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

                                  FORM 10-QSB

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

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004

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

     FOR  THE  TRANSITION  PERIOD  FROM  _________  TO  _________

                        COMMISSION FILE NUMBER: 0-18718

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

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

              8750 CENTRAL EXPRESSWAY, SUITE 100, DALLAS, TX 75231
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                 (214) 520-9292
                          (ISSUER'S TELEPHONE NUMBER)

Indicate  by check mark whether the issuer (1) has 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 the registrant was required to file such reports),
and  (2)  has  been  subject  to  such filing requirements for the past 90 days.
Yes  [X]  No  [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-25 of the Exchange Act).   Yes  [ ]   No  [X]

Indicate  the  number  of  shares outstanding of each of the issuer's classes of
common  equity,  as  of  the  latest  practicable  date.

Class                                             Outstanding at May 14, 2004

Common Stock, Par value $.01 per share                     58,545,928


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


<PAGE>
                                CT HOLDINGS, INC.
                                  FORM 10-QSB
                      QUARTERLY PERIOD ENDED MARCH 31, 2004
                                TABLE OF CONTENTS



                                                                            Page

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

     Balance Sheets
          as of March 31, 2004 (unaudited) and December 31, 2003              3

     Unaudited Statements of Operations
          for the three months ended March 31, 2004 and 2003                  4

     Unaudited Statements of Cash Flows
          for the three months ended March 31, 2004 and 2003                  5

     Notes to Unaudited Interim Financial Statements                          6

Item  2.  Management's Discussion and Analysis of Financial
            Condition and Results of Operations                              15

Item 3.   Controls and Procedures                                            32

PART II.  OTHER INFORMATION


Item 1.      Legal Proceedings                                               33

Item 2.      Recent Sales of Unregistered Securities                         36

Item 3.      Defaults Upon Senior Securities                                 36

Item 6.      Exhibits and Reports on Form 8-K                                36

Signatures                                                                   37


                                        2
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

                                   CT HOLDINGS, INC.
                                    BALANCE SHEETS

                                                       March 31,
                                                         2004       DECEMBER 31,
                                                      (unaudited)       2003
                                                     -------------  ------------
<S>                                                  <C>            <C>
                        ASSETS
                        ------

TOTAL ASSETS                                         $          -   $         -
                                                     =============  ============

     LIABILITIES AND STOCKHOLDERS' DEFICIT
     ----------------------------------------------
CURRENT LIABILITIES
  Accounts payable and accrued expenses              $    514,356   $   501,330
  Payable to Citadel                                      695,000       635,000
  Note payable to shareholder                               9,000         9,000
  Note payable to related party                            30,000             -
  Accrual for legal settlement                            207,000       207,000
                                                     -------------  ------------
 Total current liabilities                              1,455,356     1,352,330

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT
  Preferred stock, $.01 par value per share;
   1,000,000 shares authorized; no shares issued
   at March 31, 2004 and December 31, 2003                      -             -
  Common stock, $.01 par value per share;
   60,000,000 shares authorized;
   58,545,928 shares issued and outstanding at
   March 31, 2004 and December 31, 2003                   585,460       585,460
  Common stock pending issuance                           600,000       600,000
  Additional paid-in capital                           57,190,601    57,190,601
  Accumulated deficit                                 (59,831,417)  (59,728,391)
                                                     -------------  ------------
  Total stockholders' deficit                          (1,455,356)   (1,352,330)
                                                     -------------  ------------
                                                     $          -   $         -
                                                     =============  ============
</TABLE>

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


                                        3
<PAGE>
<TABLE>
<CAPTION>
                                CT HOLDINGS, INC.
                            STATEMENTS OF OPERATIONS
                                   (unaudited)

                                                      Three Months Ended
                                                           March 31,
                                                     2004            2003
                                                 -------------  -------------
<S>                                              <C>            <C>
Revenue                                          $          -    $         -

General and administrative expense                     65,470        100,641
Interest expense                                        7,556         24,481
Write off of affiliate shares acquired
  through exercise of warrants                         30,000              -
                                                 -------------  -------------
Loss before income taxes                             (103,026)      (125,122)
Provision for income taxes                                  -              -
                                                 -------------  -------------
Net loss                                         $   (103,026)  $   (125,122)
                                                 =============  =============

Net loss per share - basic and diluted           $          -   $          -
                                                 =============  =============

Weighted average shares outstanding -
  basic and diluted                                63,487,686     57,545,928
                                                 =============  =============
</TABLE>

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


                                        4
<PAGE>
<TABLE>
<CAPTION>
                                 CT HOLDINGS, INC.
                             STATEMENTS OF CASH FLOWS
                                    (unaudited)
                                                               Three Months Ended
                                                                     March 31,
                                                                 2004          2003
                                                            ------------  ------------
<S>                                                         <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                  $  (103,026)  $  (125,122)
  Adjustments to reconcile net loss to net cash
    used in operating activities
    Write off of affiliate shares acquired through
      exercise of warrants                                       30,000             -
  Changes in operating assets and liabilities
     Accounts payable and accrued expenses                       13,026        65,122
     Payable to Citadel                                          60,000        60,000
                                                            ------------  ------------
NET CASH USED IN OPERATING ACTIVITIES                                 -             -

NET CASH FROM INVESTING ACTIVITIES
  Exercise of warrants to acquire an affiliate's
    Series-A preferred stock                                    (30,000)            -

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from note payable to related party                    30,000             -
                                                            ------------  ------------
Net change in cash                                                    -             -
Cash and cash equivalents at the beginning of the period              -             -
                                                            ------------  ------------
Cash and cash equivalents at the end of the period          $         -   $         -
                                                            ============  ============

Non cash financing and investment items
   Conversion of note payable to shareholder
     into pending issuance of common stock                  $         -   $   600,000
                                                            ============  ============
</TABLE>

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


                                        5
<PAGE>
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

NOTE A - NATURE OF BUSINESS AND CERTAIN SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited interim financial statements reflect, in the opinion
of management, all adjustments (consisting of normal, recurring adjustments)
necessary to present fairly the financial position, results of operations and
cash flows of CT Holdings. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles in the United States ("GAAP") have been condensed or
omitted pursuant to rules and regulations promulgated by the Securities and
Exchange Commission (the "Commission"). These statements should be read together
with the audited financial statements and notes thereto for the years ended
December 31, 2003 and 2002, included in CT Holdings' Form 10-KSB for the fiscal
year ended December 31, 2003 on file with the Commission. The results of
operations for the interim periods shown herein are not necessarily indicative
of the results to be expected for any future interim period or for the entire
year.

NATURE OF BUSINESS

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

At March 31, 2004 the Company held investments in two companies, Parago, Inc.
("Parago") and River Logic, Inc. ("River Logic"). The Company owns approximately
1% of Parago and approximately 8% of River Logic at March 31, 2004.

Parago was formed in 1999 as an application service provider ("ASP") and
Internet based business process outsourcer that provides an online suite of
offerings designed to increase sales, reduce costs, retain customers and
increase client profitability. These services include online promotional
management, online rebate processing, proactive email, online surveys, and
customer data warehousing, analysis and reporting. Parago's comprehensive


                                        6
<PAGE>
integrated suite of outsourced customer care solutions are marketed across
multiple industry lines. The Company accounts for its investment in Parago using
the cost method of accounting. As an early stage company, Parago, until recently
has had a history of operating losses and due to uncertainty of future earnings
capacity as well as lack of marketability of the common stock, the carrying
value of the investment was written down in prior periods and the investment
has no carrying value at March 31, 2004 and December 31, 2003.

In May 2000, CT Holdings acquired a minority interest in River Logic, Inc.
("River Logic"), which develops decision-support applications for industry.
Using COR Technology, a rapid-application development system, developers at
River Logic create applications that enable industry professionals to model
complex enterprises and explore financial relationships on a desktop computer or
laptop. Embedded analytics allow end-users to understand the financial
implications of critical business decisions easily by manipulating graphical
icons that model their enterprise. The Company accounts for its investment in
River Logic using the cost method of accounting. As an early stage company,
River Logic until recently has had a history of operating losses and due to
uncertainty of future earnings capacity as well as lack of marketability of the
common stock, the carrying value of the investment was written down in prior
periods and has no carrying value at March 31, 2004 and December 31, 2003.


LIQUIDITY

The Company received a report from its' independent auditors for the year ended
December 31, 2003 containing an explanatory paragraph that describes the
uncertainty regarding its ability to continue as a going concern due to
recurring operating losses and a significant working capital deficiency. The
Company has incurred recurring operating losses and has a significant working
capital and stockholders' deficiency at March 31, 2004 of approximately $1.5
million. The Company had no cash balance or current assets at March 31, 2004 and
current liabilities total approximately $1.5 million. The Company has been and
continues to be dependent upon outside financing to perform its business
development activities, make investments in new technology companies and to fund
operations. Immediate funding needs of the business are expected to be provided
by financings through short-term notes payable and additional investments from
related parties although there can be no assurance that such funds will be
available. In addition, the Company's current financial condition and limited
investment opportunities have limited its' ability to raise funds. At March 31,
2004 the Company had no plans to raise capital nor had sources of capital been
identified.


                                        7
<PAGE>
During the three months ended March 31, 2004 there were no funds used in
operating activities. Net cash used in investing activities included $30,000 to
exercise warrants to acquire 28.8749 shares of Parago's Series-A preferred
stock. These shares were deemed to have no fair market value and were
immediately written off.

Net cash provided from financing activities included $30,000 from the CEO
through issuance of a note payable secured by Parago's Series-A preferred stock.
Future cash may come from the realization of the value of the investments in
Parago and River Logic however there can be no assurance that any value will
ever be realized from these investments.

The Company's strategy of continuing to support and expand its business
development activities requires the Company to obtain additional capital.
Achieving positive cash flow is currently highly dependent upon obtaining
liquidity from the Company's investments in unconsolidated affiliates. The
complete implementation of this element of the Company's strategy will not
generate positive cash flow in the foreseeable future. The Company estimates it
will need to raise $1.5 million to settle liabilities and to begin to support
its incubator and business development activities for the next twelve months.
Historically, the Company has obtained short-term bridge funding from related
parties. While this may occur in the future there can be no assurance that such
financing will be available or if available with terms that the Company would be
willing to accept.

The Company has made investments in entities that it believes may provide
liquidity to the Company in the long term. The Company believes that the
investment in Parago has been successful; and even though Parago has reported an
unaudited net income for the year ended December 31, 2003, as expected in an
early stage company, Parago has a history of operating losses and has
experienced cash flow deficiencies as it implements its business plan. Parago
has been successful in raising capital to support its operations but there is no
assurance that it will be able to raise sufficient capital in the future to
support operations or that its operations will attain profitability. The
Company's percentage ownership in Parago is approximately 1%. The Company
believes, however, that the investment of 20,000 common shares of Parago
(following a 1-for-1000 reverse stock split), 28.8749 shares of Series-A
preferred stock (convertible into 2,887 shares of common stock) and an
additional 5,000 (5,000,000 pre 1:1000 reverse stock split) shares received from
our CEO in February 2004 upon exercising his exchange right for 6,000,000 shares
of the Company's common stock, may ultimately provide an appropriate return.

Since the Company's initial investment, River Logic has made progress in
executing its strategy through its development and introduction of new products
and establishment of new customer relationships. The Company's ownership
percentage is approximately 8%. River Logic also has a history of operating


                                        8
<PAGE>
losses as well as a limited access to capital. The Company recognized that its
investment in River Logic would be illiquid in the early stages of its business
and accordingly carries the investment at zero on its balance sheet.

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

BASIS OF PRESENTATION

The accompanying financial statements of CT Holdings have been prepared in
accordance with accounting principles generally accepted in the United States.
Where appropriate, prior year amounts have been reclassified to conform to the
current period presentation.

USE OF ESTIMATES

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

STOCK-BASED COMPENSATION

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

The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of SFAS No. 123 and SFAS No. 148 and Emerging
Issues Task Force ("EITF") Issue No. 96-18, "Accounting for Equity Instruments
That Are Issued to


                                        9
<PAGE>
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services." All transactions in which goods or services are the consideration
received for the issuance of equity instruments are accounted for based on the
fair value of the consideration received or the fair value of the equity
instrument issued, whichever is more reliably measurable. The measurement date
of the fair value of the equity instrument issued is the earlier of the date on
which the counterparty's performance is complete or the date on which it is
probable that performance will occur.

If the Company had recognized compensation expense, in accordance with SFAS Nos.
123 and 148, based upon the fair value at the grant date for options granted to
employees, officers and directors during the three months ended March 31, 2004
and 2003, the pro forma effect on net loss and net loss per share would have
been as follows:

<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED
                                                        MARCH 31,
                                                   2004            2003
                                               ------------  ------------
<S>                                            <C>           <C>
Net loss attributable
   to common stockholders
   as reported                                 $  (103,026)  $  (125,122)

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

Deduct: Stock-based employee
   compensation expense
   determined under fair value
   based method                                          -             -
                                               ------------  ------------
Pro forma net loss                             $  (103,026)  $  (125,122)
                                               ============  ============

Net loss per common share - basic and diluted
   As reported                                 $     (0.00)  $     (0.00)
                                               ============  ============
   Pro forma                                   $     (0.00)  $     (0.00)
                                               ============  ============
</TABLE>

NET LOSS PER COMMON SHARE

Net loss per common share is computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the period. Included
in the weighted average number of common shares outstanding for the three months
ended March 31, 2004 and 2003 are 2,700,000 shares that would have been issued
when a shareholder exercised his right to convert a note payable to common stock
if the Company had the available authorized


                                       10
<PAGE>
shares. These shares have been included in the computation from the date that
they would have been issued.

In addition, the weighted average number of shares outstanding for the three
months ended March 31, 2004 includes 6,000,000 shares that would have been
issued when the CEO exercised his right to exchange 5,000,000 (5,000 after a
1:1000 reverse stock split) shares of Parago common stock if the Company had the
available authorized shares. These shares have been included in the computation
from the date that they would have been issued.

Basic loss per share excludes any dilutive effects of options and warrants.
Stock options and warrant to purchase 4,917,500 shares of common stock and
6,307,451 shares of common stock at March 31, 2004 and 2003, respectively, have
been excluded from the computation of diluted loss per share, as the effect
would be anti-dilutive. At March 31, 2004, the Company does not have any
outstanding stock options or warrants that have an exercise price below market
value.

The inclusion of the shareholder's 2,700,000 common stock shares and the CEO's
6,000,000 common stock shares in the weighted average shares outstanding for the
three months ended March 31, 2004, as discussed above, produces a weighted
average shares outstanding for the loss per share computation exceeding the
currently authorized shares of 60,000,000 common stock shares. Both the
shareholder and the CEO have waived their rights to receive their respective
shares until such time as the shares become authorized.

NOTE B - ADVANCES AND NOTES TO RELATED PARTIES

In February 2004, our CEO loaned the Company $30,000 in order for the Company to
exercise the Company's warrants to purchase shares of Series-A convertible
preferred stock, pursuant to a promissory note payable to our CEO which is
secured by a pledge of the Parago Series-A preferred stock that is payable May
17, 2004.

During 2003, CT Holdings received an advance of $225,000 from Citadel Security
Software Inc. ("Citadel")to pay a legal settlement in return for an unsecured
Note Payable to Citadel due on demand and bearing interest at 12% per year. The
accrued interest on the note payable at March 31, 2004, was approximately
$28,000 and approximately $21,000 at December 31, 2003.

Pursuant to the terms of the transition services agreement with Citadel, the
Company has agreed to pay Citadel a monthly fee of $20,000 per month for the
services of its CEO, CFO and accounting and information management staff, as
well as office rent and indirect overhead expenses. The Company has a liability
recorded for $695,000 and $635,000 for amounts payable to Citadel under


                                       11
<PAGE>
this agreement at March 31, 2004 and December 31, 2003, respectively. The
transition services agreement expires in May 2004 and may be renewed upon
approval of the independent members of each company's board of directors.

NOTE C - NOTES PAYABLE TO SHAREHOLDERS

At March 31, 2004 and December 31, 2003, the principal balance of a $9,000, 8%
note payable to a shareholder remains outstanding, was in default and continues
to bear interest at 8% per annum. Accrued interest payable of approximately
$3,200 and $2,800 related to this note is included in accounts payable and
accrued expenses at March 31, 2004 and December 31, 2003, respectively.

NOTE D - RELATED PARTY TRANSACTIONS

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

In February 2004, our CEO loaned the Company $30,000 in order for the Company to
exercise the Company's warrants to purchase 28.8749 shares of Series-A
convertible preferred stock, pursuant to a promissory note to our CEO which is
secured by a pledge of the Parago Series-A preferred stock that is payable May
17, 2004.

NOTE E - COMMITMENTS AND CONTINGENCIES

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

Following mediation in July 2000, the Company entered into a settlement term
sheet, to attempt to resolve the disputes between


                                       12
<PAGE>
it and JMA, pursuant to which the Company and JMA agreed in principle to settle
the lawsuit for an aggregate of $3 million, in a combination of $1.5 million in
cash and 300,000 shares of the Company's common stock with a guaranteed value of
$5 per share as of January, April and October 2001 (with respect to 100,000 of
the shares for each period). The settlement was subject to execution of
definitive settlement documents and approval of the boards of directors of both
parties.

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

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


                                       13
<PAGE>
settlement in an amount less than the amount accrued at March 31, 2004. The
settlement is payable on May 24, 2004.

In January 2003, R.R Donnelly asserted claims against the Company and Steve B.
Solomon alleging non-payment for services provided to CT Holdings by the
plaintiff. The plaintiff is seeking $16,872 from the Company for past due
invoices as well as attorney's fees in the amount of $24,000, court costs and
post judgment interest at the highest legal rate. The Company had a liability of
approximately $50,000 recorded at March 31, 2004 and December 31, 2003 for the
services preformed by the vendor. The Company intends to vigorously defend this
case.

In April 2003 MWW Group re-filed an old suit styled "MWW Group v. CT Holdings
et. al" in the Superior Court of Bergen County, New Jersey which had been
dismissed for want of prosecution. On July 21, 2003, a default judgment was
entered against CT Holdings and Steve Solomon. On December 9, 2003, the Court
signed an order vacating the default judgment. The plaintiff alleges damages in
the amount of $91,290. The case is in the discovery stage and is not yet
scheduled for trial. The Company intends to vigorously defend this case.

In April 2004 a lawsuit, styled Kevin Auger v. Citadel Security Software, aka
Citadel Technology and CT Holdings, Inc., was filed in the Fourth District of
Utah County, State of Utah for $20,789 alleging breach of contract. The Company
intends to vigorously defend this lawsuit but due to its recent filing cannot
assess the outcome or liability if any at March 31, 2004.

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

NOTE F - CERTAIN TRANSACTIONS

At March 31, 2004, 50,000 shares of CT Holdings' common stock, and 12,500 pro
rata dividend shares of Citadel were reserved and available to settle the
liabilities of approximately $32,000. The Company believes that the negotiations
will ultimately be concluded with the issuance of the shares in full settlement
of these liabilities however there can be no assurance that such settlement will
be finalized or on terms favorable to the Company.


                                       14
<PAGE>
ITEM 2 -MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

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

FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

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

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

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


                                       15
<PAGE>
shares of our common stock. Our business and results of operations could be
seriously harmed by any of the following risks. The trading price of our common
stock could decline due to any of these risks, and you may lose part or all of
your investment.

                                  GENERAL RISKS

WE HAVE RECEIVED A GOING CONCERN REPORT FROM OUR AUDITORS, HAVE A HISTORY OF NET
LOSSES AND WILL NEED ADDITIONAL FINANCING TO CONTINUE AS A GOING CONCERN.

We received a report from our independent auditors for our year ended December
31, 2003 containing an explanatory paragraph that describes the uncertainty
regarding our ability to continue as a going concern due to our recurring
operating losses and a significant working capital deficiency. Historically, we
have incurred recurring operating losses and have a significant stockholders'
deficit at March 31, 2004 of approximately $1.5 million. We had no cash balance
or current assets at March 31, 2004 and current liabilities total approximately
$1.5 million. We have no access to capital at March 31, 2004 and we have no
plans to raise capital, nor have we identified sources of capital. In the past
our funding needs of the business have been provided by financings through
short-term notes payable and additional investments from related parties,
including our Chief Executive Officer, however there can be no assurance that
such funds will be available from these related parties. The Company has been
and continues to be dependent upon outside financing to perform its business
development activities, make investments in new technology companies and to fund
operations.

Our plans to continue to support and expand our business development activities
are limited due to a lack of identification of near term capital. As a result,
it is unlikely that the implementation of the Company's business strategy will
generate positive cash flow in the foreseeable future. Achieving positive cash
flow is currently highly dependent upon obtaining liquidity from our investments
in unconsolidated affiliates. We have no plans at March 31, 2004 to raise
additional capital to invest in new business opportunities. We estimate that we
will need to raise up to $1.5 million to settle liabilities and to continue to
support our incubator and business development activities. Historically, we have
obtained short-term funding from our Chief Executive Officer or Directors of the
Company. The amount of capital and the timing of any future financing have not
been determined and there can be no assurance that we will be able to raise new
capital or that sources of capital would be available at terms we would be
willing to accept.


                                       16
<PAGE>
We have made investments in entities that we believe may provide liquidity to
the Company in the long term and we believe that our investments in Parago and
River Logic have been successful. Parago has recently attained profitability. As
is expected in early stage companies, River Logic has not been profitable and
has had to scale back operations. Historically both companies have experienced
cash flow deficiencies. The current private equity and venture capital market
conditions have limited the availability of investment capital for investment in
private companies. In addition, we have not participated in the additional
capital infusions since our initial investments and as a result, our ownership
percentage in both investee companies has been diluted. Our ownership percentage
in Parago is approximately 1% and approximately 8% in River Logic and the
carrying values of both investments have been written down to zero.

While the performance of the investee companies to date has been as expected,
there can be no assurance that we will ever achieve liquidity from these
investments. In addition, there can be no assurance that our plans will be
successful or what other actions may become necessary in the future. Until we
are able to create liquidity from our investments through sale to a strategic
investor, an initial public offering or some other liquidity transaction, we
will continue to require working capital to fund operating expenses. Although we
have been successful raising capital in the past, an inability to raise capital
may require us to sell assets. Such actions could have a material adverse effect
on our business and operations and result in charges that could be material to
the Company's business and results of operations. At December 31, 2003 we have
not identified sources of capital nor do we have any plans to raise capital to
settle liabilities or to fund business development activities.

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

Our business model is designed to enable the companies in whom we invest or
acquire to become market leaders in their industries. Our strategy over the
years has led to the development, acquisition and operation of technology based
businesses with strong business models and compelling valuations. We believe
that the anticipated growth in technology creates strong opportunities for us to
increase shareholder value by investing in early stage ventures well positioned
for growth in their respective marketplaces. We will attempt to increase the
value of each investee by providing management, marketing and financial
expertise along with financial capital and then realize this new value through a
subsequent liquidity event such as a sale, merger


                                       17
<PAGE>
or initial public offering of the investee companies. However, the impact of any
advice and expertise may be limited due to a lack of a significant ownership
percentage in any of our investees and the lack of available capital.

In May 2002, we were successful in spinning off Citadel into a standalone
company through the pro-rata dividend distribution of Citadel common stock to
shareholders of CT Holdings. At March 31, 2004 and December 31, 2003 we held
investments in two companies, Parago and River Logic. However the investments
have no carrying value on the balance sheet of the Company at March 31, 2004 and
December 31, 2003, due to information technology market conditions, as well as
historical operating performance of the investee companies that have created
uncertainty as to achievement of sustainable earnings and cash flow. During 2003
and through March 31, 2004 we have looked for businesses and technologies in
which to invest but economic and stock market conditions along with a general
decline in the availability of private and public capital available to us has
prevented us from making any additional investments and there can be no
assurance that these factors will improve so that the Company can continue to
execute its business plan.

Other than our formation and development of Citadel, Parago and River Logic, we
have a brief history in executing our business strategy. As a consequence, our
prior operating history may not provide a meaningful guide to our prospects in
emerging markets. Moreover, our business model and prospects must be considered
in light of the risk, expense and difficulties frequently encountered by
companies in early stages of development, particularly companies in new and
rapidly evolving markets. We may be unable to execute our strategy of developing
our business due to numerous risks, including the following:

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

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

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

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

     -    We face competition from incubators, some of which are publicly traded
          companies, venture capital companies and large corporations; many of
          these competitors have greater


                                       18
<PAGE>
          financial resources and brand name recognition than we do, which may
          make it difficult for us to effectively compete.

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

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

We have developed and invested in Parago and River Logic (our "investees" or
"investee companies"). Inasmuch as our investee companies are early stage
ventures, it is difficult to judge their future prospects. Economic,
governmental, industry and internal company factors outside of our control
affect each of our investee companies.

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

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

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

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


                                       19
<PAGE>
appointed receiver could take control of us and liquidate our business.
Following the Distribution of Citadel, we may be deemed to be an investment
company unless we qualify for a safe harbor within the time permitted under the
1940 Act.

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

OUR STOCK IS TRADED IN THE OVER THE COUNTER MARKET.

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

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

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

OUR EARNINGS AND STOCK PRICE ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS.


                                       20
<PAGE>
Due to the factors noted in this Report, our earnings and stock price have been
and may continue to be subject to significant volatility, particularly on a
quarterly basis. We have experienced no revenue or earnings which have had an
immediate and significant adverse effect on the trading price of our common
stock. This may occur again in the future.

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

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

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

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

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


                                       21
<PAGE>
includes the Distribution unless CT Holdings establishes otherwise. Under
certain circumstances, Citadel would be obligated to indemnify CT Holdings for
all or a portion of this substantial corporate tax liability under the tax
disaffiliation agreement.


RISKS RELATED TO OUR INVESTEES

The following are some risks related to the business of Parago and River Logic,
our investees, and should be considered in addition to the risk factors
described in this Report. Any of these factors could have a material adverse
effect on us.

THERE CAN BE NO ASSURANCE THAT OUR INVESTEES WILL COMPLETE AN INITIAL PUBLIC
OFFERING OR OTHER LIQUIDITY EVENT.

There can be no assurance that any of our investees will complete an initial
public offering, merger, sale or other liquidity event. The failure to complete
an offering or other liquidity event such as an acquisition by a third party
could have a material adverse effect on our stock price. You cannot be assured
that an initial public offering or other liquidity event will occur in the near
future or ever at all. Even if a liquidity event is achieved, we may not receive
material proceeds from a liquidity event because of the existence of other
securities with preferences to the securities we hold or if the price received
by the investee company is not sufficient to generate a favorable return to us.
In addition, we have agreed to convert the shares of Parago common stock issued
in connection with the acquisition of 2-Lane Media by Parago into up to 500,000
of our shares at the option of the 2-Lane Media shareholders, and in May 2002 we
exchanged 1,200 Parago shares held by some of the 2-Lane Media shareholders into
139,806 shares of our common stock. Pursuant to the terms of the subscription
agreements between Parago and some of its stockholders, we may be required to
issue up to 414,000 shares of our common stock based on a conversion price of
$3.75 per share (above the fair market value on the dates of issuance) at the
option of such stockholders. In May 2002, the Company exchanged 16,000 shares of
the Company's common stock for 40 shares of Parago common stock with one of
these shareholders. In February 2004, our CEO elected to exercise an exchange
right whereby he exchanged 5,000,000 (pre 1:1000 reverse split shares) shares of
Parago common stock for 6,000,000 shares of CT Holdings common stock. These
provisions could have the effect of diluting our stockholders if the market
price for our stock is above that price at the time of conversion.

WE MAY NOT BE ABLE TO EFFECT THE DISTRIBUTION OF PARAGO SHARES.


                                       22
<PAGE>
We previously announced that we intend to distribute shares of Parago common
stock to our shareholders upon compliance with the Securities and Exchange
Commission (SEC) requirements applicable in connection with the proposed
distribution and upon the expiration of a 180 day lockup agreement between the
underwriters of Parago's previously proposed initial public offering and us. If
there are problems associated with compliance with SEC requirements or state
law, then the distribution of Parago shares may be delayed or may not occur.
There can be no assurance that we will complete the distribution on the proposed
terms or at all.

OUR INVESTEES' BUSINESSES AND FUTURE PROSPECTS ARE EXTREMELY DIFFICULT TO
EVALUATE BECAUSE THEIR OPERATING HISTORIES ARE VERY LIMITED AND THEIR BUSINESS
MODELS ARE NEW, UNPROVEN AND EVOLVING.

Our investees are early stage companies, and therefore each investee has only a
limited operating history on which one can base an investment decision. You
should consider their prospects in light of the uncertainties and difficulties
frequently encountered by companies in their early stages of development. In
addition, each investee's business model is new, unproven and evolving. We
cannot assure that our investees' business models will be commercially
successful, or that their solutions will be accepted by businesses or consumers.
If our investees are unable to establish pricing and service models acceptable
to manufacturers, retailers and service providers and attractive to their
customers, their solutions may not be commercially successful.

EACH INVESTEE HAS A HISTORY OF NET LOSSES AND COULD INCUR SUBSTANTIAL NET LOSSES
IN THE FUTURE.

Parago has only recently reported its first unaudited full year profit and River
Logic has never reported a profit. Both investees could incur substantial losses
in the future, if our investees' revenues do not grow as they anticipate, our
investees may never be profitable.

TO CONTINUE THEIR OPERATIONS AND BUSINESSES, OUR INVESTEES MUST RAISE ADDITIONAL
FINANCING.

Parago has only recently reported its first unaudited full year profit and River
Logic has never reported a profit. Both investees could incur substantial losses
in the future, if our investees do not raise additional funds, or achieve
profitability, their businesses and results of operations will be seriously
harmed, and our assets and share price would be materially and adversely
impacted. This additional financing may not be available to our investees on a
timely basis if at all, or, if available, on terms acceptable to our investees.
Moreover,


                                       23
<PAGE>
additional financing may cause material and immediate dilution to existing
stockholders of our investees, including us.

IN THE EVENT OF THE COMPLETION OF AN INITIAL PUBLIC OFFERING BY ANY OF OUR
INVESTEES, THEIR STOCK PRICE IS LIKELY TO BE VERY VOLATILE.

Currently, the securities of our investees cannot be bought or sold publicly.
There can be no assurance that any of our investees will be able to complete an
initial public offering. Although it is anticipated that the initial public
offering price (if an initial public offering is completed) would be determined
based on several factors, the market price after the offering may vary
significantly from the initial offering price. The market price of our
investees' common stock is likely to be highly volatile and could be subject to
wide fluctuations in response to factors that are beyond its control. A decline
in their stock price will adversely affect our stock price.

Domestic and international stock markets often experience extreme price and
volume fluctuations. Market fluctuations, as well as general political and
economic conditions, such as a recession or interest rate or currency rate
fluctuations, could adversely affect the market price of Parago's and River
Logic's common stock, if the shares become publicly traded.

Sales of a substantial number of shares of our investees' common stock in the
public market after an initial public offering could depress the market price of
their common stock and could impair their ability to raise capital through the
sale of additional equity securities.


                                       24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

You should read the following discussion in conjunction with our audited
financial statements for the years ended December 31, 2003 and 2002 and the
related notes in the Company's Form 10-KSB. Our year ends on December 31, and
each of our quarters end on the final day of a calendar quarter (each March 31,
June 30 and September 30). The following discussion contains forward-looking
statements. Please see Forward-Looking Statements for a discussion of
uncertainties, risks and assumptions associated with these statements.

OVERVIEW

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

Recent geopolitical, economic and stock market conditions along with lack of
available capital have limited our ability to raise sufficient capital to invest
in additional companies and technologies that could offer us and our
shareholders a reasonable rate of return on their investment in the foreseeable
future. Historically, these factors have also affected the businesses of our
investee companies and as a result, in years prior to the year ended December
31, 2003 the carrying values of our investments in Parago and River Logic have
been written down to zero. We expect that if and when capital becomes available
to us, we may continue our business development and investment activities,
however there can be no assurance that any capital will be available to us.
Until such time as capital becomes available the Company's business activities
will be limited to reviewing investment opportunities, filing of compliance
documents and defending the lawsuits disclosed in Part I, Item 3 - Legal
Proceedings.


                                       25
<PAGE>
OUR INVESTEE COMPANIES

Parago

In January 1999, we formed Parago, an application service provider and Internet
based business process outsourcer that provides a suite of technology offerings
(including PromoCenter, ClickChoice and KnowledgeCenter) designed to increase
sales, reduce costs, and retain customers for retailers, manufacturers and
service organizations. Parago's continuous customer interaction services include
online promotional management (including online rebate processing), proactive
email, online surveys, and customer data analysis and reporting. We account for
our investment in Parago using the cost method, due to the Company's ownership
percentage of approximately 1% of the fully diluted shares outstanding. Due to
Parago's history of operating losses and inherent risks associated with an early
stage companies, the carrying amount of our investment is zero.

River Logic

In May 2000, we made an investment in River Logic by acquiring shares of common
stock of River Logic from several of its existing shareholders in exchange for
333,333 shares of our common stock. We also acquired shares of Series A
Convertible Preferred Stock ("Series A") from River Logic in exchange for the
contribution of assets acquired from a third party by the Company through
exchange of 666,667 shares of our common stock. In connection with the
investment in River Logic, we also made two bridge loans totaling $600,000 to
River Logic that were convertible into shares of capital stock of River Logic.
We account for our investment in River Logic using the cost method, due to the
Company's ownership percentage of approximately 8% of the fully diluted shares
outstanding. Due to River Logic's history of operating losses and inherent risks
associated with an early stage companies, the carrying amount of our investment
is zero.

CRITICAL ACCOUNTING POLICIES

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


                                       26
<PAGE>
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities. Actual results
may differ from these estimates under different assumptions or conditions.

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

IMPAIRMENT CHARGES

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

COMMITMENTS AND CONTINGENCIES

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

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

EFFECT OF VARIOUS ACCOUNTING METHODS FOR EQUITY INVESTMENTS

The various interests that we acquire in our investee companies are accounted
for under three broad methods: consolidation,


                                       27
<PAGE>
equity method and cost method. The applicable accounting method is generally
determined based on our percentage ownership in an investee company.

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

EQUITY METHOD: Investee companies whose results we do not consolidate, but over
whom we exercise significant influence, are generally accounted for under the
equity method of accounting. Whether or not we exercise significant influence
with respect to an investee company depends on an evaluation of several factors
including, among others, representation on the investee company's board of
directors and percentage ownership level, which is generally a 20% to 50%
interest in the securities of the investee company, including our holdings in
common, preferred and other convertible instruments in the investee company
where we may have voting rights. Under the equity method of accounting, an
investee company's accounts are not reflected within our financial statements;
however, our share of the earnings or losses of the investee company is
reflected in our statements of operations. At March 31, 2004 and December 31,
2003 we had no investee company qualified for this accounting method.

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

RESULTS OF OPERATIONS

THE QUARTER ENDED MARCH 31, 2004 COMPARED WITH THE QUARTER ENDED MARCH 31, 2003

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


                                       28
<PAGE>
our investee companies are not consolidated, we do not report revenue from
investee businesses.

GENERAL AND ADMINISTRATIVE EXPENSES

During the quarter ended March 31, 2004 general and administrative expenses were
approximately $65,000 representing a decrease of approximately $36,000 or 35.6%
from the approximately $101,000 of general and administrative expenses recorded
for the quarter ended March 31, 2003. The decrease is primarily due to lower
legal, accounting, consulting and other professional fees and expenses resulting
from the lower business development activities during the quarter ended March
31, 2004 versus the similar period of 2003.

INTEREST (INCOME) EXPENSE

Interest expense for the quarter ended March 31, 2004 was approximately $7,600
representing interest expense on advances and notes payable to shareholders and
the demand note payable to Citadel. Interest expense for the quarter ended March
31, 2003 was approximately $24,000. The decrease in interest expense is due to
lower average balances of interest bearing debt outstanding during the quarter
ended March 31, 2004 versus the same quarter of 2003.

WRITE-OFF OF AFFILAITES SHARES ACQUIRED THROUGH EXERCISE OF WARRANT

The $30,000 write off of investment in affiliates is related to the warrant
exercised by the Company to obtain Series-A Parago preferred Stock, which was
determined by the Company to have no fair market value and was immediately
written off.

NET INCOME (LOSS)

For the quarter ended March 31, 2004 we reported a net loss of approximately
$103,000 versus a net loss of approximately $125,000 for the quarter ended March
31, 2003.

LIQUIDITY AND CAPITAL RESOURCES

We received a report from our independent auditors for our year ended December
31, 2003 containing an explanatory paragraph that describes the uncertainty
regarding our ability to continue as a going concern due to our recurring
operating losses and our significant working capital deficiency. Historically,
we have incurred recurring operating losses and have a significant stockholders'
deficit at March 31, 2004 of approximately $1.5 million. We had no cash balance
or current assets at March 31,


                                       29
<PAGE>
2004 and current liabilities total approximately $1.5 million. We have no access
to capital at March 31, 2004 and we have no plans to raise capital nor have we
identified sources of capital. Our past funding needs of the business have been
provided by financings through short-term notes payable and additional
investments from related parties, including our Chief Executive Officer, however
there can be no assurance that such funds will be available from this related
party. The Company has been and continues to be dependent upon outside financing
to perform its business development activities, make investments in new
technology companies and to fund operations.

PLAN OF OPERATIONS

Our plans to continue to support and expand our business development activities
are limited due to a lack of identification and availability of near term
capital. As a result, it is unlikely that the implementation of the Company's
business strategy will generate positive cash flow in the foreseeable future.
Achieving positive cash flow is currently highly dependent upon obtaining
liquidity from our investments in unconsolidated affiliates. We have no plans at
March 31, 2004 to raise additional capital to invest in new business
opportunities. To do so we estimate that we will need to raise up to $1.5
million to settle liabilities after which we may then begin to support our
incubator and business development activities. However there can be no assurance
that we will raise additional funds needed to settle our liabilities.

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

There was no net cash used in operating activities for the quarter ended March
31, 2004. This is the result of net loss of approximately $103,000 for the
quarter ended March 31, 2004 and an offset by cash from changes in operating
assets and liabilities of approximately $73,000 and $30,000 write-off of
investment in affiliate.

CASH FLOW ACTIVITIES

There was no net cash used in operations for the quarter ended March 31, 2003
which is principally a result of the net loss of approximately $125,000 offset
by the changes in operating assets and liabilities of approximately $125,000.



                                       30
<PAGE>
Net cash provided from financing activities during the quarter ended March 31,
2004 included $30,000 from the CEO through a note payable secured by Parago's
Series-A preferred stock.

Net cash used in investing activities during the quarter ended March 31, 2004,
included $30,000 to exercise warrants to acquire Parago's Series-A preferred
stock.

There was no cash from investing activities for the quarter ended March 31,
2003. There were no cash flows provided from financing activities for the
quarter ended March 31, 2003.

At March 31, 2004 the Company was in default on the following indebtedness:

  -  $9,000, an 8% note payable to a shareholder. The note continues to bear
interest at 8% with accrued interest at March 31, 2004 of $3,200.

As a result of the aforementioned factors, there were no net cash flows in the
quarters ended March 31, 2004 and 2003.

CONTRACTUAL OBLIGATIONS

At March 31, 2004 we have a note payable to a related party of $30,000 secured
by Parago Series-A Preferred Stock due May 17, 2004. There are no other long
term debt obligations, capital lease obligations, operating lease obligations or
long term capital purchase commitments. However at March 31, 2004 we have
accrued obligations for estimated payments of legal judgments against us and for
payments to Citadel under the transition services agreement and demand note
payable, none of which may be paid until such time as the Company has sufficient
cash to pay these obligations.

ITEM 3. CONTROLS AND PROCEDURES

The Company's management, including the Company's principal executive officer
and principal financial officer, has evaluated the effectiveness of the
Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period
covered by this Quarterly Report on Form 10-QSB. Based upon that evaluation, the
Company's principal executive officer and principal financial officer have
concluded that the disclosure controls and procedures were effective as of the
end of the period covered by this Quarterly Report on Form 10-QSB.

There were no changes in the Company's internal control over financial reporting
that occurred during the Company's last


                                       31
<PAGE>
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial reporting.


                                       32
<PAGE>
PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

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

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


                                       33
<PAGE>
Court of New York, that state's trial court, in a case styled Roan Meyers v. CT
Holdings. CT Holdings has filed counter claims for breach of the terms sheet as
well as breach of the placement agency agreement. Cross motions for partial
summary judgments have been argued but the court has not ruled on the motions.
No trial date has been set at this time. The Company intends to vigorously
defend this case.

In June 2000, CT Holdings was served with a lawsuit filed in the 157th State
District Court in Houston, Texas by Michael and Patricia Ferguson for breach of
contract, breach of fiduciary duty, tortuous interference, violation of the
Texas Deceptive Trade Practices Act and negligence. The case was styled Michael
and Patricia Ferguson v. CT Holdings, Inc. Specifically, the Ferguson's claim
that they were damaged when they attempted to exercise warrants during a time
when CT Holdings' related registration statement could not be used. In July,
2002, the plaintiffs were awarded damages of $575,510, pre-judgment interest of
$86,748, attorneys' fees of $103,818, post-judgment interest at 10% per year,
and costs. The Company had a liability of $785,000 recorded at December 31, 2002
for this judgment.

In August 2002, PriceWaterhouseCoopers, LLP ("PWC") filed a lawsuit against CT
Holdings seeking payment of $131,816 for services performed pursuant to a
contract with CT Holdings related to the JMA lawsuit described above. The court
ordered that mediation be held by July 2003. The case is styled
PriceWaterhouseCoopers, LLP v. CT Holdings, and was filed in the 192nd District
Court, Dallas County, Texas. In July 2003, PWC obtained a summary judgment
against the Company for damages of $131,816 plus pre-judgment interest of
$57,615, post-judgment interest at 10% and attorneys' fees in the amount of
$8,605. During the year ended December 31, 2003 the Company recorded an accrual
for legal settlement of $207,000 including accrued interest in association with
this judgment. PWC has obtained a garnishment of the Company's bank accounts and
is seeking to obtain post judgment discovery. The Company has reached a
settlement in an amount less than the amount accrued at March 31, 2004. The
settlement is payable on May 24, 2004.

In January 2003, R.R Donnelly asserted claims against the Company and Steve B.
Solomon alleging non-payment for services provided to CT Holdings by the
plaintiff during the nine months ended September 30, 2002. The plaintiff is
seeking $16,872 from the Company for past due invoices as well as attorney's
fees in the amount of $24,000, court costs and post judgment interest at the
highest legal rate. The Company had a liability of approximately $50,000
recorded at March 31, 2004 and December 31, 2003 and 2002


                                       34
<PAGE>
for the services preformed by the vendor. The Company intends to vigorously
defend this case.

In April 2003 MWW Group re-filed an old suit styled "MWW Group v. CT Holdings
et. al" in the Superior Court of Bergen County, New Jersey which had been
dismissed for want of prosecution. On July 21, 2003, a default judgment was
entered against CT Holdings ad Steve Solomon. On December 9, 2003, the Court
signed an order vacating the default judgment. The plaintiff alleges damages in
the amount of $91,290. The case is in the discovery stage and is not yet
scheduled for trial. The Company intends to vigorously defend this case.

In April 2003, Harte Hanks, Inc. filed a lawsuit styled "Harte Hanks, Inc. v. CT
Holdings Inc. dba Citadel Computer" seeking payment of $12,513 for services
performed. In July 2003, the plaintiffs filed a motion for receivership and
alternatively to compel discovery in the lawsuit. At a hearing on the matter
held on September 5, 2003 in the County Court of Law Number Three of Dallas
County, Texas, the court ordered the Company to provide additional discovery by
October 20, 2003 which the Company failed to produce. As part of the
Distribution, Citadel assumed responsibility for this liability, and has settled
this liability for a total payment of $8,000.

In April 2004 a lawsuit, styled Kevin Auger v. Citadel Security Software, aka
Citadel Technology and CT Holdings, Inc., was filed in the Fourth District of
Utah County, State of Utah for $20,789 alleging breach of contract. The Company
intends to vigorously defend this lawsuit but due to its recent filing cannot
assess the outcome or liability if any at March 31, 2004.

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


                                       35
<PAGE>
ITEM 2 - RECENT SALES OF UNREGISTERED SECURITIES

During February 2004, the CEO exercised his conversion right to exchange
5,000,000 (pre 1:1000 reverse split) shares of Parago common stock for 6,000,000
shares of common stock of the Company. Since the issuance of these shares would
exceed the number of authorized shares, the CEO has waived his right to receive
the shares until such time as the shares become authorized.


ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

At March 31, 2004, and December 31, 2003 the Company was in default on the
following indebtedness:

     -    $9,000, an 8% note payable to a shareholder. The note continues to
bear interest at 8% with accrued interest at March 31, 2004 of approximately
$3,200.

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     31.1 Certification of Chief Executive Officer Pursuant To 18 U.S.C. Section
1350, As Adopted Pursuant To Section 302 Of The Sarbanes-Oxley Act of 2002

     31.2 Certification of Chief Financial Officer Pursuant To 18 U.S.C. Section
1350, As Adopted Pursuant To Section 302 Of The Sarbanes-Oxley Act of 2002

     32   Certification of Chief Executive Officer and Chief Financial Officer
Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The
Sarbanes-Oxley Act of 2002


(b)  Current Reports on Form 8-K

     None


                                       36
<PAGE>
                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.

CT Holdings, Inc.
(REGISTRANT)

Date: May 17, 2004                   By:  /s/  STEVEN B. SOLOMON
                                     --------------------------------
                                     Steven B. Solomon,
                                     President and Chief
                                     Executive Officer
                                     (Duly Authorized Signatory and
                                     Principal Executive Officer)


                                     /s/  RICHARD CONNELLY
                                     --------------------------------
                                     Richard Connelly,
                                     Chief Financial Officer
                                     (Duly Authorized Signatory and
                                     Principal Accounting and Financial
                                     Officer)


<PAGE>