fisbeck, 18,852,023 (25.6%); Carter M. Fortune, 42,486,793
(57.8%); and Jeffrey Kingston, 8,000,000 (10.9%).

(3) As part of the Stock Purchase Agreement to acquire KSC, subject to the
limitations and restrictions described below, Mr. Kingston may, in his sole
discretion, sell any or all of the Company's common stock to the Company and the
Company shall purchase any of the Company's common stock offered by Mr. Kingston
if any of the following conditions are met (the "Put Option"): 1) If during the
period September 1, 2002 to August 31, 2004, KSC's cumulative earnings before
income tax depreciation and amortization (EBITDA), as defined in the Stock
Purchase Agreement, is greater than $1,600,000: the Company shall have a cash
put at $.125 per share; 2) If during the period September 1, 2002 to August 31,
2004, KSC's Cumulative EBITDA is greater than $2,000,000: the Company shall have
a cash put at $.175 per share; 3) If during the period September 1, 2002 to
August 31, 2004, KSC's cumulative EBITDA is greater than $2,400,000: the Company
shall have a cash put at $.225 per share; 4) If during the period September 1,
2002 to August 31, 2004, KSC's cumulative EBITDA is greater than $3,000,000: the
Company shall have a cash put at $.300 per share. Mr. Kingston may only exercise
the Put Option during the period October 15, 2004 to November 30, 2004. In
addition, Mr. Kingston may only exercise the Put Option if the average bid price
per share during the period October 1, 2004 to October 31, 2004 is less than the
proposed put price, or if the Company's stock is not listed on the OTC Bulletin
Board, the New York Stock Exchange, NASDAQ or another nationally-recognized
securities market or exchange during the period October 1, 2004 to October 31,
2004. Any closing on a sale of the Company's Stock to the Company shall occur
within ninety (90) days of the Company's receipt of written notice from Mr.
Kingston requesting exercise of his put option.

                                       35
<PAGE>

(4) Mr. May is the Chief Financial Officer, Vice President of Finance and
Secretary of the Company. Pursuant to a Stock Purchase Agreement dated July 20,
2001, Mr. May purchased 200,000 of the shares owned by him in connection with
his employment at $.15 per share for a total of $30,000. Payment for the shares
was in the form of a Recourse Promissory Note that is secured by the shares
under a Stock Pledge Agreement. The shares are restricted by the Stock Purchase
Agreement and are subject to a vesting schedule set out in the Stock Purchase
Agreement. Vesting of the shares occurs when the Company's voting common stock
trades at a price (based upon the daily closing price) equal to or greater than
one dollar ($1.00) per share for a period of forty five (45) consecutive,
calendar days. If the employment of Mr. May terminates for any reason (including
death or 29 permanent disability) or if there is a change of control of
Cornerstone, Cornerstone is obligated to repurchase any unvested shares from Mr.
May (or his personal representative) and apply the proceeds of such repurchase
first to any balance of the Recourse Promissory Note. The shares have been
registered under the Securities Act of 1933 on Form S-8 and upon vesting under
the Stock Purchase Agreements and satisfaction of the Recourse Promissory Note
may be transferable. The remaining 100,000 shares of Mr. May's stock were
received when the Control Group acquired control in September, 2000.

CHANGES IN CONTROL

Except as described elsewhere in this item under "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS", the Company knows of no arrangements the operation of which
may at a subsequent date result in a change of control.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

See "Security Ownership of Certain Beneficial Owners and Management" for those
persons or groups known to the Company who may be deemed to own beneficially
more than 5% of the Company's voting securities (i.e. Common Stock).

See "Description of Business - Change of Control" for certain relationships
regarding the Company's subsidiary







                                       36
<PAGE>

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)  Exhibits.

<TABLE>
<CAPTION>
EXHIBIT
  NO.             DESCRIPTION                                                               LOCATION
------            -----------                                                               --------
<S>               <C>                                                                       <C>
2.1               Asset Purchase Agreement as of January 18, 2002 by and among PDH, INC.    (1) Exh 2.1
                  an Indiana corporation, as Purchaser, and DICKSONHUGHES GROUP, LLC, an
                  Indiana limited liability company, as Seller, and Andrew W. Thimlar,
                  Allen E. Hughes, and S. David Dickson for limited purposes related
                  thereto.

2.2               Stock Purchase Agreement, dated as of July 31, 2002, between Fortune      (2) Exh. 2.2
                  Diversified Industries, Inc. and Jeffrey J. Kingston and Kingston Sales
                  Corp.

2.3               Employment Agreement entered into on July 31, 2002 by and between         (2) Exh. 2.3
                  Kingston Sales Corp. and Robert J. Kingston, Exhibit A to the Stock
                  Purchase Agreement.

2.4               Lease entered into by Kingston Design, LLC and Kingston Sales Corp.,      (2) Exh. 2.4
                  Exhibit B to the Stock Purchase Agreement, dated July 31, 2002.

2.5               Voting Agreement, dated July 31, 2002 by John F. Fisbeck, Carter          (2) Exh. 2.5
                  Fortune, and Robert J. Kingston to elect Kingston to the Board of
                  Directors of FDVI, Exhibit C to the Stock Purchase Agreement.

2.6               Registration Rights Agreement, entered into July 31, 2002 by and          (2) Exh. 2.6
                  between Fortune Diversified Industries, Inc., and Robert J. Kingston,
                  Exhibit D to the Stock Purchase Agreement.

2.7               Guaranty dated July 31, 2002, by John F. Fisbeck in favor of Robert J.    (2) Exh. 2.7
                  Kingston, Exhibit E of the Stock Purchase Agreement.

2.8               Guaranty dated July 31, 2002, by Carter Fortune in favor of Robert J.     (2) Exh. 2.8
                  Kingston, Exhibit E of the Stock Purchase Agreement.

2.9               Asset Purchase Agreement effective as of September 1, 2002 by and among   (2) Exh. 2.9
                  TTC ACQUISITION COMPANY. an Indiana corporation (the "Purchaser"),
                  TELECOM TECHNOLOGY CORP., an Indiana corporation, (the "Seller") and
                  MICHAEL GROTHE ("Grothe").

2.10              Asset Purchase Agreement effective as of September 1, 2002 by and         (3) Exh. 2.10
                  between TTC ACQUISITION COMPANY and PAT HAGAN.

3.1               Restated Certificate of Incorporation.                                    (4) Exh. 3.1

3.2               Certificate of Amendment to Certificate of Incorporation.                 (4) Exh. A

3.3               Amendment to Bylaws.                                                      (4) Exh. 3.3

                                       37
<PAGE>

4.1               Specimen Common Stock Certificate.                                        (5) Exh. 4.1

10.1              Asset Purchase Agreement dated October 31, 2002 by and among STARQUEST    (7) Exh. 10.1
                  WIRELESS, INC., an Indiana corporation (the "Purchaser"), and STARQUEST
                  WIRELESS, LLC, NOEL KAPLAN ("Kaplan") and STEVE COCHRAN ("Cochran")
                  (collectively the "Sellers").

10.2                                                                                        (7) Exh. 10.2
                  EMPLOYMENT AGREEMENT dated October 31, 2002, by and between STARQUEST
                  WIRELESS, INC. as Employer and NOEL KAPLAN as Employee.

10.3                                                                                        (7) Exh. 10.3
                  EMPLOYMENT AGREEMENT dated October 31, 2002, by and between STARQUEST
                  WIRELESS, INC. as Employer and STEVE COCHRAN as Employee.

16.1              Resignation Letter of Katz Sapper & Miller LLP.                           (6) Exh. 16.1

21                List of subsidiaries.                                                     (7) Exh. 21

23.1              Consent of Whipple & Co.                                                  (7) Exh. 23.1
</TABLE>

(1) This exhibit is incorporated by reference to the Company' Current Report on
Form 8-K dated January 31, 2002.

(2) Each of these exhibits is incorporated by reference to the Company's Current
Report on Form 8-K dated August 15, 2002.

(3) This exhibit is incorporated by reference to the Company's Current Report on
Form 8-K dated September 13, 2002.

(4) Each of these exhibits is incorporated by reference to the Company's Annual
Report on Form 10-KSB for the year ended August 31, 2000.

(5) This exhibit is incorporated by reference to the Definitive Information
Statement filed by the Company on July 27, 2001.

(6) This exhibit is incorporated by reference to the Company's Current Report on
Form 8-K dated August 7, 2002.

(7) Enclosed herewith.

(b) Reports on Form 8-K.

The Company filed the following reports during the three month period ended
August 31, 2002:

Form 8-K/A dated October 15, 2002, Amendment No. 1 to Form 8-K dated August 14,
2002 to include the financial information required by item 7 with respect to the
Kingston Sales Corp. acquisition effective July 31, 2002.

Form 8-K dated September 13, 2002 with respect to the announcement of the TTC
acquisition transaction effective September 1, 2002

Form 8-K dated September 5, 2002 with respect to the appointment of Whipple &
Company, PC as the Registrant's independent certified public accountants
effective as of August 31, 2002.

Form 8-K dated August 15, 2002 with respect to the Kingston Sales Corp
Acquisition, change in control resulting in the addition of Jeff Kingston to the
Control Group and the election of Mr. Kingston to the Board of Directors.

Form 8-K dated August 7, 2002 with respect to The Company's prior independent
certified public accountants, Katz Sapper & Miller, LLP, electing to cease
performing audits of publicly traded companies and to focus on serving the
unique needs of entrepreneurial companies. As a result, they resigned as the
Company's auditors effective July 31, 2002. There were no disagreements with
Katz Sapper & Miller, LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which, if not
resolved to the satisfaction of Katz Sapper & Miller, LLP would have caused Katz
Sapper & Miller, LLP to make reference to the matter in its audit report.

                                       38
<PAGE>







                      FORTUNE DIVERSIFIED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS
                                       AND
                          INDEPENDENT AUDITORS' REPORT

                            August 31, 2002 and 2001










<PAGE>

              FORTUNE DIVERSIFIED INDUSTRIES, INC. AND SUBSIDIARIES


                                TABLE OF CONTENTS


                                                                       Page

Independent Auditors' Report                                            F-1

Consolidated Balance Sheets                                             F-2

Consolidated Statements of Operations                                   F-3

Consolidated Statements of Stockholders' Equity                         F-4

Consolidated Statements of Cash Flows                                   F-5

Notes to Consolidated Financial Statements                              F-6






                                       F-1
<PAGE>


                          Independent Auditors' Report



To the Board of Directors and Stockholders
Fortune Diversified Industries, Inc. and Subsidiaries
Indianapolis, Indiana



We have audited the accompanying consolidated balance sheet of Fortune
Diversified Industries, Inc. and Subsidiaries as of August 31, 2002, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit. The
consolidated financial statements of Fortune Diversified Industries, Inc. and
Subsidiaries as of August 31, 2001, were audited by other auditors whose report
dated October 24, 2001, expressed an unqualified opinion on those statements.

We conducted our audit in accordance with generally accepted auditing standards
of the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
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 audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Fortune Diversified
Industries, Inc. and Subsidiaries as of August 31, 2002, and the results of its
operations, and its cash flows for the year then ended in conformity with
generally accepted accounting principles of the United States.


/s/  Whipple & Company, PC

Indianapolis, Indiana
November 25, 2002


                                       F-2
<PAGE>

              FORTUNE DIVERSIFIED INDUSTRIES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                            August 31, 2002 and 2001

<TABLE>
<CAPTION>
                                     ASSETS

                                                                 2002            2001
<S>                                                          <C>             <C>
CURRENT ASSETS
      Cash and equivalents                                   $   291,000     $ 2,538,000
      Accounts receivable, net                                 2,141,000              --
      Purchase adjustment receivable                             600,000              --
      Inventory, net                                             509,000              --
      Other current assets                                        84,000         107,000
                                                             -----------     -----------
           Total Current Assets                                3,625,000       2,645,000
                                                             -----------     -----------

OTHER ASSETS
      Notes receivable                                            30,000         630,000
      Investment in land development                                  --           6,000
      Office equipment, net                                      281,000          35,000
      Vehicles, net                                              133,000              --
      Leasehold improvements, net                                166,000              --
      Goodwill                                                   876,000              --
      Other intangible assets, net                               751,000              --
                                                             -----------     -----------
           Total Other Assets                                  2,237,000         671,000
                                                             -----------     -----------

           TOTAL ASSETS                                      $ 5,862,000     $ 3,316,000
                                                             ===========     ===========


LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
      Line of credit                                         $ 1,277,000     $        --
      Accounts payable                                           477,000          73,000
      Current maturities of long-term debt                       442,000              --
      Current maturities of capital lease obligations              8,000              --
      Accrued payroll and related expenses                        44,000          28,000
      Accrued expenses                                           197,000          50,000
      Deferred revenue                                           241,000              --
                                                             -----------     -----------
           Total Current Liabilities                           2,686,000         151,000
                                                             -----------     -----------

LONG-TERM LIABILITIES
      Long-term debt, less current maturities                  2,589,000              --
      Capital lease obligations, less current maturities          17,000              --
                                                             -----------     -----------
           Total Long-term Liabilities                         2,606,000              --
                                                             -----------     -----------

STOCKHOLDERS' EQUITY
      Common stock                                               735,000         695,000
      Additional paid-in capital and warrants outstanding      6,441,000       7,001,000
      Accumulated deficit                                     (6,606,000)     (4,531,000)
                                                             -----------     -----------
           Total Stockholders' Equity                            570,000       3,165,000
                                                             -----------     -----------

           TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY        $ 5,862,000     $ 3,316,000
                                                             ===========     ===========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements

                                       F-3
<PAGE>

              FORTUNE DIVERSIFIED INDUSTRIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                              Years Ended
                                                      August 31,      August 31,
                                                         2002            2001
<S>                                                  <C>             <C>
NET REVENUES                                         $ 2,342,000     $   425,000

COST OF REVENUES                                       2,107,000       5,381,000
                                                     -----------     -----------

GROSS PROFIT (LOSS)                                      235,000      (4,956,000)

OPERATING EXPENSES
     Selling, general and administrative expenses      1,622,000       2,003,000
     Depreciation and amortization                        51,000           6,000
                                                     -----------     -----------
         Total Operating Expenses                      1,673,000       2,009,000
                                                     -----------     -----------

Operating Income (Loss)                               (1,438,000)     (6,965,000)

OTHER INCOME (EXPENSE)
     Interest income                                      51,000          20,000
     Interest expense                                    (23,000)       (180,000)
     Gains (losses) on investments in marketable
      securities, net                                   (597,000)             --
     Net gain (loss) on sale of equipment                (23,000)             --
     Other income (expense)                              (45,000)             --
                                                     -----------     -----------
         Total Other Income (Expense)                   (637,000)       (160,000)
                                                     -----------     -----------

Net (Loss) Before Extraordinary Credit and Income
 Taxes                                                (2,075,000)     (7,125,000)

EXTRAORDINARY CREDIT-EXTINGUISHMENT OF DEBT                   --       4,174,000
                                                     -----------     -----------

Net (Loss) Before Provision for Income Taxes          (2,075,000)     (2,951,000)

PROVISION FOR INCOME TAXES                                    --              --
                                                     -----------     -----------

NET (LOSS)                                           $(2,075,000)    $(2,951,000)
                                                     ===========     ===========


BASIC INCOME (LOSS) PER SHARE
     Before extraordinary credit                     $     (0.03)    $     (0.11)
     Extraordinary credit                                     --            0.06
                                                     -----------     -----------

         Total Basic Income (Loss) Per Share         $     (0.03)    $     (0.05)
                                                     ===========     ===========

DILUTED INCOME (LOSS) PER SHARE
     Before extraordinary credit                     $     (0.03)    $     (0.11)
     Extraordinary credit                                     --            0.06
                                                     -----------     -----------

         Total Diluted Income (Loss) Per Share       $     (0.03)    $     (0.05)
                                                     ===========     ===========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements

                                       F-4
<PAGE>

              FORTUNE DIVERSIFIED INDUSTRIES, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                      Years Ended August 31, 2002 and 2001

<TABLE>
<CAPTION>
                                                  Preferred
                                                    Stock                        Additional
                                                   Women of                    Paid-in Capital    Cost of
                                                  Wrestling,        Common       and Warrants     Treasury       Accumulated
                                                     Inc.           Stock        Outstanding        Stock          Deficit

<S>                                              <C>             <C>             <C>             <C>             <C>
BALANCE AT AUGUST 31, 2000                       $ 1,300,000     $   624,000     $   158,000     $        --     $  (811,000)

Dividends paid to preferred stockholders                  --              --              --              --        (119,000)
Issuance of 7,000 shares of subscribed
 preferred stock                                     700,000              --              --              --              --
Issuance of 16,250,000 shares of common stock
 for debt forgiveness                             (2,000,000)        162,000       3,088,000              --              --
Issuance of stock options                                 --              --       1,282,000              --              --
Cancellation of stock options                             --              --        (930,000)             --              --
Redemption of 19,000,000 shares of common
 stock                                                    --        (190,000)        159,000              --              --
Issuance of 11,550,000 shares of
 common stock                                             --         117,000       3,384,000              --              --
Cancellation of stock warrants                            --         (18,000)       (140,000)             --        (650,000)
Net loss                                                  --              --              --              --      (2,951,000)
                                                 -----------     -----------     -----------     -----------     -----------

BALANCE AT AUGUST 31, 2001                                --         695,000       7,001,000              --      (4,531,000)

Purchase of 4,000,000 shares of common
 stock in treasury                                        --              --        (560,000)        (40,000)             --
Issuance of 8,000,000 shares of
 common stock                                             --          80,000              --              --              --
Cancellation of 4,000,000 shares of
 treasury stock                                           --         (40,000)             --          40,000              --
Net loss                                                  --              --              --              --      (2,075,000)
                                                 -----------     -----------     -----------     -----------     -----------

BALANCE AT AUGUST 31, 2002                       $        --     $   735,000     $ 6,441,000     $        --     $(6,606,000)
                                                 ===========     ===========     ===========     ===========     ===========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements

                                       F-5
<PAGE>

              FORTUNE DIVERSIFIED INDUSTRIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      Years Ended August 31, 2002 and 2001


<TABLE>
<CAPTION>
                                                                         2002            2001
<S>                                                                  <C>             <C>
OPERATING ACTIVITIES
    Net (loss)                                                       $(2,075,000)    $(2,951,000)
    Adjustments to reconcile net income (loss) to net cash
     provided (used) by operating activities:
       Depreciation and amortization                                      51,000           6,000
       Loss from impairment of production and web-site
        development costs                                                     --         158,000
       Stock options granted for services                                     --         128,000
       Extraordinary credit-extinguishment of debt                            --      (4,174,000)
       Net realized loss from sale of available for
        sale securities                                                  597,000              --
       Net loss on disposal of equipment                                  23,000              --
       (Increase) decrease in certain operating assets:
          Accounts receivable                                           (245,000)             --
          Inventory                                                      238,000              --
          Other current assets                                            31,000         345,000
       Increase (decrease) in certain operating liabilities:
          Accounts payable                                              (264,000)         91,000
          Accrued expenses and other current liabilities                 104,000          79,000
          Deferred revenue                                                 6,000              --
                                                                     -----------     -----------
             Net Cash Provided (Used) by Operating Activities         (1,534,000)     (6,318,000)
                                                                     -----------     -----------

INVESTING ACTIVITIES
    Land development costs incurred                                           --          (5,000)
    Purchases of vehicles, equipment and leasehold
     improvements, net                                                   (32,000)        (14,000)
    Purchases of available for sale securities                        (5,448,000)             --
    Sales of available for sale securities                             4,851,000              --
    Acquisition of productive assets and businesses, net cash         (3,740,000)             --
                                                                     -----------     -----------
             Net Cash Provided (Used) by Investing Activities         (4,369,000)        (19,000)
                                                                     -----------     -----------

FINANCING ACTIVITIES
    Dividends paid to preferred stockholders                                  --        (119,000)
    Proceeds from issuance of preferred stock                                 --         700,000
    Net borrowings (repayments) under line of credit                     628,000       5,250,000
    Net borrowings (repayments) under long-term debt                   3,003,000              --
    Net borrowings under capital lease obligations                        25,000              --
    Issuance of common stock                                                  --       2,750,000
                                                                     -----------     -----------
             Net Cash Provided (Used) by Financing Activities          3,656,000       8,581,000
                                                                     -----------     -----------

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS                       (2,247,000)      2,244,000

CASH AND EQUIVALENTS
    Beginning of Period                                                2,538,000         294,000
                                                                     -----------     -----------

    End of Year Period                                               $   291,000     $ 2,538,000
                                                                     ===========     ===========

SUPPLEMENTAL DISCLOSURES
    Interest paid                                                        (23,000)       (180,000)

    Noncash investing and financing activities:
       Issuance of common stock in exchange for debt                          --       5,250,000
       Issuance of common stock in exchange for preferred
        stock                                                                 --       2,000,000
       Issuance (redemption) of common stock in exchange
        for notes receivable                                            (600,000)        630,000

       Acquisition of Kingston Sales Corp:
          Accounts receivable                                          1,373,000
          Inventory                                                      747,000
          Accounts payable                                              (668,000)
          Accrued expenses and other current liabilities                 (59,000)
          Deferred revenue                                              (235,000)
          Vehicles, equipment and leasehold improvements                 363,000
          Line of credit                                                (649,000)
          Long-term debt                                                 (28,000)
          Goodwill and other intangible assets                         1,636,000
                                                                     -----------
                                                                       2,480,000
          Purchase adjustment receivable at 8/31/02                      600,000
          Common stock consideration                                     (80,000)
                                                                     -----------
          Cash paid as of 8/31/02 to acquire Kingston Sales Corp.    $ 3,000,000
                                                                     ===========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements

                                       F-6
<PAGE>

              FORTUNE DIVERSIFIED INDUSTRIES, INC. AND SUBSIDIARIES


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Nature of Business: Fortune Diversified Industries, Inc. (the Company),
     formerly known as WOW Entertainment, Inc. and American Gaming &
     Entertainment, Ltd., is a Delaware corporation organized in 1988. The
     Company has conducted its business directly and through wholly-owned
     subsidiaries. The Company is the parent company of Kingston Sales Corp.
     (KSC), PDH, Inc. (PDH), Cornerstone Wireless Services, Inc. and Cornerstone
     Wireless Construction Services, Inc. (Cornerstone), Murphy Development,
     Ltd. and Women of Wrestling, Inc. (WOW).

     Through July 2001, the Company's main area of emphasis was in
     entertainment, primarily, WOW - Women of Wrestling(R). However, the
     Company's primary operating focus has shifted from the entertainment
     industry. Because of the Company's change in operating focus and its
     expanded current and future anticipated holdings, the Company amended its
     certificate of incorporation to change its name from WOW Entertainment,
     Inc. to Fortune Diversified Industries, Inc. and changed its stock symbol
     from WOWI to FDVI, effective August 16, 2001.

     The Company's current operating focus is achieved through its Rep and
     Distribution Segment (Kingston Sales) and its Telecom Infrastructure
     Development Segment (PDH, Inc., Cornerstone Wireless Services, Inc. and
     Cornerstone Wireless Construction Services, Inc. subsidiaries and their
     affiliates).

          Rep and Distribution Segment: The Company's Rep and Distribution
          segment is conducted through its Kingston Sales Corporation
          subsidiary, which is a manufacturer's representative and distributor
          for prominent national companies in the electronic, sound, security,
          and video markets. Kingston Sales Corporation offers the latest
          technology in TVs, sound systems, electronic locking devices, wire,
          cable and fiber optics, and intercom systems.

          Telecom Infrastructure Segment: The Company's Telecom Infrastructure
          segment is conducted through its PDH, Inc. (PDH), Cornerstone Wireless
          Services, Inc. and Cornerstone Wireless Construction Services, Inc.
          subsidiaries and their affiliates. The Company can assist its
          customers with the telecom site development process from network
          infrastructure real estate planning through infrastructure
          construction, as well as marketing and management including:

          o    Site acquisition (e.g., raw land property, building rooftop, or
               antenna structure for co-location);

          o    Architectural and engineering analysis and drawings (e.g.,
               analysis of existing cell tower or construction drawings of cell
               towers and switches);

          o    Site construction, and;

          o    Existing site marketing and management.

     Cornerstone also offers architectural and engineering services for the
     traditional real estate development industries such as residential,
     commercial and industrial markets.

     Principles of Consolidation: The accompanying consolidated financial
     statements include the accounts of the Company and its wholly-owned
     subsidiaries. All significant intercompany accounts and transactions have
     been eliminated.


                                       F-7
<PAGE>

NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        (CONTINUED)

     Estimates: Management uses estimates and assumptions in preparing financial
     statements in accordance with accounting principles generally accepted in
     the United States. Those estimates and assumptions affect the reported
     amounts of assets and liabilities, the disclosure of contingent assets and
     liabilities and the reported revenues and expenses. Actual results could
     vary from the estimates that were used.

     Revenue Recognition: In the Company's Rep and Distribution segment, revenue
     from the sale of products is recognized according to the terms of the sales
     arrangement, which is generally upon shipment. Commission revenue is
     recognized when realizable and earned, which is typically upon receipt of
     the commission payment. Payments received where there are delivery elements
     required to be met in order to retain those payments are recorded as
     deferred revenue under current or long-term liabilities, as appropriate,
     and taken into income when the criteria are met.

     In its Telecom Infrastructure Development segment, the Company enters into
     contracts principally on the basis of competitive bids, the final terms and
     prices of which are frequently negotiated with the customer. Although the
     terms of its contracts vary considerably, most are made on a unit price
     basis in which the Company agrees to do the work for units of work
     performed. The Company also performs services on a cost-plus or time and
     materials basis. The Company completes most projects within one year. The
     Company generally recognizes revenue utilizing output measures, such as
     when services are performed, units are delivered or when contract
     milestones are reached.

     Within its entertainment segment, the Company recognizes revenue from the
     direct distribution, exploitation, and licensing of film and television
     programs before deduction for any of the Company's direct costs of
     distribution. For markets and territories in which the Company's fully or
     jointly-owned films and television programs are distributed by third
     parties, revenue is the net amounts payable to the Company by third party
     distributors.

     Revenue is reduced by appropriate allowances, estimated returns, price
     concessions, and similar adjustments, as applicable.

     Cost of Revenues: Cost of revenues within the Company's Rep and
     Distribution segment consist primarily of purchases of goods that are
     resold to customers, but also consist of salaries, wages and benefits to
     employees, fuel and other vehicle expenses, equipment rentals,
     subcontracted services, insurance, facilities expenses, and supplies.

     Cost of Revenues within the Company's other segments consist primarily of
     salaries, wages and benefits to employees, fuel and other vehicle expenses,
     equipment rentals, subcontracted services, insurance, materials and parts
     and supplies.

     Selling, General and Administrative Expenses: Selling, general and
     administrative expenses consist primarily of compensation and related
     benefits to management, administrative salaries and benefits, marketing,
     office rent and utilities, communications and professional fees.

     Cash and Equivalents: Cash and equivalents may include money market fund
     shares, bank time deposits and certificates of deposits, and other
     instruments with original maturities of three months or less. The Company
     maintains its cash in bank deposit accounts, which, at times, may exceed
     federally insured limits. The Company has never experienced any losses in
     such accounts.

     Marketable Securities: Marketable securities include common stocks
     classified as "available for sale". The securities are carried at fair
     value based on current market quotations. Unrealized holding gains and
     losses are not included in "net income", but are accounted for as "other
     comprehensive income" and reflected as a separate component of the change
     in stockholders' equity. The Company did not have any marketable equity
     securities or accumulated other comprehensive gains or losses at August 31,
     2002 and 2001. The cost of securities used to compute realized gains and
     losses is based on specifically-identified securities.

     Inventories: Inventories are recorded at the lower of cost (primarily
     first-in, first-out) or market value and consist of entirely goods
     purchased for resale.

                                       F-8
<PAGE>

NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        (CONTINUED)

     Shipping and Handling: Costs incurred for shipping and handling are
     included in the Company's financial statements as a component of costs of
     revenue.

     Property, Equipment, and Depreciation: Property and equipment are carried
     at cost and includes expenditures for new additions and those, which
     substantially increase the useful lives of existing assets. Depreciation is
     computed at various rates by use of the straight-line method and certain
     accelerated methods. Depreciable lives are generally ranging from 3 to 39
     years.

     Expenditures for normal repairs and maintenance are charged to operations
     as incurred. The cost of property or equipment retired or otherwise
     disposed of and the related accumulated depreciation are removed from the
     accounts in the year of disposal with the resulting gain or loss reflected
     in earnings or in the cost of the replacement asset.

     The provision for depreciation amounted to $44,000 and $6,000 for the years
     ended August 31, 2002 and 2001, respectively.

     Production Costs: The Company has implemented Statement of Position (SOP)
     00-2, "Accounting by Producers or Distributors of Films", which requires
     special accounting for production costs relating to episodic television
     series. Specifically, SOP 00-2 requires a company to demonstrate through
     its experience and industry norms that the number of episodes already
     produced, plus those for which a firm commitment exists and the entity
     expects to deliver, can be licensed in the secondary market before an
     episodic television series can implement the
     individual-film-forecast-computation method to amortize production costs.
     SOP 00-2 further stipulates that until an entity can establish estimates of
     secondary market revenue, capitalized costs for each episode produced
     should not exceed an amount equal to the amount of revenue contracted for
     that episode, the entity should expense as incurred production costs in
     excess of this limitation on an episode-by-episode basis, and the entity
     should expense all capitalized costs for each episode as it recognizes the
     related revenue for each episode. The Company follows the more conservative
     episode-by-episode basis versus the individual-film-forecast-computation
     method. Furthermore, as the Company had effectively recognized revenues
     from the initial airing of all of the episodes produced through the
     year-ended August 31, 2001, all production costs as of August 31, 2001,
     were expensed. As such, the Company did not have any capitalized production
     costs as of August 31, 2002 and 2001.

     Goodwill and Other Intangible Assets: The Company has adopted Statement of
     Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other
     Intangible Assets". With the adoption of SFAS No. 142, goodwill is no
     longer amortized but instead is assessed for impairment at least as often
     as annually and as triggering events occur. In making this assessment,
     management relies on a number of factors including operating results,
     business plans, economic projections, anticipated future cash flows, and
     transactions and market place data. There are inherent uncertainties
     related to these factors and management's judgment in applying them to the
     analysis of goodwill impairment. Since management's judgment is involved in
     performing goodwill and other intangible assets valuation analyses, there
     is risk that the carrying value of our goodwill and other intangible assets
     may be overstated or understated. We have determined that there is no
     impact of adopting this new standard under the transition provisions of
     SFAS No. 142.

     Long-lived Assets: Long-lived assets including the Company's property,
     plant and equipment, are reviewed for impairment whenever events or changes
     in circumstances indicate that the carrying amount of an asset may not be
     recoverable. Recoverability is measured by comparison of the carrying
     amount to future net undiscounted cash flows expected to be generated by
     the related asset. If such assets are considered to be impaired, the
     impairment to be recognized is measured by the amount by which the carrying
     amount exceeds the fair market value of the assets.

     Advertising and Exploitation Costs: Advertising and exploitation costs
     including marketing, advertising, publicity, promotion and other
     distribution costs, are expensed as incurred and totaled $29,000 and
     $1,299,000 for the years ended August 31, 2002 and 2001, respectively.

                                      F-9
<PAGE>

NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        (CONTINUED)

     Fair Value of Financial Instruments: The fair value of financial
     instruments is estimated using relevant market information and other
     assumptions. Fair value estimates involve uncertainties and matters of
     significant judgment regarding interest rates, prepayments, and other
     factors. Changes in assumptions or market conditions could significantly
     affect these estimates. The amounts reported in the consolidated balance
     sheets for cash and equivalents, marketable securities, receivables, and
     payables approximate fair value.

     Stock-based Compensation: The Company accounts for all stock based
     compensation under the provision of SFAS No. 123, "Accounting for
     Stock-Based Compensation", which uses the term "compensation" in its
     broadest sense to refer to consideration paid for goods and services,
     regardless of whether the supplier is an employee or not. The Company
     values stock options and warrants issued based upon an option-pricing model
     and recognizes this value as an expense over the period in which the option
     vests.

     Income (Loss) Per Common Share: Income (loss) per share has been computed
     in accordance with SFAS No. 128, "Earnings Per Share." Under SFAS No. 128,
     basic income (loss) per share is computed based on net income (loss)
     applicable to common stock divided by the weighted average number of common
     shares outstanding for the period. Diluted income (loss) per share is
     computed based on net income (loss) applicable to common stock divided by
     the weighted average number of shares of common stock outstanding during
     the period after giving effect to securities considered to be dilutive
     common stock equivalents.

     Income Taxes: The Company accounts for income taxes under the provisions of
     SFAS No. 109, "Accounting for Income Taxes." Accordingly, deferred tax
     assets and liabilities are determined based on differences between the
     financial reporting and tax basis of assets and liabilities and are
     measured using the enacted tax rates.

     New Accounting Pronouncements: In June 2001, the Financial Accounting
     Standards Board ("FASB") issued SFAS No. 141, "Business Combinations". SFAS
     No. 141 eliminates the use of the pooling-of-interests method of accounting
     for business combinations and establishes the purchase method of accounting
     as the only acceptable method for all business combinations initiated after
     June 30, 2001.

     In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
     Assets." This statement modifies existing generally accepted accounting
     principles related to the amortization and impairment of goodwill and other
     intangible assets. Upon adoption of the new standard, goodwill, including
     goodwill associated with equity method investments, will no longer be
     amortized. For the years ended August 31, 2002 and 2001, there was no
     goodwill amortization. In addition, goodwill, other than goodwill
     associated with equity method investments, must be assessed at least
     annually for impairment using a fair-value based approach. The Company
     adopted the provisions of this statement effective September 1, 2001 and
     there was no material impact on the consolidated financial statements.

     In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
     Retirement Obligations." SFAS No. 143 addresses accounting and reporting
     for obligations associated with the retirement of tangible long-lived
     assets and the associated asset retirement costs. This statement is
     effective for fiscal years beginning after June 15, 2002. Management is
     currently assessing the impact of this new standard. However, we do not
     expect the impact to be material.

     In July 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
     or Disposal of Long-Lived Assets," which is effective for fiscal years
     beginning after December 15, 2001. The provisions of this statement provide
     a single accounting model for impairment of long-lived assets. Management
     is currently assessing the impact of this new standard.

                                      F-10
<PAGE>

NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        (CONTINUED)

     In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
     No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
     Corrections," which is effective for fiscal years beginning after May 15,
     2002. This statement rescinds the indicated statements and amends other
     existing authoritative pronouncements to make various technical
     corrections, clarify meanings, or describe their applicability under
     changed conditions. Management is currently assessing the impact of this
     new standard. However, we do not expect the impact to be material.

     In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
     Associated with Exit or Disposal Activities," which is effective for exit
     or disposal activities that are initiated after December 31, 2002. This
     statement nullifies Emerging Issues Task Force Issue No. 94-3, "Liability
     Recognition for Certain Employee Termination Benefits and Other Costs to
     Exit an Activity (including Certain Costs Incurred in a Restructuring)."
     This statement requires that liabilities associated with exit or disposal
     activities be recognized and measured at fair value when incurred as
     opposed to at the date an entity commits to the exit or disposal plans.
     Management is currently assessing the impact of this new standard.

NOTE 2 - CHANGE IN CONTROL

     2000 Change in Control
     ----------------------

     On September 1, 2000, David B. McLane, John F. Fisbeck, Carter M. Fortune
     (collectively, the "Control Group") and their assigns collectively
     purchased 61,318,563 shares of the Company common stock. Of the 61,318,563
     shares purchased, 57,360,255 shares were purchased by the Control Group.
     The right to purchase the remainder of the shares was assigned to family
     members of the Control Group and employees and consultants of WOW
     Entertainment, Inc., a company owned by the Control Group (which company
     became a wholly-owned subsidiary of the Company and changed its name to
     Women of Wrestling, Inc.). In particular, the Company's distributor of its
     television program, M/G Perin, Inc., through its principal shareholder,
     Richard Perin, purchased 3% of the 61,318,563 shares common stock pursuant
     to a distribution agreement with the Company. (MG Perin, Inc. was also
     entitled to receive a warrant to purchase 1% of the common stock owned by
     the Control Group). The source of funds for all purchases was from personal
     funds of the Control Group. Collectively, the stock purchased represented
     98.1% of the outstanding share of common stock of the Company.

     The stock was purchased pursuant to two stock purchase agreements dated
     July 28, 2000. One agreement was with Richard C. Breeden, who is the
     bankruptcy trustee (the "Trustee") for the Bennett Funding Group, Inc. et
     al. (the "Estate") in a bankruptcy proceeding pending in the United States
     Bankruptcy Court for the Northern District of New York (the "Bankruptcy
     Court"). This agreement provided for the purchase of 60,348,060 shares (the
     "Estate Stock") of common stock from the Estate for $98,200 in cash. The
     Estate stock included 60,098,060 shares of common stock that were converted
     from the Company's Series C cumulative preferred stock, Series D cumulative
     preferred stock and Series E preferred stock owned by the Estate pursuant
     to a notice of conversion delivered to the Company dated July 21, 2000.

     The other agreement was with Shamrock Holdings Group, Inc. ("Shamrock",
     collectively with the Estate, the "Sellers") and provided for the purchase
     of 970,503 shares of common stock (of which 233,260 shares were converted
     from the Company's Series A preferred stock owned by Shamrock pursuant to a
     notice of conversion delivered to the Company dated July 21, 2000) for
     $1,800 in cash.

     Pursuant to the stock purchase agreements, the Control Group and the
     Sellers required that the cash on hand in the Company as of September 1,
     2000, less specified liabilities, be deposited with an escrow agent and,
     subject to certain offsets, be distributed to the Sellers on September 30,
     2000.

     On September 1, 2000, J. Douglas Wellington resigned as the Company's
     President and Chief Executive Officer ("CEO") and David McLane was elected
     President and Douglas E. May was elected Chief Financial Officer, Vice
     President of Finance and Corporate Secretary. Mr. McLane was also appointed
     to the Board of Directors. As of such date, the Company entered in a
     severance and consulting agreement with Mr. Wellington.

                                      F-11
<PAGE>

NOTE 2 - CHANGE IN CONTROL (CONTINUED)

     In October 2000, certain actions, which had been approved by written
     consent of the Control Group, became effective, including a 1 for 6 reverse
     stock split resulting in each share of common stock being reclassified into
     0.1667 of a share of new common stock, $0.01 par value. Except as otherwise
     noted, all references to the Company's common stock presented in this Form
     10-KSB have been adjusted for this reverse stock split.

     Cancellation of Perin and McLane Ownership Interests
     ----------------------------------------------------

     As of May 22, 2001, the Company and its subsidiary, WOW, executed an
     Amendment to its Distribution Agreement with M/G Perin, Inc. and Richard
     Perin in which they agreed to terminate their Distribution Agreement dated
     January 18, 2000 and enter into a new agreement covering only WOW's free
     television programs created through May 22, 2001. Also as part of the
     agreement, Mr. Perin returned for cancellation by the Company 1,839,556
     restricted shares, which represented all of his common stock in the
     Company. All rights to warrants issuable under the Distribution Agreement
     were also voided. Perin also received funding from WOW sufficient to pay
     certain payables incurred in connection with its representation of WOW. The
     funds used to pay Perin were loaned to WOW by Mr. Fortune.

     On June 26, 2001, the Company redeemed all of Mr. McLane's common stock in
     the Company (19,007,585 shares). Mr. McLane also resigned as President and
     a member of the Board of Directors of the Company, as well as all
     subsidiaries of the Company in which he also held said positions on June
     26, 2001. Mr. McLane is no longer part of the Control Group. Messrs.
     Fisbeck and Fortune continued to be part of the Control Group.

     2001 Capital Restructuring
     --------------------------

     On June 29, 2001, the Company announced a major capital restructuring,
     which was effective July 2, 2001. The restructuring, which was part of
     several agreements and commitments between the Company and Mr. Fortune, the
     Company's largest shareholder and the holder of certain debt and preferred
     stock of the Company, allowed the Company to eliminate its existing debt,
     acquire Murphy Development, Ltd. ("Murphy Development"), a commercial and
     retail real estate development company 50% owned by Mr. Fortune, and issue
     new convertible debt to be used to purchase and operate the Company's
     existing and future businesses.

     As part of the restructuring, Mr. Fortune received $3,250,000 of the
     Company's common stock at the June 28, 2001 closing price of $0.20 a share,
     or 16,250,000 restricted shares, in exchange for his $2,000,000 of WOW
     preferred stock and in full satisfaction of his approximately $5,424,000 of
     WOW debt.

     In addition, Mr. Fortune and Julie Fisbeck, who is the sister of John
     Fisbeck, a member of the control group, also exchanged their respective 50%
     ownership interests in Murphy Development, in exchange for $120,000 of the
     Company's common stock at the June 28, 2001 closing price of $0.20 a share.
     Mr. Fortune and Julie Fisbeck each received 300,000 restricted shares.

     Mr. Fortune also agreed to loan $500,000 to Murphy Development. The loan
     was secured by all of the assets of Murphy Development and was convertible
     at Mr. Fortune's option into shares of the Company's common stock at
     $0.407401 a share. Mr. Fortune exercised the option on August 27, 2001, and
     received 1,227,292 restricted shares.

     Mr. Fortune also agreed to make available to Murphy Development an
     operating line of credit of up to $2,250,000, if and as needed. The line of
     credit was secured by all of the assets of Murphy Development and
     convertible at Fortune's option into shares of the Company's common stock
     at $0.407401 a share. On August 27, 2001, the Company borrowed $2,250,000
     under the line of credit, and Mr. Fortune exercised the option and received
     5,522,814 restricted shares.

                                      F-12
<PAGE>

NOTE 2 - CHANGE IN CONTROL (CONTINUED)

     Addition of Robert J. Kingston to the Control Group
     ---------------------------------------------------

     Effective July 31,2002, as part of the purchase price for 1,000 shares of
     the common stock, no par value, of KSC, constituting all of the outstanding
     shares of KSC's capital stock, pursuant to the terms of a Stock Purchase
     Agreement by and among the Company, KSC and Robert J. Kingston, Mr.
     Kingston received 8,000,000 restricted shares of the Company's common
     stock.

     In addition to the 8,000,000 shares of the Company's common stock, Mr.
     Kingston also was paid, as part of the purchase price for his KSC shares,
     $2,400,000 ($3,000,000 closing payment less a $600,000 purchase
     adjustment). Mr. Kingston received $3,000,000 at closing. Mr. Kingston paid
     the Company a purchase adjustment amount of $600,000 based upon certain
     requirements in the Stock Purchase Agreement and Amendment to the Stock
     Purchase Agreement in November 2002. There is also a $250,000 contingent
     payment that is part of the Stock Purchase Agreement due on or before
     December 15, 2004. The payment of any or all of the $250,000 to Mr.
     Kingston, on or before December 15, 2004, is contingent upon KSC attaining
     certain cumulative earnings before income tax (EBIT) requirements, as
     described in the Stock Purchase Agreement, during the period September 1,
     2002 to August 31, 2004.

     Also as part of the Stock Purchase Agreement, subject to the limitations
     and restrictions described below, Mr. Kingston may, in his sole discretion,
     sell any or all of the Company's common stock to the Company and the
     Company shall purchase any of the Company's common stock offered by Mr.
     Kingston if any of the following conditions are met (the "Put Option"): 1)
     If during the period September 1, 2002 to August 31, 2004, KSC's cumulative
     earnings before income tax depreciation and amortization (EBITDA), as
     defined in the Stock Purchase Agreement, is greater than $1,600,000: the
     Company shall have a cash put at $.125 per share; 2) If during the period
     September 1, 2002 to August 31, 2004, KSC's Cumulative EBITDA is greater
     than $2,000,000: the Company shall have a cash put at $.175 per share; 3)
     If during the period September 1, 2002 to August 31, 2004, KSC's cumulative
     EBITDA is greater than $2,400,000: the Company shall have a cash put at
     $.225 per share; 4) If during the period September 1, 2002 to August 31,
     2004, KSC's cumulative EBITDA is greater than $3,000,000: the Company shall
     have a cash put at $.300 per share. Mr. Kingston may only exercise the Put
     Option during the period October 15, 2004 to November 30, 2004. In
     addition, Mr. Kingston may only exercise the Put Option if the average bid
     price per share during the period October 1, 2004 to October 31, 2004 is
     less than the proposed put price, or if the Company's stock is not listed
     on the OTC Bulletin Board, the New York Stock Exchange, NASDAQ or another
     nationally-recognized securities market or exchange during the period
     October 1, 2004 to October 31, 2004. Any closing on a sale of the Company's
     Stock to the Company shall occur within ninety (90) days of the Company's
     receipt of written notice from Mr. Kingston requesting exercise of his put
     option.

     Mr. Kingston will continue as president of KSC under the terms of an
     employment agreement, dated July 31, 2002 and incorporated into the Stock
     Purchase Agreement as an exhibit.

     Mr. Kingston is subject to a non-compete agreement, dated July 31, 2002 and
     incorporated into the Stock Purchase Agreement as an exhibit.

     A Lease was entered into by Kingston Design, LLC, a Company controlled by
     Mr. Kingston and KSC. Said lease is for the facility in which KSC currently
     operates, and was incorporated into the Stock Purchase Agreement as an
     exhibit.

     Mr. Kingston was elected to the Board of Director's of the Company by
     shareholders Messrs. Fisbeck and Fortune without a meeting by written
     consent pursuant to Section 228 of the General Corporation Law of the State
     of Delaware in lieu of holding a meeting. Such election was agreed to in
     writing in a document entitled Voting Agreement, dated July 31, 2002, which
     is an exhibit of the Stock Purchase Agreement.

     Mr. Kingston was granted Piggy-Back Registration Rights as part of a
     Registration Rights Agreement, and an exhibit of the Stock Purchase
     Agreement, dated July 31, 2002 by and between Fortune Diversified
     Industries, Inc. and Robert J. Kingston.

                                      F-13
<PAGE>

NOTE 2 - CHANGE IN CONTROL (CONTINUED)

     Mr. Fisbeck entered into a written Guaranty, and an exhibit of the Stock
     Purchase Agreement, dated July 31, 2002, in consideration of Mr. Kingston
     entering into the Purchase Agreement and agreeing to close the transactions
     contemplated therein, to which he guaranteed the Company's payment and
     performance of its obligations arising under and with respect to the Put
     Option.

     Mr. Fortune also entered into a written Guaranty, and an exhibit of the
     Stock Purchase Agreement, dated July 31, 2002 in consideration of Mr.
     Kingston entering into the Purchase Agreement and agreeing to close the
     transactions contemplated therein, to which he guaranteed the Company's
     payment and performance of its obligations arising under and with respect
     to the Put Option.

     Messrs. Fisbeck and Fortune entered into an arrangement whereby Mr. Fisbeck
     will indemnify and hold harmless Mr. Fortune for a percentage of any losses
     that Mr. Fortune may suffer as a result of Mr. Fortune's guarantee of the
     loan held by the Registrant with Merrill Lynch Business Financial Services,
     Inc. Such indemnification and hold harmless agreement is on a pro-rata
     basis of the relative shareholdings in the Company of Mr. Fortune and Mr.
     Fisbeck.

     Although Messrs. Fisbeck, Fortune and Kingston have taken ownership of the
     Company's stock in their individual names and Mr. Kingston has individually
     supplied his ownership in KSC in consideration for the acquisition of his
     Fortune Diversified common stock, Messrs. Fisbeck, Fortune and Kingston may
     be considered to be acting together for the purpose of acquiring and
     holding the stock since Messrs. Fisbeck and Fortune previously signed Stock
     Purchase Agreements to initially acquire control of the Company and Mr.
     Kingston's acquisition of shares was not in the ordinary course of his
     business and may be deemed to have arisen in a transaction having the
     purpose or effect of influencing control of the Company, under Rule
     13d-5(b)(2)(ii).

     At August 31, 2002, Messrs. Fisbeck, Fortune and Kingston were as members
     of a group deemed to beneficially own 69,335,131 shares of the Company's
     common stock representing 94.3% of the outstanding common stock of FDVI.
     Individually, each person had sole dispositive and voting power over the
     following shares of common stock: John F. Fisbeck, 18,852,023 (or 25.6%),
     Carter M. Fortune, 42,486,793 (or 57.8%) and Robert J. Kingston, 8,000,000
     (or 10.9%).

NOTE 3 - ACQUISITIONS

     Women of Wrestling, Inc.
     ------------------------

     On September 1, 2000, the Company purchased for nominal consideration all
     of the common stock of Women of Wrestling, Inc. ("WOW"), a company owned by
     the Control Group. WOW was incorporated as an Indiana corporation in May
     2000, and had no operating history. This transaction was accounted for in a
     manner similar to a pooling of interests. WOW's significant assets included
     employment, venue and other production contracts (entered into in the
     ordinary course of business); certain intellectual property, including
     trademark rights in the "WOW Women of Wrestling" name, logos and character
     names of performers; rights in characters portrayed by performers;
     publicity rights of performers with respect to their performances; and
     copyrights in recorded performances, events, programs, advertisements and
     promotional materials and capitalized production costs relating to its
     syndicated television program.

     Murphy Development, LTD
     -----------------------

     Initiated on June 29, 2001 and effective July 2, 2001, the Company acquired
     from Carter Fortune and Julie Fisbeck, who is the sister of John Fisbeck,
     one of the members of the Control Group, their ownership interests, 50%
     each, in Murphy Development, constituting 100% of the outstanding interests
     of Murphy Development, LTD. The acquisition was accounted for using the
     purchase method of accounting. The primary assets of Murphy Development,
     Ltd were pre-acquisition development costs of a northeast, Ohio commercial
     development, including several options to purchase real estate. Murphy
     Development, Ltd. exercised the options. However, it did not close on the
     real estate due to the unavailability of financing under terms acceptable
     to Murphy Development, Ltd. and the lack of a commitment from a major

                                      F-14
<PAGE>

NOTE 3 - ACQUISITIONS (CONTINUED)

     anchor tenant. The options expired at the end of 2001. The results of
     operations of Murphy Development have been included in the accompanying
     statement of operations from the date of the acquisition in the Telecom
     Infrastructure segment. The purchase price was $120,000 of the Company's
     common stock at the June 28, 2001 closing price of $0.20 a share. Mr.
     Fortune and Ms. Fisbeck each received 300,000 restricted shares. The
     aggregate purchase price of the acquisition was $0, which amount is equal
     to the excess purchase price over the value of the net assets acquired.

     Cornerstone Wireless Services, Inc.
     -----------------------------------

     In July 2001, The Company acquired from its incorporator William A.
     Shoemake 100 shares of the common stock, $.01 par value, of Cornerstone
     Wireless Services, Inc., an Indiana Corporation with no assets and no
     business operations, constituting all of the outstanding shares of
     Cornerstone Wireless Services Inc.'s capital stock. Cornerstone was
     established to develop a full line of architectural and engineering
     services specializing in the telecommunications industry. The transaction
     was accounted for using the purchase method of accounting. The results of
     operations of Cornerstone have been included in the accompanying statement
     of operations from the date of the acquisition. The purchase price was
     payable in cash of $10. The aggregate purchase price of the acquisition was
     $0, which amount is equal to the excess purchase price over the value of
     the net assets acquired.

     PDH, Inc. Purchase of Certain DicksonHughes Group, LLC Assets
     -------------------------------------------------------------

     PDH, Inc. ("PDH"), an Indiana corporation and wholly-owned subsidiary of
     the Company, acquired certain assets of DicksonHughes Group, LLC ("DHG"),
     an Indiana limited liability company, through an Asset Purchase Agreement
     dated January 18, 2002 ("DHG Agreement"). The assets were acquired through
     DHG. Messrs. Thimlar, Hughes and Dickson were parties to the DHG Agreement
     for purposes of certain covenants not to compete and indemnification
     provisions of the Agreement. There was no material relationship between the
     Company or PDH and DHG or Messrs. Thimlar, Hughes and Dickson. DHG used the
     physical assets in multiple aspects of its business; the Company has
     devoted the physical assets to its existing Telecom Infrastructure segment.
     This transaction was considered an acquisition of productive assets and not
     considered a business combination. However, some of the standards of
     accounting for business combinations, including certain disclosures, are
     considered relevant and have been applied whenever practicable. The results
     of the assets acquired from DHG have been included in the accompanying
     statement of operations from the date of acquisition. The assets acquired
     included certain of the DHG's accounts receivable, work-in-process, prepaid
     expenses, software, computer hardware and fixtures, and backlog. The nature
     and amount of consideration given for the acquired assets was Seven Hundred
     Forty Thousand Dollars ($740,000.00), which was subject to adjustments as
     described in the Agreement, however no adjustments were warranted. There
     were no liabilities assumed in this transaction. The source of the funds
     used for the acquisition was cash held by the Company prior to the
     Agreement. The consideration paid was based upon the fair market value of
     the individual tangible assets acquired, as such, the entire purchase price
     was allocated to tangible assets. The aggregate purchase price of the
     acquisition was $0, which amount is equal to the excess purchase price over
     the value of the net assets acquired. The following is a condensed balance
     sheet disclosing the amount assigned to each major asset caption acquired
     from DHG at the acquisition date:

        Accounts receivable                                            $386,000
        Work in progress                                                137,000
        Prepaid expenses                                                  8,000
        Vehicles, equipment and leasehold improvements                  209,000
                                                                     ----------
                                                                       $740,000
                                                                     ==========

        Cash consideration paid                                        $740,000
                                                                     ----------
                                                                           $-0-
                                                                     ==========

                                      F-15
<PAGE>

NOTE 3 - ACQUISITIONS (CONTINUED)

     Kingston Sales Corporation
     --------------------------

     The Company acquired from Robert J. Kingston 1,000 shares of the common
     stock, no par value, of Kingston Sales Corporation (an Indiana
     Corporation), constituting all of the outstanding shares of Kingston Sales
     Corporation's capital stock, pursuant to the terms of a Stock Purchase
     Agreement by and among Fortune Diversified Industries, Inc., Kingston Sales
     Corporation and Robert J. Kingston, effective July 31, 2002. KSC is an
     industry-leading manufacturers' representative and distributor for
     prominent national companies in the electronic, sound, security, and video
     markets. KSC offers the latest technology in TVs, sound systems, electronic
     locking devices, wire, cable and fiber optics, and intercom systems. The
     Company intends for KSC, as a wholly-owned subsidiary of the Company, to
     continue to operate as it did prior to the acquisition in its Rep and
     Distribution segment. The transaction was accounted for using the purchase
     method of accounting. The source of funds for the transaction came from a
     loan from a financial institution. The purchase price was payable in cash
     of $3,000,000 paid at closing less a purchase adjustment amount of $600,000
     based upon certain requirements in the Stock Purchase Agreement and
     proposed Amendment to the Stock Purchase Agreement paid to the Company by
     Mr. Kingston in November 2002. There is also a $250,000 contingent payment
     that is part of the Stock Purchase Agreement due on or before December 15,
     2004. The payment of any or all of the $250,000 to Mr. Kingston, on or
     before December 15, 2004, is contingent upon KSC attaining certain
     cumulative earnings before income tax (EBIT) requirements, as described in
     the Stock Purchase Agreement, during the period September 1, 2002 to August
     31, 2004. This contingent consideration will be recorded as an additional
     cost of the acquisition when the contingency is resolved, which is
     anticipated sometime in 2004. The fair market value of the 8,000,000 shares
     of the Company's common stock of $80,000 (which was based upon the bid
     price discounted for various factors, including liquidity) was also
     included as part of the purchase price. The aggregate purchase price of the
     acquisition was $876,000, which amount is equal to the excess purchase
     price over the value of the net assets acquired. The entire aggregate cost
     has been allocated to goodwill based on management's assessment as required
     by SFAS No. 141, "Business Combinations. The following is a condensed
     balance disclosing the amount assigned to each major asset and liability
     caption of KSC at the acquisition date:

        Accounts receivable                                     $1,373,000
        Inventory                                                  747,000
        Vehicles, equipment and leasehold improvements             363,000
        Goodwill                                                   876,000
        Customer relationships                                     526,000
        Non-compete agreement                                      234,000
                                                                ----------
                                                                 4,119,000
                                                                ----------
        Accounts payable                                           668,000
        Accrued expenses and other current liabilities              59,000
        Deferred revenue                                           235,000
        Line of credit                                             649,000
        Long-term debt                                              28,000
                                                                ----------
                                                                 1,639,000
                                                                ----------
                                                                $2,480,000
                                                                ==========

        Cash consideration paid as of 8/31/02                   $3,000,000
        Purchase adjustment receivable at 8/31/02                 (600,000)
                                                                ----------
                                                                 2,400,000
                                                                ----------
        Fair value of common stock consideration                    80,000
                                                                ----------
                                                                $2,480,000
                                                                ==========

                                      F-16
<PAGE>

NOTE 3 - ACQUISITIONS (CONTINUED)

     The following unaudited pro forma data summarize the results of operations
     for the periods indicated as if the KSC acquisition had been completed as
     of the beginning of the periods presented. The pro forma data give effect
     to actual operating results prior to the acquisitions and adjustments to
     interest expense and income taxes. No effect has been given to cost
     reductions or operating synergies in this presentation. These pro forma
     amounts do not purport to be indicative of the results that would have
     actually been achieved if the acquisition had occurred as of the beginning
     of the periods presented or that may be achieved in the future.

<TABLE>
<CAPTION>
                                                      Year Ended       Year Ended
                                                       August 31,       August 31,
                                                          2002             2001
<S>                                                   <C>              <C>
Net revenue                                           $ 11,902,000     $ 13,645,000
Cost of revenues                                        10,260,000       16,492,000
                                                      ------------     ------------
Gross profit (loss)                                      1,642,000       (2,847,000)
Operating expenses                                       3,243,000        3,142,000
                                                      ------------     ------------
Operating income                                        (1,601,000)      (5,989,000)
Other income (expenses)                                   (665,000)        (197,000)
                                                      ------------     ------------
Net Income (loss)                                       (2,266,000)      (6,186,000)
Dividends                                                       --         (119,000)
                                                      ------------     ------------
Net Income (Loss) Available for Common
 Stockholders                                         $ (2,266,000)    $ (6,305,000)
                                                      ============     ============

Basic Income (Loss) Per Share:
    Before extraordinary credit                       $      (0.03)    $      (0.09)
    Extraordinary credit                                        --             0.06
                                                      ------------     ------------
         Total Basic Income per Share                 $      (0.03)    $      (0.03)
                                                      ============     ============

Diluted Income (Loss) Per Share:
    Before extraordinary credit                       $      (0.03)    $      (0.09)
    Extraordinary credit                                        --             0.06
                                                      ------------     ------------
         Total Diluted Income (Loss) per Share        $      (0.03)    $      (0.03)
                                                      ============     ============

Shares Outstanding:
    Basic weighted average number of common shares
     outstanding                                        77,363,295       73,535,720
    Dilutive effect of conversion of options                    --               --
                                                      ------------     ------------
         Total Shares Outstanding                       77,363,295       73,535,720
                                                      ============     ============
</TABLE>

     At August 31, 2002 and 2001, all common stock equivalents were
     anti-dilutive.

NOTE 4 - ACCOUNTS RECEIVABLE

     Accounts receivable include the following at August 31:

                                                       2002             2001
                                                    ----------       ----------
      Amounts currently due                         $2,341,000             $-0-
      Less allowance for doubtful accounts            (100,000)             -0-
      Less allowance for sales returns                (100,000)             -0-
                                                    ----------       ----------
                                                    $2,141,000             $-0-
                                                    ==========       ==========

NOTE 5 - INVENTORIES

     Inventories reflected on the accompanying balance sheets are summarized as
     follows:

      Finished goods                                $  559,000       $      -0-
      Less inventory reserve                           (50,000)             -0-
                                                    ----------       ----------
                                                    $  509,000       $      -0-
                                                    ==========       ==========

                                      F-17
<PAGE>

NOTE 6 - NOTES RECEIVABLE

     In July 2001, the Company entered into several restricted stock agreements
     with key employees. Pursuant to these agreements, the Company issued three,
     6% recourse promissory notes in the amount of $630,000 to purchase
     4,200,000 shares of restricted stock. The restrictions are pursuant to the
     respective stock purchase agreements. The loans are repayable in October
     2006.

     In April 2002 the Company purchased back 4,000,000 shares of the restricted
     stock, which were held as treasury stock until July 31, 2002, when they
     were cancelled. The 4,000,000 shares of treasury stock were paid for by
     canceling two of the recourse promissory notes totaling $600,000. At the
     time of cancellation of the two promissory notes, the Company forgave the
     accrued interest of approximately $27,000 as part of a termination
     agreement.

     The notes receivable outstanding at August 31, 2002 and 2001, amounted to
     $30,000 and $630,000, respectively. Interest income relating to these notes
     amounted to $29,000 and $3,000 for the years ended August 31, 2002 and
     2001, respectively.

NOTE 7 - PROPERTY AND EQUIPMENT

     Property and equipment, including capital leases, is comprised of the
     following at August 31:

                                                       2002             2001
                                                    ----------       ----------
      Office equipment                              $  325,000       $   40,000
      Vehicles                                         190,000              -0-
      Leasehold improvements                           178,000              -0-
                                                    ----------       ----------
                                                       693,000              -0-
                                                    ----------       ----------
      Less accumulated depreciation                   (113,000)          (5,000)
                                                    ----------       ----------
                                                    $  580,000       $   35,000
                                                    ==========       ==========

NOTE 8 - GOODWILL AND OTHER INTANGIBLE ASSETS

     The Company periodically reviews and evaluates its goodwill and other
     intangible assets for potential impairment. Effective September 1, 2001,
     the beginning of the Company's fiscal year 2002, the Company adopted SFAS
     No. 142, "Goodwill and Other Intangible Assets," under which goodwill is no
     longer amortized but instead is assessed for impairment at least annually.
     Under the transition provisions of SFAS No. 142, there was no goodwill
     recorded and as such no impairment at September 1, 2001. Also, there was no
     goodwill amortization recorded in the prior periods, as such, no
     reconciliation of previously reported financial information to pro forma
     amounts excluding goodwill amortization is necessary or presented.

     The changes in the carrying amount of goodwill for the years ended August
     31, 2002, as reclassified for the adoption of SFAS 142, are as follows:

<TABLE>
<CAPTION>
                                                        TELECOM
                                         REP AND     INFRASTRUCTURE                     HOLDING         SEGMENT
                                      DISTRIBUTION    DEVELOPMENT    ENTERTAINMENT      COMPANY         TOTALS
<S>                                     <C>            <C>             <C>             <C>             <C>
     Goodwill at August 31, 2001        $     -0-      $     -0-       $     -0-       $     -0-       $     -0-
     Goodwill acquired during year        876,000            -0-             -0-             -0-         876,000
     Impairment losses                        -0-            -0-             -0-             -0-             -0-
                                        ---------      ---------       ---------       ---------       ---------
     Goodwill at August 31, 2002        $ 876,000      $     -0-       $    -0-        $     -0-       $ 876,000
                                        =========      =========       =========       =========       =========
</TABLE>

                                      F-18
<PAGE>

NOTE 8 - GOODWILL AND OTHER INTANGIBLE ASSETS (CONTINUED)

     The following table sets forth the gross carrying amount and accumulated
     amortization of the Company's intangible assets:

<TABLE>
<CAPTION>
                                                AT AUGUST 31, 2002                            AT AUGUST 31, 2001
                                   ------------------------------------------      --------------------------------------
                                                                     WEIGHTED                                    WEIGHTED
                                      GROSS                          AVERAGE        GROSS                        AVERAGE
                                    CARRYING        ACCUMULATED       AMORT        CARRYING      ACCUMULATED      AMORT
                                     AMOUNT        AMORTIZATION       PERIOD        AMOUNT      AMORTIZATION      PERIOD
<S>                                <C>             <C>                <C>          <C>   <C>      <C>   <C>        <C>
      Customer Relationships       $  526,000      $      4,000       10 YRS       $    -0-       $    -0-         0 YRS
      Non-compete                     234,000             5,000        4 YRS            -0-            -0-         0 YRS
                                   ----------      ------------       ------       --------       --------        ------
      Total                        $  760,000      $      9,000        8 YRS       $    -0-       $    -0-         0 YRS
                                   ==========      ============       ======       ========       ========        ======
</TABLE>

     Intangible asset amortization expense for the years ended August 31, 2002
     and 2001 was 9,000 and zero, respectively

     Amortization expense on intangible assets currently owned by the Company
     for each of the next five fiscal years are approximately as follows:

           Year Ending August 31,
           ------------------------
                  2003                                     $  111,000
                  2004                                        111,000
                  2005                                        111,000
                  2006                                        106,000
                  2007                                         53,000

NOTE 9 - LINES OF CREDIT

     The Company has a $1,500,000 line of credit available through July 31,
     2003. Interest on the line is charged at 2.40% plus the one-month London
     Interbank Offered Rate (one-month LIBOR). Outstanding borrowings amounted
     to approximately $1,277,000 and zero at August 31, 2002 and 2001,
     respectively.

     The Company also has a $250,000, unsecured line of credit with a
     stockholder. There were no outstanding borrowings at August 31, 2002 and
     2001, respectively.


                                      F-19
<PAGE>

NOTE 10 - LONG-TERM DEBT

     Long-term debt consisted of the following at August 31:

<TABLE>
<CAPTION>
                                                                                         2002             2001
                                                                                      ----------       ----------
<S>                                                                                   <C>                    <C>
     Notes payable to financial institutions:

       $3,000,000 reducing revolver loan with monthly line reductions equal to
       1/84th of the loan amount per month for the first 59 months, with a
       balloon payment due at maturity 7/31/07. Interest is variable at 2.40%
       plus one-month LIBOR. The loan is secured by the business assets of
       Kingston Sales Corp., with a second lien on assets pledged
       by a shareholder                                                               $3,005,000             $-0-

       Due in monthly installments of $434, including interest at 4.9% through
       January 2005.
       Secured by a vehicle                                                              $12,000             $-0-

       Due in monthly installments of $418, including interest at 9.03% through
       December 2004.
       Secured by a vehicle                                                              $10,000             $-0-

       Due in monthly installments of $563, including interest at 9% through
       March 2003.
       Secured by a vehicle                                                               $4,000             $-0-
                                                                                      ----------       ----------
                                                                                      $3,031,000             $-0-
       Less current maturities                                                         $(442,000)            $-0-
                                                                                      ----------       ----------
                                                                                      $2,589,000             $-0-
                                                                                      ==========       ==========
</TABLE>

     Principal payments due on long-term debt outstanding at August 31, 2002,
     are approximately as follows:

           Year Ending August 31,
           ------------------------
                  2003                                     $  442,000
                  2004                                        273,000
                  2005                                        236,000
                  2006                                        212,000
                  2007                                      1,868,000
                                                           ----------
                                                           $3,031,000
                                                           ==========

NOTE 11 - CAPITAL LEASES

     Long-term leases relating to the financing of fixed assets are accounted
     for as installment purchases. The capital lease obligations reflect the
     present value of future rental payments, discounted at the interest rate
     implicit in the lease, and a corresponding amount is capitalized as the
     cost of the fixed assets. The fixed assets are being depreciated over a
     period of three years. The following is an analysis of fixed assets under
     capital lease at August 31:

                                                       2002             2001
                                                    ----------       ----------
      Equipment                                        $26,000             $-0-
      Less allowance for depreciation                   (1,000)             -0-
                                                    ----------       ----------
                                                       $25,000             $-0-
                                                    ==========       ==========


                                      F-20
<PAGE>

NOTE 11 - CAPITAL LEASES (CONTINUED)

     Following is a schedule of future minimum lease payments due under the
     capital lease obligations together with the present value of net minimum
     lease payments as of August 31, 2002:

           Year Ending August 31,
           ------------------------
                  2003                                                $ 10,000
                  2004                                                  10,000
                  2005                                                   8,000
                                                                    ----------
           Total minimum lease payments                                 28,000
           Less amounts representing interest                            3,000
                                                                    ----------
           Present value of net minimum lease payments                  25,000
           Less current portion                                         (8,000)
                                                                    ----------
           Long-term portion                                           $17,000
                                                                    ==========

NOTE 12 - STOCKHOLDERS' EQUITY

     The following are the details of the Company's common stock as of August
     31, 2002 and 2001:

<TABLE>
<CAPTION>
                                              Number of Shares
                                   Authorized       Issued     Outstanding      Amount
<S>             <C>                <C>            <C>           <C>           <C>
      August 31, 2002
         Common stock, $0.01 par
          value (1)(2)             500,000,000    73,496,629    73,496,629    $  735,000
                                                                              ==========

      August 31, 2001
         Common stock, $0.01 par
          value (2)(3)(4)(5)       500,000,000    69,496,629    69,496,629    $  695,000
                                                                              ==========
</TABLE>

     (1)  As a part of a transaction pursuant to the terms of a Stock Purchase
          Agreement by and among the Company, Kingston Sales Corporation and
          Robert J. Kingston, effective July 31, 2002, Mr. Kingston acquired
          8,000,000 shares of The Company's common stock, in part, in return for
          1,000 shares of the common stock, of Kingston Sales Corp.,
          constituting all of the outstanding shares of Kingston Sales Corp's
          capital stock. Also on July 31, 2002, the Company cancelled 4,000,000
          shares of stock held in treasury since April 2002, when it purchased
          the restricted shares back from two of its former employees.

     (2)  In July 2001, the Company entered into several restricted stock
          agreements with key employees. Pursuant to these agreements, the
          Company issued recourse promissory notes in the amount of $630,000 to
          purchase 4,200,000 shares of restricted stock. The restrictions are
          pursuant to the respective stock purchase agreements. The loans are
          repayable in 2006. In April 2002 the Company purchased back 4,000,000
          shares of the restricted stock and were held as treasury stock at
          until July 31, 2002, when they were cancelled. The shares were paid
          for by canceling two of the recourse promissory notes totaling
          $600,000.

     (3)  The Company announced a capital restructuring June 29, 2001, and made
          effective July 2, 2001. The restructuring, which was part of several
          agreements and commitments between the Company and Carter Fortune, the
          Company's largest shareholder and the holder of certain debt and
          preferred stock of the Company, allowed the Company to eliminate its
          existing debt, acquire Murphy Development, Ltd. ("Murphy
          Development"), and issue new convertible debt to be used to purchase
          and operate the Company's existing and future businesses. As part of
          the restructuring, Mr. Fortune received $3,250,000 of the Company's
          common stock at the June 28, 2001 closing price of $0.20 a share, or
          16,250,000 restricted shares, in exchange for his $2,000,000 of WOW
          preferred stock and in full satisfaction of his approximately
          $5,424,000 of WOW debt. In addition, Mr.

                                      F-21
<PAGE>

NOTE 12 - STOCKHOLDERS' EQUITY (CONTINUED)

          Fortune and Julie Fisbeck, who is the sister of John Fisbeck, a member
          of the Control Group, also exchanged their respective 50% ownership
          interests in Murphy Development, in exchange for $120,000 of the
          Company's common stock at the June 28, 2001 closing price of $0.20 a
          share. Mr. Fortune and Julie Fisbeck each received 300,000 restricted
          shares. Mr. Fortune also agreed to loan $500,000 to Murphy
          Development. The loan was secured by all of the assets of Murphy
          Development and was convertible at Mr. Fortune's option into shares of
          the Company's common stock at $0.407401 a share. Mr. Fortune exercised
          the option on August 27, 2001, and received 1,227,292 restricted
          shares. Mr. Fortune also agreed to make available to Murphy
          Development an operating line of credit of up to $2,250,000. The line
          of credit was secured by all of the assets of Murphy Development and
          convertible at Fortune's option into shares of the Company's common
          stock at $0.407401 a share. On August 27, 2001, the Company borrowed
          $2,250,000 under the line of credit, and Mr. Fortune exercised the
          option and received 5,522,814 restricted shares.

     (4)  As of June 26, 2001, the Company redeemed 19,007,585 shares of common
          stock of the Company from David B. McLane, which represented all the
          shares owned by Mr. McLane, and cancelled the outstanding warrant.
          Concurrently with the redemption, Mr. McLane resigned from the Board
          of Directors of the Company and as President of the Company and its
          subsidiaries.

     (5)  As of May 22, 2001, the Company and its subsidiary, Women of
          Wrestling, Inc. (WOW), executed an Amendment to its Distribution
          Agreement with M/G Perin, Inc. and Richard Perin (collectively
          "Perin") in which they agreed to terminate their Distribution
          Agreement dated January 18, 2000 and enter into a new agreement
          covering only WOW's free television programs created through May 22,
          2001. Also as part of the agreement, Mr. Perin returned for
          cancellation by the Company 1,839,556 restricted shares, which
          represented all of his common stock in the Company. All rights to
          warrants issuable under the Distribution Agreement were also voided.
          Perin also received funding from WOW sufficient to pay certain
          payables incurred in connection with its representation of WOW.

NOTE 13 - STOCK OPTIONS, WARRANTS AND OTHER COMPENSATION

     The Company previously sponsored a stock option plan for employees that
     provided for the issuance of both incentive and nonqualified stock options
     to purchase shares of the Company's common stock at exercise prices not
     less than the fair market value of the common stock on the date of grant.
     The stock option plan terminated as a result of the purchase of
     substantially all of the common stock by the Control Group on September 1,
     2000 (see note 2). All options granted under the Plan that were not
     exercised prior to such purchase were terminated.

     The Company periodically issues warrants on a one-for-one basis for the
     purchase of shares of its common stock. The exercise prices of the warrants
     are no less than the fair market value of the common stock on the dates of
     grant. The estimated fair market value of the warrants is measured on the
     date of grant (measurement date), and accounted for as part of the related
     transaction. In connection with the initial change in control discussed in
     Note 2, the Company agreed to grant 50,000 new warrants to the Company's
     former CEO on September 1, 2000. Each new warrant is convertible into one
     share of common stock at an exercise price of $1.00 per share exercisable
     from June 30, 2002 through June 30, 2008. In connection with a certain
     distribution agreement, the Company's distributor was granted a warrant to
     purchase 1% of the common stock owned by the Control Group at an aggregate
     exercise price of $1,000,000. That agreement was terminated in May 2001,
     the warrant rights were voided and the Company redeemed the distributor's
     1,839,556 shares of common stock.


                                      F-22
<PAGE>

NOTE 13 - STOCK OPTIONS, WARRANTS AND OTHER COMPENSATION (CONTINUED)

     Transactions related to the stock option plan are as follows:

<TABLE>
<CAPTION>
                                                   Weighted                         Weighted
                                                   Average                          Average
                                    Year Ended     Exercise     Year Ended          Exercise
                                    August 31,      Price       August 31,            Price
                                       2002        Per Share       2001             Per Share
<S>                                   <C>           <C>         <C>                   <C>
         Options outstanding at
          beginning of period         350,000       $0.46           83,334            $0.42
         Options exercised                  -                      (83,334)            0.42
         Options issued                     -                    1,350,000 (1)(3)      0.12
         Options canceled                   -                   (1,000,000)(2)         0.01
                                      -------                   ----------
         Options outstanding at
          end of period               350,000       $0.46          350,000             $0.46
                                      =======                   ==========
</TABLE>

     (1)  On January 12, 2001, the Company hired a new CEO. In connection with
          this hiring, he was granted an option to purchase 1,200,000 shares of
          common stock of an aggregate purchase price of $12,000. The options
          vest at a rate of 200,000 shares every six months beginning July 12,
          2001.

     (2)  The Company and the CEO entered into an agreement on November 15, 2001
          to cancel the options to purchase 1,000,000 of the 1,200,000 shares of
          common stock previously granted to the CEO.

     (3)  In connection with a certain consulting agreement, the Company's
          investment banker was granted an option to purchase 150,000 shares of
          common stock at an aggregate exercise price of approximately $143,000.
          The options are exercisable immediately and expire in 2005.

     The Company accounts for employee stock-based transactions under Accounting
     Principles Board Opinion No. 25. Accordingly, no compensation cost has been
     recognized for options issued with an exercise price equal to the market
     value of the common stock at the date of grant. The Company has adopted the
     disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based
     Compensation," which defines a fair value method of accounting for stock
     options and other equity instruments. Under the fair value method,
     compensation cost is measured at the grant date based on the fair value of
     the award and is recognized over the service period, which is usually the
     vesting period. Management believes that had compensation cost been
     determined based on the fair value at the grant dates consistent with the
     provisions of SFAS No. 123, there would have been no material effect on the
     Company's net loss and its loss per common share for the period ended
     August 31, 2001. The Company agreed to grant 50,000 warrants to the
     Company's former CEO on September 1, 2000. Each warrant is convertible into
     one share of common stock at an exercise price of $1.00 per share
     exercisable June 30, 2002 through June 30, 2008.

     As part of the Stock Purchase Agreement, subject to the limitations and
     restrictions described below, Mr. Kingston may, in his sole discretion,
     sell any or all of his 8,000,000 shares of the Company's common stock to
     the Company and the Company shall purchase any of the Company's common
     stock offered by Mr. Kingston if any of the following conditions are met
     (the "Put Option"): 1) If during the period September 1, 2002 to August 31,
     2004, KSC's cumulative EBITDA, as defined in the Stock Purchase Agreement,
     is greater than $1,600,000: the Company shall have a cash put at $.125 per
     share; 2) If during the period September 1, 2002 to August 31, 2004, KSC's
     Cumulative EBITDA is greater than $2,000,000: the Company shall have a cash
     put at $.175 per share; 3) If during the period September 1, 2002 to August
     31, 2004, KSC's cumulative EBITDA is greater than $2,400,000: the Company
     shall have a cash put at $.225 per share; 4) If during the period September
     1, 2002 to August 31, 2004, KSC's cumulative EBITDA is greater than
     $3,000,000: the Company shall have a cash put at $.300 per share. Mr.
     Kingston may only exercise the Put Option during the period October 15,
     2004 to November 30, 2004. In addition, Mr. Kingston may only exercise the
     Put Option if the average bid price per share during the period October 1,
     2004 to October 31, 2004 is less than the proposed put price, or if the
     Company's stock is not listed on the OTC Bulletin Board, the New York Stock
     Exchange, NASDAQ or another nationally-recognized securities market or
     exchange during the period October 1, 2004 to October 31, 2004. Any closing
     on a sale of the Company's Stock to

                                      F-23
<PAGE>

NOTE 13 - STOCK OPTIONS, WARRANTS AND OTHER COMPENSATION (CONTINUED)

     the Company shall occur within ninety (90) days of the Company's receipt of
     written notice from Mr. Kingston requesting exercise of his put option.

     Also as part of the Stock Purchase Agreement to acquire KSC, subject to the
     following contingencies, the company shall pay to Mr. Kingston the
     remaining purchase price amount of $250,000 (the "Post-Closing Payment") on
     or before December 15, 2004. The payment of the full Post-Closing Payment
     amount is contingent upon KSC attaining a cumulative EBIT, as defined in
     the Stock Purchase Agreement, of at least $2,325,000 during the period
     September 1, 2002 to August 31, 2004. If KSC does not attain a cumulative
     EBIT of at least $2,325,000 during the period September 1, 2002 to August
     31, 2004 but does attain a cumulative EBIT of at least $2,125,000, the
     Company shall pay to Mr. Kingston a Post-Closing Payment in the amount of
     $150,000 on or before December 15, 2004. If KSC does not attain a
     cumulative EBIT of at least $2,125,000 during the period September 1, 2002
     to August 31, 2004, but does attain a cumulative EBIT of at least
     $1,925,000, the Company shall pay to Mr. Kingston a Post-Closing Payment in
     the amount of $100,000 on or before December 15, 2004. If KSC does not
     attain a cumulative EBIT of at least $1,925,000 during the period September
     1, 2002 to August 31, 2004, the Company shall not pay to Mr. Kingston any
     Post-Closing Payment. Notwithstanding the foregoing, the Company shall not
     pay any Post-Closing Payment amount if Mr. Kingston exercises the Put
     Option with respect to twenty-five percent (25%) or more of the Company's
     stock; provided, however, that if Mr. Kingston exercises the Put Option
     with respect to twenty-five percent (25%) or more of the Company's stock
     and Mr. Kingston remains employed by KSC, the Company or any Affiliate of
     KSC or the Company for a period of three (3) years following

     Closing, then notwithstanding Mr. Kingston's exercise of the Put Option,
     the Company shall pay to Mr. Kingston the Post-Closing Payment amount
     earned under the immediately preceding sentence (if any) within thirty (30)
     days following the third anniversary of Closing. As used in this Agreement,
     "Affiliate" shall have the meaning specified in Rule 12b-2 of the
     regulations promulgated under the Securities Exchange Act of 1934, as
     amended.

NOTE 14 - INCOME TAXES

     Reconciliation of income taxes computed at the statutory rate to the
     Company's effective rate is as follows:

<TABLE>
<CAPTION>
                                                                       2002        2001
<S>                                                                 <C>         <C>
         Federal and state income tax (benefit) at statutory rate   $(824,000)  $(835,000)
         Other                                                             --      35,000
         Change in valuation allowance                                824,000     800,000
                                                                    ---------   ---------

             Provision for Income Taxes                             $      --   $      --
                                                                    =========   =========
</TABLE>

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

                                              August 31,      August 31,
                                                 2002            2001
     Deferred Tax Assets:
         Net operating loss carryforwards    $ 2,294,000     $ 1,225,000
         Reserves                                 52,000              --
         Deferred Revenue                         96,000              --
         Stock warrants                          170,000         145,000
         Valuation allowance                  (2,612,000)     (1,375,000)
                                             -----------     -----------

     Net Deferred Tax Asset                  $        --     $        --
                                             ===========     ===========

     At August 31, 2002, the Company's had federal tax operating loss
     carryforwards of approximately $6,267,000, which expire during the years of
     2020, 2021 and 2022. The state tax operating loss carryforwards were
     approximately $2,057,000. The difference between federal and state net
     operating loss carryforwards represents a change in business venue.


                                      F-24
<PAGE>

NOTE 15 - PER SHARE DATA

     The following presents the computation of basic income (loss) per share and
     diluted income (loss) per share:

                                                      Year Ended    Year Ended
                                                      August 31,    August 31,
                                                         2002          2001
Net (loss)                                           $(2,075,000)  $(2,951,000)
Dividends                                                     --      (119,000)
                                                     -----------   -----------
Net Income (Loss) Available for Common
 Stockholders                                        $(2,075,000)  $(3,070,000)
                                                     ===========   ===========

Basic Income (Loss) Per Share:
    Before extraordinary credit                      $     (0.03)  $     (0.11)
    Extraordinary credit                                      --          0.06
                                                     -----------   -----------
         Total Basic Income per Share                $     (0.03)  $     (0.05)
                                                     ===========   ===========

Diluted Income (Loss) Per Share:
    Before extraordinary credit                      $     (0.03)  $     (0.11)
    Extraordinary credit                                      --          0.06
                                                     -----------   -----------
         Total Diluted Income (Loss) per Share       $     (0.03)  $     (0.05)
                                                     ===========   ===========

Shares Outstanding:
    Basic weighted average number of common shares
     outstanding                                      69,829,962    65,535,720
    Dilutive effect of conversion of options                  --            --
                                                     -----------   -----------
         Total Shares Outstanding                     69,829,962    65,535,720
                                                     ===========   ===========

     At August 31, 2002 and 2001, all common stock equivalents were
     anti-dilutive.

NOTE 16 - OPERATING LEASE COMMITMENTS

     The Company leases one of its office and warehouse facilities from a
     limited liability company in which one of the members of the control group,
     during the reporting period covered, was a member. The agreement expires in
     April 2022. The agreement includes a renewal option, which allows the
     Company to extend the lease term for an additional six years. In addition
     to base monthly rent, the agreement requires the Company to pay its
     proportionate share of real estate taxes, insurance, and common area
     maintenance expenses. The Company leases a second premise under an
     agreement that expires August 2005. In addition to base monthly rent, that
     agreement requires the Company to pay its proportionate share of common
     area maintenance expenses.

     Rent expense under these agreements amounted to $71,000 and $13,200 for the
     year ended August 31, 2002 and 2001.

     The Company is also committed to vehicle leases, which expire in August and
     September 2004. Lease expense under all agreements amounted to $7,000 and
     $0 for the years ended August 31, 2002 and 2001, respectively.

     Future minimum commitments under these agreements are as follows at August
     31, 2002:

           Year Ending August 31,          Facilities           Vehicles
           ------------------------        ----------           ----------
                    2003                   $  153,000            $ 11,000
                    2004                      153,000            $ 11,000
                    2005                      153,000               1,000
                    2006                       84,000                 -0-
           Later Years (2007 - 2022)        1,232,000                 -0-
                                           ----------            --------
                                           $1,775,000            $ 23,000
                                           ==========            ========

                                      F-25
<PAGE>

NOTE 17 - RELATED PARTY TRANSACTIONS

     The Company buys certain products from a corporation in one of the members
     of the control group of the Company during the reporting period was a
     shareholder. Purchases from this related corporation amounted to
     approximately $1,000 and $0 for the years ended August 31, 2002 and 2001,
     respectively.

     The Company is a guarantor on two loans used for the construction of one of
     the buildings it currently leases from another related party. The
     outstanding balances of these debt obligations as reflected on the books of
     the related party were approximately $888,000 and $904,000 at August 31,
     2002 and December 31, 2001, respectively.

NOTE 18 - CONCENTRATION OF CREDIT RISK

     The Company's financial instruments that are exposed to concentrations of
     credit risk consist primarily of cash and cash equivalents and accounts
     receivables. The Company places its cash and cash equivalents with high
     credit quality institutions. At times, such amounts may be in excess of the
     FDIC insured limit. The Company routinely assesses the financial strength
     of its customers and, as a consequence, believes that its accounts
     receivable credit risk exposure is limited and reserved for adequately.

NOTE 19 - ECONOMIC DEPENDENCY ON SUPPLIERS

     In its Rep and Distribution segment the Company purchased approximately 40%
     of its inventories from one vendor for the period August 1, 2002 to August
     31, 2002. The Company did not have any inventory at August 31, 2001.

NOTE 20 - COMMITMENTS AND CONTINGENCIES

     As part of the Stock Purchase Agreement to acquire KSC, there is a $250,000
     contingent payment due on or before December 15, 2004. Subject to the
     following contingencies, the company shall pay to Mr. Kingston the
     remaining amount of $250,000 (the "Post-Closing Payment") on or before
     December 15, 2004. The payment of the full Post-Closing Payment amount is
     contingent upon KSC attaining a cumulative EBIT, as defined in the Stock
     Purchase Agreement, of at least $2,325,000 during the period September 1,
     2002 to August 31, 2004. If KSC does not attain a cumulative EBIT of at
     least $2,325,000 during the period September 1, 2002 to August 31, 2004 but
     does attain a cumulative EBIT of at least $2,125,000, the Company shall pay
     to Mr. Kingston a Post-Closing Payment in the amount of $150,000 on or
     before December 15, 2004. If KSC does not attain a cumulative EBIT of at
     least $2,125,000 during the period September 1, 2002 to August 31, 2004,
     but does attain a cumulative EBIT of at least $1,925,000, the Company shall
     pay to Mr. Kingston a Post-Closing Payment in the amount of $100,000 on or
     before December 15, 2004. If KSC does not attain a cumulative EBIT of at
     least $1,925,000 during the period September 1, 2002 to August 31, 2004,
     the Company shall not pay to Mr. Kingston any Post-Closing Payment.
     Notwithstanding the foregoing, the Company shall not pay any Post-Closing
     Payment amount if Mr. Kingston exercises the Put Option with respect to
     twenty-five percent (25%) or more of the Company's stock; provided,
     however, that if Mr. Kingston exercises the Put Option with respect to
     twenty-five percent (25%) or more of the Company's stock and Mr. Kingston
     remains employed by KSC, the Company or any Affiliate of KSC or the Company
     for a period of three (3) years following Closing, then notwithstanding Mr.
     Kingston's exercise of the Put Option, the Company shall pay to Mr.
     Kingston the Post-Closing Payment amount earned under the immediately
     preceding sentence (if any) within thirty (30) days following the third
     anniversary of Closing. As used in this Agreement, "Affiliate" shall have
     the meaning specified in Rule 12b-2 of the regulations promulgated under
     the Securities Exchange Act of 1934, as amended.


                                      F-26
<PAGE>


NOTE 21 - EMPLOYEE BENEFIT PLAN

     The Company maintains a profit-sharing plan that covers all employees who
     meet the eligibility requirements set forth in the plan. Company
     contributions are made at management's discretion and are allocated based
     upon each participant's eligible compensation. The plan includes a 401(k)
     savings plan whereby employees can contribute and defer taxes on
     compensation contributed to the plan. The Company is not required to
     contribute to the plan but may make a discretionary contribution. The
     Company did not make contributions for the years ended August 31, 2002 and
     2001.

NOTE 22 - SUBSEQUENT EVENTS

     Telecom Technology
     ------------------

     TTC Acquisition Company ("TTC"), an Indiana corporation and wholly-owned
     subsidiary of the Company, acquired certain assets and assumed certain
     liabilities of Telecom Technology Corp. ("Telecom"), an Indiana
     corporation, and Michael W. Grothe, through an Asset Purchase Agreement
     effective as of September 1, 2002 ("TTC Agreement"). The assets were
     acquired from Telecom. Mr. Grothe is party to the TTC Agreement and is
     subject to an Employment Agreement. Prior to the TTC Agreement, there was
     no material relationship between the Company and Telecom or Mr. Grothe.
     Telecom provides cable and wiring solutions for interactive communication
     and networking data transmission. The Company has devoted the assets to its
     existing Telecom Infrastructure segment. The assets acquired include
     certain of Telecom's work-in-process, software and related assets, fixed
     assets, equipment and machinery, computer hardware and fixtures, a complete
     customer list, intellectual property, sales proposals and like documents
     and contracts, inventory, accounts receivable, intangible assets, prepaid
     expenses, cash and cash equivalents. TTC also only accepted and assumed
     $45,000 of specifically identified accounts payable and all of Sellers'
     rights and executory obligations under the Assumed Contracts to be
     performed after the Closing Date (excluding any obligations or liabilities
     of Sellers under any Assumed Contracts that were to have been performed,
     fulfilled or satisfied on or prior to the Closing Date). In addition to the
     assumed liabilities, the consideration given for the acquired assets was
     $125,952 cash and 450,000 restricted shares of the Company's common stock,
     of which 200,000 shares vested immediately and 250,000 shares are subject
     to adjustments as described in the TTC Agreement.

     In addition, the Company, through TTC and an Asset Purchase Agreement
     effective as of September 1, 2002 ("Hagan Agreement"), acquired the
     customer lists, and other business assets of Pat Hagan, who is being
     employed by TTC. The assets were acquired through Telecom. Mr. Hagan is a
     party to the Hagan Agreement and is subject to an Employment Agreement.
     Prior to the Hagan Agreement, there was no material relationship between
     the Company and Mr. Hagan. The consideration given for the acquired assets
     was $1.00 cash and 250,000 restricted shares of the Company's common stock,
     which are subject to adjustments as described in the Hagan Agreement.

     These two transactions were considered together as one transaction and are
     being accounted for using the purchase method of accounting. The results of
     the assets acquired from Telecom will be included in the future statements
     of operations commencing from the date of acquisition. Some of the values
     of the assets acquired have not yet been determined. As such, the aggregate
     purchase price of the acquisition, which amount is equal to the excess
     purchase price over the value of the net assets acquired, has not yet been
     determined.

                                      F-27
<PAGE>

NOTE 22 - SUBSEQUENT EVENTS (CONTINUED)

     StarQuest Wireless
     ------------------

     StarQuest Wireless, Inc ("SWI"), an Indiana corporation and wholly-owned
     subsidiary of TTC, acquired certain assets of StarQuest Wireless, LLC
     ("SWL"), Noel Kaplan and Steve Cochran, through an agreement entered into
     on October 31, 2002 and effective October 9, 2002 by and among SWI, SWL,
     Mr. Kaplan and Mr. Cochran ("SWI Agreement"). The purchased assets and
     assumed liabilities were used or useful in connection with the business of
     selling, installing or maintaining satellite television systems. The
     Company has devoted the assets to its existing Telecom Infrastructure
     segment. The transaction was accounted for using the purchase method of
     accounting. The assets acquired included a complete list of customers
     current as of the Closing Date, all accounts receivable, all sales agency
     and similar agreements with satellite television providers (including, but
     not limited to, DirecTV, Echostar, Pegasus and Musicland), the telephone
     numbers used in conjunction with the sellers' operations. The Company also
     only accepted and assumed all of sellers' rights and executory obligations
     under the assumed contracts to be performed after the Closing Date
     (excluding any obligations or liabilities of the sellers under any assumed
     contracts that were to have been performed, fulfilled or satisfied on or
     prior to the Closing Date). The consideration given for the acquired assets
     was $1.00 cash and 600,000 (300,000 shares each to Cochran and Kaplan) of
     restricted shares of the Company's common stock, which are subject to
     adjustments as described in the SWI Agreement. Some of the values of the
     assets acquired have not yet been determined. As such, the aggregate
     purchase price of the acquisition, which amount is equal to the excess
     purchase price over the value of the net assets acquired, has not yet been
     determined.

NOTE 23 - SEGMENT INFORMATION

     The operations of the Company are organized around the following segments:

     o    Rep and Distribution
     o    Telecom Infrastructure Development
     o    Entertainment
     o    Holding Company








                                      F-28
<PAGE>

NOTE 23 - SEGMENT INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
                                                                  Telecom
                                                   Rep and     Infrastructure                      Holding         Segment
                                                 Distribution    Development    Entertainment      Company         Totals
<S>                                               <C>            <C>             <C>             <C>             <C>
Year Ended August 31, 2002
Net revenues                                      $ 1,529,000    $   813,000     $        --     $        --     $ 2,342,000
Cost of revenues                                    1,233,000        874,000              --              --       2,107,000
                                                  -----------    -----------     -----------     -----------     -----------
Gross profit (loss)                                   296,000        (61,000)             --              --         235,000
Operating expenses
  Selling, general and administrative expenses        236,000        854,000           6,000         526,000       1,622,000
  Depreciation and amortization                        14,000         33,000              --           4,000          51,000
                                                  -----------    -----------     -----------     -----------     -----------
     Total operating expense                          250,000        887,000           6,000         530,000       1,673,000
                                                  -----------    -----------     -----------     -----------     -----------

Segment operating income (loss)                   $    46,000    $  (948,000)    $    (6,000)    $  (530,000)    $(1,438,000)
                                                  ===========    ===========     ===========     ===========     ===========

As of August 31, 2002
Cash                                              $   133,000    $   108,000     $     1,000     $    49,000     $   291,000
Accounts receivable                                 1,617,000        266,000              --         258,000       2,141,000
Purchase adjustment                                        --             --              --         600,000         600,000
Inventory, net                                        509,000             --              --              --         509,000
Other current assets                                   18,000         51,000              --          15,000          84,000
Notes receivable                                           --             --              --          30,000          30,000
Office equipment, net                                  69,000        193,000              --          19,000         281,000
Vehicles, net                                         133,000             --              --              --         133,000
Leasehold improvements, net                           156,000         10,000              --              --         166,000
Goodwill                                              876,000             --              --              --         876,000
Other intangible assets, net                          751,000             --              --              --         751,000
                                                  -----------    -----------     -----------     -----------     -----------

Total Segment Assets                              $ 4,262,000    $   628,000     $     1,000     $   971,000     $ 5,862,000
                                                  ===========    ===========     ===========     ===========     ===========


Year Ended August 31, 2001
Net revenues                                      $        --    $        --     $   425,000     $        --     $   425,000
Cost of revenues                                           --        175,000       5,206,000              --       5,381,000
                                                  -----------    -----------     -----------     -----------     -----------
Gross profit (loss)                                        --       (175,000)     (4,781,000)             --      (4,956,000)
Operating expenses
  Selling, general and administrative expenses             --         80,000       1,402,000         521,000       2,003,000
  Depreciation and amortization                            --          5,000              --           1,000           6,000
                                                  -----------    -----------     -----------     -----------     -----------
     Total operating expense                               --         85,000       1,402,000         522,000       2,009,000
                                                  -----------    -----------     -----------     -----------     -----------

Segment operating income (loss)                   $        --    $  (260,000)    $(6,183,000)    $  (522,000)    $(6,965,000)
                                                  ===========    ===========     ===========     ===========     ===========


As of August 31, 2001
Cash                                              $        --    $   305,000     $    30,000     $ 2,203,000     $ 2,538,000
Other current assets                                       --         10,000           5,000          92,000         107,000
Other assets                                               --         29,000              --         642,000         671,000
                                                  -----------    -----------     -----------     -----------     -----------

Total segment assets                              $        --    $   344,000     $    35,000     $ 2,937,000     $ 3,316,000
                                                  ===========    ===========     ===========     ===========     ===========
</TABLE>

                                      F-29
<PAGE>

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Company caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.




                                  FORTUNE DIVERSIFIED INDUSTRIES, INC.



Date:     11/29/02                By: /s/ Carter M. Fortune
                                      ------------------------------------------
                                      Carter M. Fortune, Chief Executive Officer



In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Company and in the capacities and on the
dates indicated.

Date:    11/29/02

/s/ Carter M. Fortune
---------------------------------
Carter M. Fortune, Chief Executive Officer and Chairman of the Board

/s/ Douglas E. May
---------------------------------
Douglas E. May, Chief Financial Officer,
Vice President of Finance, Secretary and Director

/s/ Robert J. Kingston
---------------------------------
Robert J. Kingston, President of Kingston Sales Corp. and Director

/s/ David A. Berry
---------------------------------
David A. Berry, Director



                                       69
<PAGE>

                                 CERTIFICATIONS


I, Carter M. Fortune, Chief Executive Officer, certify that:

1. I have reviewed this annual report on Form 10-KSB of Fortune Diversified
Industries, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.


Date:  11/29/02


/s/ Carter M. Fortune
---------------------------------
Carter M. Fortune
Chief Executive Officer




I, Douglas, Chief Financial Officer, certify that:

1. I have reviewed this annual report on Form 10-KSB of Fortune Diversified
Industries, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.


Date:  11/29/02

/s/ Douglas E. May
---------------------------------
Douglas E. May
Chief Financial Officer


                                       70
<PAGE>

STATEMENT OF MANAGEMENT RESPONSIBILITY

The consolidated financial statements of Fortune Diversified Industries, Inc.
and its subsidiaries have been prepared in accordance with accounting principles
generally accepted in the United States of America. The integrity and
objectivity of these statements, including the effect of certain estimates and
judgments, is the responsibility of management.

The Company's management has established and maintains an internal control
structure that is designed to provide reasonable assurance that Company assets
are safeguarded, transactions are executed in accordance with management's
authorization, and that the Company's financial records may be relied upon for
the purpose of preparing financial statements. That system is continuously
monitored and assessed by direct management review and by the Company's internal
audit function. Management has concluded that the internal control structure was
effective throughout the year ended December 31, 2001.

Each year, the Company's Board of Directors appoints independent accountants who
audit the Company's financial statements in accordance with auditing standards
generally accepted in the United States of America. Their audit includes a
review of the internal control structure and tests of selected transactions with
respect to financial reporting.

The Audit Review Committee of the Board of Directors, which consists of
directors who are neither officers nor employees of the Company, meets regularly
with management, the independent accountants and the internal auditors to review
financial reporting, internal accounting controls and auditing matters. The
Committee has direct and private access to both internal and external auditors.


                                       71