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

                                  FORM 10-KSB/A

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

                    For the fiscal year ended August 31, 2004

[ ]     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)

6402 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. [ ]

State issuer's revenues for its most recent fiscal year.       $66,882,000
                                                               -----------

As of November 29, 2004 the aggregate market value of the voting Common Stock of
the Company held by non-affiliates of the registrant, based on the final sale
price on such date, was approximately $15,538,112.

As of November 29, 2004 there were 102,470,944 shares of the Company's voting
Common Stock outstanding.

<PAGE>

                                    EXPLANATORY NOTE

This Amendment No. 1 to our Annual Report on Form 10-KSB amends our Annual
Report on Form 10-KSB for the fiscal year ended August 31, 2004 that was
originally filed on November 29, 2004. This amendment corrects the sections
related to the reporting of shares held by the Company's Control Group due to
the filing of a Schedule 13D/A on April 21, 2005, which filing removes Mr.
Kingston from the Company's Control Group effective July 31, 2004. This filing
additionally adds a footnote to a table that was mistakenly left out of the
original filing. The amendments have no effect on the Company's financial
statements, however Note 2 to the financial statements is being amended to the
extent that note is affected by the exclusion of Mr. Kingston from the Control
Group.

The following Items have been amended:

     1)   Cover Page. The aggregate market value of the voting Common stock of
          the Company held by non-affiliates of the registrant has been adjusted
          to account for the exclusion of Robert J. Kingston from the Control
          Group and his resignation as a director of the registrant.

     2)   Part 1, Item 1. Description of Business. The description of the
          Control Group has been modified to exclude Robert J. Kingston and the
          section describing Acquisition of Ownership was modified to describe
          Robert J. Kingston's withdrawal from the Control Group.

     3)   Part 2, Item 7. Financial Statements. Note 2, Acquisition of Ownership
          discussion was amended to exclude Robert J. Kingston from the Control
          Group and the discussion of Acquisition of Ownership was amended to
          include Robert J. Kingston's withdrawal from the Control Group.

     4)   Part 3, Item 11. The tables and footnotes describing Security
          Ownership of Certain Beneficial Ownership and Management were revised
          to exclude Robert J. Kingston and his owned shares from the Control
          Group. The incorrect placement of footnote in the table listing
          Security Ownership of Management was corrected, and a footnote 4 was
          added to the table describing the Security Ownership of Management.

Besides the changes to the sections listed above, no other changes have been
made to the Form 10-KSB dated November 29, 2004.

This Amendment continues to speak as of the date of the original Annual Report,
and we have not updated the disclosure contained herein to reflect events that
have occurred since the filing of the original Annual Report. Accordingly, this
Form 10KSB/A should be read in conjunction with our other filings made with the
Securities and Exchange Commission subsequent to the filing of the original
Annual Report, including any amendments to those filings.


                                       1
<PAGE>

                                     PART I

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 its subsidiaries
unless the context otherwise requires. Fortune Diversified Industries, Inc., in
its individual capacity, may be referred to as the "Holding Company". The
Company is the parent company of Professional Staff Management, Inc.,
Professional Staff Management, Inc. II and Pro Staff, Inc. (collectively "PSM");
Nor-Cote International, Inc. (Nor-Cote); Kingston Sales Corporation (Kingston);
Commercial Solutions, Inc. (Commercial Solutions); James H. Drew Corp. (JH
Drew); PDH, Inc. (PDH); Cornerstone Wireless Services, Inc. (Cornerstone
Wireless); Cornerstone Wireless Construction Services, Inc. (Cornerstone
Construction); Innovative Telecommunications Consultants, Inc. (ITC); Telecom
Technology Corp. (TTC); StarQuest Wireless Services, Inc. (StarQuest); Women of
Wrestling, Inc. (WOW); and Murphy Development, Ltd. (Murphy). In addition,
subsequent to August 31, 2004, the Company acquired Ink Source, Inc. (Ink
Source), September 30, 2004, which has become a part of Nor-Cote and MAGTECH
Services, Inc. ("Magtech"), November 1, 2004, which has become a wholly-owned
subsidiary of the Company.

The Company's strategy is to create an environment that supports the growth of
our acquired companies and to continue acquiring successful companies. As a
conglomerate or holding company, we are investing in a diverse portfolio of
companies that bring to market, product and service strengths in their sectors.

The Company's principal executive offices are located at 6402 Corporate Drive,
Indianapolis, Indiana 46278, and its telephone number is 317-532-1374.

                                  Control Group

In order to better understand the Company's business organization and
development, it is important to know that as of August 31, 2004, Messrs.
Fisbeck, Fortune, Wolcott, Jr. and Schafir, along with the Norman G. Wolcott,
Sr. and Lucile H. Wolcott Revocable Trust of 1995, Marital Trust and the Norman
G. Wolcott, Sr. and Lucile H. Wolcott Revocable Trust of 1995, Survivor's Trust
are considered members of a "group" deemed to beneficially own 83,906,375 shares
of the Company's Common Stock representing 81.951% of the outstanding Common
Stock of the Company, which totals 102,386,444 shares. Individually, each of the
above persons has the sole voting and dispositive power over the following
number of shares of the Company's Common Stock as of August 31, 2004: John F.
Fisbeck, 17,087,023 (or 16.689%), Carter M. Fortune, 41,328,108 (or 40.365%),
Norman G. Wolcott, Jr., individually, 9,537,515 (or 9.315%), Norman G. Wolcott
Jr., as Trustee of the Norman G. Wolcott, Sr. and Lucille H. Wolcott Revocable
Trust of 1995 Marital Trust and the Norman G. Wolcott, Sr. and Lucille H.
Wolcott Revocable Trust of 1995 Survivor's Trust (the "Wolcott Trusts"),
2,853,729 (or 2.787%), and Harlan M. Schafir, 13,100,000 (or 12.795%).

                       Acquisition of Ownership

Addition / Withdrawal of Robert J. Kingston to/from the Control Group
--------------------------------------------------------------------

Effective July 31, 2002, as part of the purchase price for 1000 shares of the
Common Stock, no par value, of Kingston, constituting all of the outstanding
shares of Kingston's capital stock, pursuant to the terms of a Stock Purchase
Agreement by and among the Company, Kingston and Robert J. Kingston, Mr. Robert
J. Kingston received 8,000,000 restricted shares of the Company's Common Stock.

                                       2
<PAGE>

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 Kingston 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. Also as a part of the Stock Purchase Agreement, subject to the limitations
and restrictions described below, Mr. Kingston could, in his sole discretion,
sell any or all of the Company's Common Stock held by Mr. Kingston if certain
earnings goals were met as defined in the Stock Purchase Agreement. In addition,
Mr. Kingston could only exercise this put option if the average bid price per
share during the period October 1, 2004 to October 31, 2004 was 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. Since the earnings goals were not met, and the average bid price during
the month of October was substantially higher than that of the put prices along
with the fact that the Company was listed on the OTC Bulletin Board exchange,
Mr. Kingston's put option expired October 31, 2004.

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

Mr. Kingston was elected to the Board of Directors 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. On July 31, 2004 Mr. Kingston voluntarily
resigned from the Company's Board and subsequently a Schedule 13D/A was filed
removing Mr. Kingston from the Control Group effective July 31, 2004.

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


Addition of Norman G. Wolcott, Jr. to the Control Group
---------------------------------------------------------

Effective July 1, 2003, pursuant to a Stock Purchase Agreement as part of the
purchase price of all the outstanding shares of common and preferred stock of
Nor-Cote International, Inc., the Company issued 12,391,244 of Common Stock to
Norman G. Wolcott, Jr. and the Norman G. Wolcott Sr. and Lucile H. Wolcott
Revocable Trust of 1995 (the "Wolcott Trust").

                                       3
<PAGE>

The disposition of the Company's shares held by Norman G. Wolcott, Jr. and the
Wolcott Trust (collectively, "Common Stock Sellers") is substantially restricted
by an Option Agreement. Common Stock Sellers shall each have the option to put
any or all of the Company's stock received by them to Carter M. Fortune and Mr.
Fortune shall have the option to call any or all of the Company's stock from
each of the Common Stock Sellers. The put price and the call price shall be the
same (the "put/call price") and the put/call price shall be dependent upon
Nor-Cote's cumulative Adjusted EBITDA during the three-year period July 1, 2003
to June 30, 2006 (the "Test Period"). If Nor-Cote's cumulative Adjusted EBITDA
during the Test Period is at least $4,683,000, the put/call price per share
shall be $.3365. The put/call price shall, however, be decreased in proportion
to the amount by which Nor-Cote's cumulative Adjusted EBITDA during the Test
Period is less than $4,683,000, as defined in the Stock Exchange Agreement.
Common Stock Sellers may only exercise the put option and Mr. Fortune may only
exercise the call option during the period September 1, 2006 to September 30,
2006. Any closing on the sale of the Company's stock to Mr. Fortune shall occur
within 90 days of a party's receipt of written notice from the other party
requesting exercise of his put or call option. All of the Company's stock
received by them shall be retained by each of the Common Stock Sellers until (i)
the exercise of the put and call options or (ii) the expiration of the exercise
period (including any extensions) for such put and call options without exercise
of such put and call options. In addition, Mr. Fortune shall have an option to
call any or all of the Company's stock held by the Common Stock Sellers at the
call price per share of $.3365 at any time during the three-year period July 1,
2003 to June 30, 2006.

Mr. Wolcott Jr. continues as Chairman of Nor-Cote under the terms of an
employment agreement dated July 1, 2003 and incorporated into the Stock Exchange
Agreement as an exhibit. The employment agreement is effective July 1, 2003 to
and including June 30, 2006, unless terminated pursuant to the terms of the
employment agreement. Prior to the Stock Exchange Agreement, there was no
material relationship between the Company and Norm Wolcott, Jr.

Mr. Wolcott Jr. is subject to a non-compete agreement that is incorporated into
the employment agreement dated July 1, 2003.  The non-compete agreement is in
effect as of the date of purchase and continues until two years after his
employment ceases.

Addition of Harlan M. Schafir to the Control Group
--------------------------------------------------

Effective as of October 1, 2003, pursuant to the three related Agreements and
Plans of Merger ("Merger Agreements") as part of the purchase price for all of
the outstanding shares of PSM, the Company issued 13,100,000 shares of Common
Stock to Harlan M. Schafir.

                                       4
<PAGE>

Two option agreements substantially restrict the disposition of the Company's
shares held by Mr. Schafir. The first is an option agreement entered into the
1st day of October 2003 by and between Harlan M. Schafir and Carter M. Fortune
and Robert J. Kingston (collectively, "Shareholders"); the second is an option
agreement entered into the 1st day of October 2003 by and between Harlan M.
Schafir, and the Company (Collectively, "Option Agreements"). Mr. Schafir shall
have the option to put any or all of the Company's stock received by him to the
Shareholders or the Company, according to the terms of these Option Agreements.

If Mr. Schafir desires to sell any or all of the Company's Common Stock held by
him pursuant to the October 1, 2003 stock purchase agreement, he must
simultaneously make demand upon Carter M. Fortune, Robert J. Kingston, and the
Company:

 (i)       Within 10 days of demand, Carter M. Fortune and Robert J.
           Kingston shall comply with the terms of the Option Agreement
           Fortune/Kingston/Schafir);

 (ii)      If Carter M. Fortune and Robert J. Kingston fail to comply with the
           terms of the Option Agreement (Fortune/Kingston/Schafir) then to the
           extent of Carter M. Fortune's and Robert J. Kingston's non-compliance
           within 20 days of demand, the Company shall comply with
           the terms of the Option Agreement (Company/Schafir);and

(iii)      If the Company fails to comply with the terms of the Option
           Agreement (Company/Schafir) then to the extent of the Company's
           non-compliance within 30 days of demand, Mr. Schafir may then
           execute upon the Merrill Lynch Pledged Collateral Account Control
           Agreement (relating to Carter M. Fortune), the Merrill Lynch Pledged
           Collateral Account Control Agreement (relating to Robert J. Kingston)
           and the Merrill Lynch Pledged Collateral Account Control Agreement
           (relating to the Company) on a pro-rata basis based upon the market
           value of the assets contained in each of the pledged collateral
           accounts.


The put price shall be dependent upon PSM's cumulative EBITDA during the
three-year period October 1, 2003 to September 30, 2006 ("Regular Test Period"),
as defined in the Option Agreements.

Mr. Schafir continues as Chairman of PSM under the terms of an employment
agreement dated October 1, 2003 and incorporated into the Merger Agreements as
an exhibit. The employment agreement is effective October 1, 2003 to and
including September 30, 2006, unless terminated pursuant to the terms of that
employment agreement. Prior to the October 1, 2003 Merger Agreements, there was
no material relationship between the Company and Mr. Schafir.

Mr. Schafir is subject to a non-compete agreement that is incorporated into the
employment agreement dated October 1, 2003. The non-compete agreement is in
effect as of the date of purchase and continues until after his employment
ceases.

                                       5
<PAGE>


                                     Part II


Item 7.  FINANCIAL STATEMENTS

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - Acquisition of Ownership

In order to better understand the Company's business organization and
development, it is important to know that as of August 31, 2004, Messrs.
Fisbeck, Fortune, Wolcott, Jr. and Schafir, along with the Norman G. Wolcott,
Sr. and Lucile H. Wolcott Revocable Trust of 1995, Marital Trust and the Norman
G. Wolcott, Sr. and Lucile H. Wolcott Revocable Trust of 1995, Survivor's Trust
are considered members of a "group" deemed to beneficially own 83,906,375 shares
of the Company's Common Stock representing 82.0% of the outstanding Common Stock
of the Company, which totals 102,386,444 shares. Individually, each of the above
persons has the sole voting and dispositive power over the following number of
shares of the Company's Common Stock as of August 31, 2004: John F. Fisbeck,
17,087,023 (or 16.689%), Carter M. Fortune, 41,328,108 (or 40.365%), Norman G.
Wolcott, Jr., individually, 9,537,515 (or 9.315%), Norman G. Wolcott Jr., as
Trustee of the Norman G. Wolcott, Sr. and Lucille H. Wolcott Revocable Trust of
1995 Marital Trust and the Norman G. Wolcott, Sr. and Lucille H. Wolcott
Revocable Trust of 1995 Survivor's Trust (the "Wolcott Trusts"), 2,853,729 (or
2.787%), and Harlan M. Schafir, 13,100,000 (or 12.795%).

Addition/Withdrawal of Robert J. Kingston to/from 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 Kingston, constituting all of the outstanding
shares of Kingston's capital stock, pursuant to the terms of a Stock Purchase
Agreement by and among the Company, Kingston 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 Kingston 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. Also as part of the Stock Purchase Agreement, subject to the limitations
and restrictions, described below, Mr. Kingston could, 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
certain earnings goals were met as defined in the Stock purchase agreement. In
addition, Mr. Kingston could only exercise the Put Option if the average bid
price per share during the period October 1, 2004 to October 31, 2004 was 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. Since the earnings goals were not met by Kingston
Sales, and the average bid price during the month of October was substantially
higher than of the put prices, along with the fact that the Company was listed
on the OTC Bulletin Board exchange, Mr. Kingston's put option expired October
31, 2004.

                                       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.

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. On July 31, 2004 Mr. Kingston voluntarily
resigned from the Company's Board and subsequently a Schedule 13D/A was filed
removing Mr. Kingston from the Control Group effective July 31, 2004.


Addition of Norman G. Wolcott, Jr. to the Control Group
--------------------------------------------------------

Effective as of July 1, 2003, as part of the purchase price of all of the
outstanding shares of common and preferred stock of Nor-Cote International,
Inc., the Company issued 12,391,244 of common stock to Norman G. Wolcott, Jr.
and the Wolcott Trust.

The disposition of the Company's shares held by Norman G. Wolcott, Jr. and the
Wolcott Trust (collectively, "Common Stock Sellers") is substantially restricted
by an Option Agreement between shareholders. Common Stock Sellers shall each
have the option to put any or all of the Company's stock received by them to Mr.
Fortune and Mr. Fortune shall have the option to call any or all of the
Company's stock from each of the Common Stock Sellers. The put price and the
call price shall be the same (the "put/call price") and the put/call price shall
be dependent upon Nor-Cote's cumulative Adjusted EBITDA during the three-year
period July l, 2003 to June 30, 2006. If Nor-Cote's cumulative Adjusted EBITDA
during the Test Period is at least $4,683,000, the put/call price per share
shall be $.3365. The put/call price shall, however, be decreased in proportion
to the amount by which Nor-Cote's cumulative Adjusted EBITDA during the Test
Period is less than $4,683,000, as defined in the Stock Exchange Agreement.
Common Stock Sellers may only exercise the put option and Mr. Fortune may only
exercise the call option during the period September 1, 2006 to September 30,
2006. Any closing on a sale of the Company's stock to Fortune shall occur within
ninety (90) days of a party's receipt of written notice from the other party
requesting exercise of his put or call option. All of the Company's stock
received by them shall be retained by each of the Common Stock Sellers until (i)
the exercise of the put and call options or (ii) the expiration of the exercise
period (including any extensions) for such put and call options without exercise
of such put and call options. In addition, Mr. Fortune shall have an option to
call any or all of the Company's stock at the call price per share of $.3365 at
any time during the three-year period July 1, 2003 to June 30, 2006.

                                       7
<PAGE>

Mr. Wolcott Jr. continues as Chairman of Nor-Cote under the terms of an
employment agreement dated July 1, 2003 and incorporated into the Stock Exchange
Agreement as an exhibit. The employment agreement is effective July 1, 2003 to
and including June 30, 2006, unless terminated pursuant to the terms of the
employment agreement. Prior to the Stock Exchange Agreement, there was no
material relationship between the Company and Norm Wolcott, Jr.

Mr. Wolcott Jr. is subject to a non-compete agreement that is incorporated into
the employment agreement dated July 1, 2003. The non-compete agreement is in
effect as of the date of purchase and continues until two years after his
employment ceases.

Addition of Harlan M. Schafir to the Control Group
--------------------------------------------------

Effective as of October 1, 2003, as part of the purchase price for all of the
outstanding shares of PSM, the Company issued 13,100,000 shares of Common Stock
to Harlan M. Schafir.

Two option agreements substantially restrict the disposition of the Company's
shares held by Mr. Schafir. The first is an option agreement entered into the
1st day of October 2003 by and between Harlan M. Schafir and Carter M. Fortune
and Robert J. Kingston (collectively, "Shareholders"); the second is an option
agreement entered into the 1st day of October 2003 by and between Harlan M.
Schafir, and the Company (Collectively, "Option Agreements"). Mr. Schafir shall
have the option to put any or all of the Company's stock received by him to the
Shareholders or the Company, according to the terms of these Option Agreements.

If Mr. Schafir desires to sell any or all of the Company's Common Stock held by
him pursuant to the October 1, 2003 stock purchase agreement, he must
simultaneously make demand upon Carter M. Fortune, Robert J. Kingston, and the
Company:

 (i)       Within 10 days of demand, Carter M. Fortune and Robert J.
           Kingston shall comply with the terms of the Option Agreement
           (Fortune/Kingston/Schafir);

 (ii)      If Carter M. Fortune and Robert J. Kingston fail to comply with the
           terms of the Option Agreement (Fortune/Kingston/Schafir) then to the
           extent of Carter M. Fortune's and Robert J. Kingston's non-compliance
           within 20 days of demand, the Company shall comply with the terms of
           the Option Agreement (Company/Schafir);and

 (iii)     If the Company fails to comply with the terms of the Option Agreement
           (Company/Schafir) then to the extent of the Company's non-compliance
           within 30 days of demand, Mr. Schafir may then execute upon the
           Merrill Lynch Pledged Collateral Account Control Agreement (relating
           to Carter M. Fortune), the Merrill Lynch Pledged Collateral Account
           Control Agreement (relating to Robert J. Kingston) and the Merrill
           Lynch Pledged Collateral Account Control Agreement (relating to the
           Company) on a pro-rata basis based upon the market value of the
           assets contained in each of the pledged collateral accounts.


The put price shall be dependent upon PSM's cumulative EBITDA during the
three-year period October 1, 2003 to September 30, 2006 ("Regular Test Period"),
as defined in the Option Agreements.

Mr. Schafir continues as Chairman of PSM under the terms of an employment
agreement dated October 1, 2003 and incorporated into the Stock Purchase
Agreement as an exhibit. The employment agreement is effective October 1, 2003
to and including September 30, 2006, unless terminated pursuant to the terms of
that employment agreement. Prior to the October 1, 2003 stock purchase
agreement, there was no material relationship between the Company and Mr.
Schafir.

Mr. Schafir is subject to a non-compete agreement that is incorporated into the
employment agreement dated October 1, 2003. The non-compete agreement is in
effect as of the date of purchase and continues until after his employment
ceases.

                                       8
<PAGE>
                                    Part III

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 November 29, 2004 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).

                  Name and Address of       Amount and Nature of     Percent
Title of Class    Beneficial Owner          Beneficial Ownership(1)  of Class
--------------    ----------------          -----------------------  --------
Common Stock      John F. Fisbeck           84,906,375(2)            82.9
                  6402 Corporate Drive
                  Indianapolis, IN 4627

Common Stock      Carter M. Fortune         84,906,375(2),(3)        82.9
                  6402 Corporate Drive
                  Indianapolis, IN 46278

Common Stock      Robert J. Kingston        7,892,754                7.7
                  6402 Corporate Drive
                  Indianapolis, IN 46278

Common Stock     Norman G. Wolcott, Jr.     84,906,375(2)            82.9
                 6402 Corporate Drive
                 Indianapolis, IN  46278

Common Stock     Harlan M. Schafir          84,906,375(2)            82.9
                 6402 Corporate Drive
                 Indianapolis, IN 46278

Common Stock     Norman G. Wolcott, Sr.     84,906,375 (2)           82.9
                 and Lucille H. Wolcott
                 Revocable Trust of 1995
                 Marital Trust and the
                 Norman G. Wolcott, Sr.
                 and Lucile H. Wolcott
                 Trust of 1995, Survivor's
                 Trust
                 6402 Corporate Drive
                 Indianapolis, IN 46278

(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 November 29, 2004. "Beneficial ownership" also includes that
ownership of shares that is imputed to any members of the Control Group of the
Company.

(2) As the Control Group, Messrs. John F. Fisbeck, Carter M. Fortune,
Norman G. Wolcott, Jr., Harlan M. Schafir and the Wolcott Trusts beneficially
own, as defined in Footnote No.1 of this table, 84,906,375 shares of Common
Stock, as of November 29, 2004. Individually, each person has sole dispositive
and voting power over the following shares of Common Stock: John F.
Fisbeck, 17,087,023(16.7%); Carter M. Fortune, 41,328,108(40.4%); Norman G.
Wolcott, Jr., 9,537,515 (9.3%); Norman G. Wolcott, Jr. as Trustee for
the Wolcott Trusts, 2,853,729 (2.8%); and Harlan M. Schafir,
13,100,000 (12.8%).

(3) As an interest holder in Fortune Real Estate Development, LLC, Carter M.
Fortune has shared voting and dispositive power over 1,000,000 shares of
Company Common Stock held by that entity (.98%). This amount is included in the
beneficial holding reported for the Control Group.


                                       9
<PAGE>

                        Security Ownership of Management

The following table sets forth information as of November 29, 2004 with respect
to (i) each current director, (ii) all individuals serving as the Company's
executive officers during the fiscal year ended August 31, 2004, and (iii) all
current 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>
                 Name and Address of          Amount and Nature of             Percent
Title of Class   Beneficial Owner             Beneficial Ownership (1)         of Class
--------------   ----------------------       ------------------------         --------
<S>              <C>                             <C>                             <C>
Common Stock     Carter M. Fortune               84,906,375(2)(3)(4)             82.9
                 6402 Corporate Drive
                 Indianapolis, IN 46278

Common Stock     David A. Berry                  200,000                           *
                 6402 Corporate Drive
                 Indianapolis, IN 46278

Common Stock     Amy E. Gallo                    100,000                           *
                 6402 Corporate Drive
                 Indianapolis, IN  46278

Common Stock     K.L. Sipe                       200,000                           *
                 6402 Corporate Drive
                 Indianapolis, IN  46278

Common Stock     Harlan M. Schafir               84,906,375 (2)                  82.9
                 6402 Corporate Drive
                 Indianapolis, IN  46278

Common Stock     All current executive officers  85,506,375                      83.5
                 and directors as a group
</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 November 29, 2004. "Beneficial ownership" also includes all imputed
beneficial ownership arising from an individual's membership in a control group.

(2) As more fully described in Footnote 2 to the Table listing the Security
Ownership of Certain Beneficial Owners, the beneficial ownership reported in
this table of Messrs. Fortune and Schafir includes the beneficial ownership
imputed to them as members of the Control Group as of November 29, 2004.

(3) Subject to certain rights and restrictions contained in the Agreements and
Plans of Merger and Option Agreements to which Harlan Schafir is a party, Carter
M. Fortune has a contingent right to purchase 2,500,000 shares of the Company's
Common Stock owned by Mr. Schafir through a call option. Also, pursuant to an
Option Agreement by an among Norman G. Wolcott, Jr., the Wolcott Trust, Carter
Fortune, and the Company, Mr. Fortune has the right to purchase all of the
12,391,244 shares of the Company's Common Stock held by Mr. Wolcott and held by
the Wolcott Trusts. This purchase could be made through a call option held by
Mr. Fortune that is subject to the rights and restrictions stated in that Option
Agreement. Each of these contingent call rights is potentially exercisable
within 60 days from the date of this Report on Form 10KSB.

(4) As an interest holder in Fortune Real Estate Development, LLC, Carter M.
Fortune has shared voting and dispositive power over 1,000,000 shares of
Company Common Stock held by that entity (.98%). This amount is included in the
beneficial holding reported for the Control Group.

                                       10
<PAGE>

ITEM 13.      EXHIBITS

31.1       Certificate Pursuant to 18 U.S.C. Section 1350, as Adopted
           Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by
           Carter M. Fortune.

31.2       Certificate Pursuant to 18 U.S.C. Section 1350, as Adopted
           Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by
           Amy E. Gallo.


32.1      Certificate Pursuant to 18 U.S.C. Section 1350, as Adopted
          Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
          by Carter M. Fortune.
32.2      Certificate Pursuant to 18 U.S.C. Section 1350, as Adopted
          Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
          by Amy E. Gallo.













                                       11
<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:  April 21, 2005              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:  April 21, 2005                 /s/ Carter M. Fortune
                                      ------------------------------------------
                                      Carter M. Fortune, Chief Executive Officer
                                      and Chairman of the Board


Date:  April 21, 2005                 /s/ Amy E. Gallo
                                      ------------------------------------------
                                      Amy E. Gallo, Principal Financial Officer


Date:  April 21, 2005                 /s/ David A. Berry
                                      ------------------------------------------
                                      David A. Berry, Director




                                       12