United States
                       Securities and Exchange Commission
                             Washington, D.C. 20549

                                   Form 10-QSB


(Mark One)

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

                For the quarterly period ended November 30, 2001

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

                For the transition period from __________ to ___________

                Commission file number          0-19049



                      Fortune Diversified Industries, Inc.
--------------------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)


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

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

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


--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

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. Yes  X  No
                                                              ---    ---

On January 11, 2002 there were 69,496,629 shares of the Company's Common Stock
outstanding.



<PAGE>

PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements.

              FORTUNE DIVERSIFIED INDUSTRIES, INC. AND SUBSIDIARIES
                (FORMERLY WOW ENTERTAINMENT, INC. AND SUBSIDIARY)

                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                           ASSETS

                                                                  Unaudited         Audited
                                                                 November 30,      August 31,
                                                                     2001             2001
                                                                 -----------      -----------
<S>                                                              <C>              <C>
CURRENT ASSETS
     Cash and equivalents                                        $ 1,775,000      $ 2,538,000
     Accounts receivable                                              18,000               --
     Other current assets                                            111,000          107,000
                                                                 -----------      -----------
         Total Current Assets                                      1,904,000        2,645,000
                                                                 -----------      -----------

OTHER ASSETS
     Notes receivable-Note 4                                         630,000          630,000
     Investment in land development                                    6,000            6,000
     Investment in marketable securities                             677,000               --
     Office equipment                                                 48,000           35,000
                                                                 -----------      -----------
         Total Other Assets                                        1,361,000          671,000
                                                                 -----------      -----------

         TOTAL ASSETS                                            $ 3,265,000      $ 3,316,000
                                                                 ===========      ===========


                        LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Accounts payable                                            $    62,000      $    73,000
     Accrued payroll and related expenses                             44,000           28,000
     Accrued expenses                                                 53,000           50,000
                                                                 -----------      -----------
         Total Current Liabilities                                   159,000          151,000
                                                                 -----------      -----------

STOCKHOLDERS' EQUITY-Notes 2, 4 and 5
     Common stock                                                    695,000          695,000
     Additional paid-in capital and warrants outstanding           7,001,000        7,001,000
     Accumulated deficit, since July 21, 2000, when a
      deficit of $60,099,000 was eliminated-Note 7                (4,722,000)      (4,531,000)
     Accumulated other comprehensive income                          132,000               --
                                                                 -----------      -----------
                                                                   3,106,000        3,165,000

         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY              $ 3,265,000      $ 3,316,000
                                                                 ===========      ===========
</TABLE>

See Accompanying Summary of Accounting Policies and Notes to Unaudited Interim
Consolidated Financial Statements.

                                       2
<PAGE>

              FORTUNE DIVERSIFIED INDUSTRIES, INC. AND SUBSIDIARIES
                (FORMERLY WOW ENTERTAINMENT, INC. AND SUBSIDIARY)

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                Three Months Ended
                                                            November 30,     November 30,
                                                                2001             2000
                                                            -----------      -----------
<S>                                                         <C>              <C>
REVENUES                                                    $    20,000      $    92,000

COST OF REVENUES                                                 85,000        2,641,000
                                                            -----------      -----------

GROSS PROFIT                                                    (65,000)      (2,549,000)

SELLING, GENERAL, AND
     ADMININSTRATIVE EXPENSES                                   265,000          366,000
                                                            -----------      -----------

Operating (Loss)                                               (330,000)      (2,915,000)
                                                            -----------      -----------

OTHER INCOME (EXPENSE)
     Interest income                                             26,000            1,000
     Interest expense                                                --           (7,000)
     Gains on investments in marketable securities, net         113,000               --
                                                            -----------      -----------
         Total Other Income (Expense)                           139,000           (6,000)
                                                            -----------      -----------

Net (Loss) before Provision for Income Taxes                   (191,000)      (2,921,000)

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

NET (LOSS)                                                  $  (191,000)     $(2,921,000)
                                                            ===========      ===========


BASIC INCOME (LOSS) PER SHARE-Note 6                        $        --      $     (0.05)
                                                            ===========      ===========


DILUTED INCOME (LOSS) PER SHARE-Note 6                      $        --      $     (0.05)
                                                            ===========      ===========
</TABLE>

See Accompanying Summary of Accounting Policies and Notes to Unaudited Interim
Consolidated Financial Statements.

                                       3
<PAGE>

              FORTUNE DIVERSIFIED INDUSTRIES, INC. AND SUBSIDIARIES
                (FORMERLY WOW ENTERTAINMENT, INC. AND SUBSIDIARY)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                     Three Months Ended
                                                                November 30,     November 30,
                                                                    2001             2000
                                                                -----------      -----------
<S>                                                             <C>              <C>
OPERATING ACTIVITIES
     Net (loss)                                                 $  (191,000)     $(2,921,000)
     Adjustments to reconcile net (loss) to net cash (used)
      by operating activities:
         Depreciation                                                 5,000            1,000
         Gain on sale of investments                               (113,000)
         Increase (decrease) in certain operating assets
          and liabilities:
             Accounts receivable                                    (18,000)         (97,000)
             Merchandise inventories                                     --          (38,000)
             Production costs                                            --           16,000
             Other current assets                                    (4,000)          38,000
             Accounts payable, accrued expenses and other
              current liabilities                                     8,000          203,000
                                                                -----------      -----------
                 Net Cash (Used) by Operating Activities           (313,000)      (2,798,000)
                                                                -----------      -----------

INVESTING ACTIVITIES
     Purchase of office equipment                                   (18,000)          (5,000)
     Purchase of available-for-sale investments                  (1,095,000)              --
     Sale of available-for-sale investments                         663,000
     Web-site development costs incurred                                 --          (49,000)
                                                                -----------      -----------
                 Net Cash  (Used) by Investing
                  Activities                                       (450,000)         (54,000)
                                                                -----------      -----------

FINANCING ACTIVITIES
     Dividends paid to preferred stockholders                            --          (28,000)
     Proceeds from issuance of preferred stock                           --          700,000
     Proceeds from line of credit borrowings                             --        2,000,000
     Issuance of common stock                                            --           34,000
                                                                -----------      -----------
                 Net Cash Provided by Financing Activities               --        2,706,000
                                                                -----------      -----------

NET DECREASE IN CASH AND EQUIVALENTS                               (763,000)        (146,000)

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

     End of Year Period                                         $ 1,775,000      $   148,000
                                                                ===========      ===========

SUPPLEMENTAL DISCLOSURES
     Noncash investing and financing activities:
      Unrealized net gain on marketable securities              $   132,000
</TABLE>


See Accompanying Summary of Accounting Policies and Notes to Unaudited Interim
Consolidated Financial Statements.

                                       4
<PAGE>

              FORTUNE DIVERSIFIED INDUSTRIES, INC. AND SUBSIDIARIES
                (FORMERLY WOW ENTERTAINMENT, INC. AND SUBSIDIARY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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

     Nature of Business: Fortune Diversified Industries, Inc. (the Company),
     formerly known as WOW Entertainment, Inc. and American Gaming &
     Entertainment, Ltd., is a Delaware corporation organized in 1988. The
     Company is the parent company of wholly-owned subsidiaries: Cornerstone
     Wireless Services, Incorporated, Cornerstone Wireless Construction
     Services, Inc., Women of Wrestling, Inc., and Murphy Development, Ltd. The
     Company's current operating focus is achieved through its Cornerstone
     Wireless subsidiaries: Cornerstone Wireless Services Incorporated and
     Cornerstone Wireless Construction Services, Inc. and their affiliates
     ("Cornerstone").

          o    Cornerstone can assist its customers with: 1) wireless site
               acquisition (e.g., raw-land property along an interstate or a
               building rooftop for co-location of an antenna); 2) architectural
               and engineering analysis and drawings (e.g., analysis of an
               existing cell tower or construction drawings of cell towers and
               switches); 3) site construction; and 4) existing site maintenance
               and upgrades.

          o    Women of Wrestling, Inc. owns the WOW - Women of Wrestling(R)
               property. In July 2001, WOW agreed to license the property to
               David McLane Enterprises, Inc. ("DME")for a minimum monthly
               dollar amount plus a percentage of certain revenues for three and
               one half years. A licensing agreement with DME has not yet been
               finalized and it is uncertain whether any licensing agreement
               will be entered into with DME.

          o    Murphy Development, Ltd. is a commercial and retail real estate
               development company.

     During 2000 and through July 2001, the Company's main area of emphasis was
     in entertainment, primarily, WOW - Women of Wrestling. However, the
     Company's primary operating focus has shifted from the entertainment
     industry to the wireless telecommunications industry through its
     Cornerstone subsidiaries. Because of the Company's change in operating
     focus and its expanded current and future anticipated holdings, the Company
     amended its certificate of incorporation to change its name from "WOW
     Entertainment, Inc." to "Fortune Diversified Industries, Inc." and changed
     its stock symbol from "WOWI" to "FDVI", effective August 16, 2001.

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

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

                                       5
<PAGE>

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

     Revenues: Cornerstone enters into contracts principally on the basis of
     competitive bids, the final terms and prices of which are frequently
     negotiated with the customer. Although the terms of its contracts vary
     considerably, most are made on either a fixed price or unit price basis in
     which Cornerstone agrees to perform work for a fixed amount for the entire
     project (fixed price) or for units of work performed (unit price).
     Cornerstone also performs services on a cost-plus or time and materials
     basis. Cornerstone completes most projects within one year, and generally
     recognizes revenue when services are performed. However, Cornerstone does
     recognize revenue from long term, fixed price contracts on a
     percentage-of-completion basis.

     Women of Wrestling recognizes revenue from the direct distribution,
     exploitation, and licensing of film and television programs before
     deduction for any direct costs of distribution. For markets and territories
     in which the Women of Wrestling's fully or jointly-owned films and
     television programs are distributed by third parties, revenue is the net
     amounts payable to Women of Wrestling by third party distributors. Revenue
     is reduced by appropriate allowances, estimated returns, price concessions,
     and similar adjustments, as applicable.

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

     Marketable Securities include common stocks classified as "available for
     sale". The securities are carried at fair value based on current market
     quotations. Unrealized holding gains and losses are not included in "net
     income", but are accounted for as "other comprehensive income" and
     reflected as a separate component of the change in stockholder's equity. At
     November 30, 2001, the portfolio of marketable equity securities included
     gross unrealized gains of $132,000. The cost of securities used to compute
     realized gains and losses is based on specifically-identified securities.

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

     Leases: The Company's facilities are leased pursuant to a one-year lease
     agreement which expires in June 2002.

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

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

                                        6
<PAGE>

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

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

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

NOTE 2 - CHANGE IN CONTROL

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

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

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

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

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

                                       7
<PAGE>

NOTE 2 - CHANGE IN CONTROL (CONTINUED)

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

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

NOTE 3 - CREDIT FACILITIES

     At November 30, 2000, the Company had borrowed $2 million on a $3 million
     operating line of credit with a stockholder. The line of credit was secured
     by all of the assets of WOW, an operating subsidiary of the Company. The
     line of credit expired during the year ended August 31, 2001. There were no
     outstanding borrowings at November 30, 2001.

NOTE 4 - STOCKHOLDERS' EQUITY

     The following are the details of the Company's preferred and common stock
     (giving effect to the one-for-six reverse stock split discussed in Note 2)
     as of November 30, 2001 and August 31, 2001:

<TABLE>
<CAPTION>
                                                   Number of Shares
                                       Authorized        Issued     Outstanding     Amount
<S>                                   <C>            <C>             <C>           <C>
     November 30, 2001
        Common stock, $0.01 par
         value (1)(2)                 500,000,000    69,496,629      69,496,629    $695,000
                                                                                   ========

        Preferred stock
           Series A Preferred stock
            of subsidiary, $100 par
            value                       5,000,000             -               -    $       -
                                                                                   =========

     August 31, 2001
        Common stock, $0.01 par
         value (1)(2)                 500,000,000    69,496,629      69,496,629    $695,000
                                                                                   ========

        Preferred stock
           Series A Preferred stock
            of subsidiary, $100 par
            value                       5,000,000             -               -    $       -
                                                                                   =========
</TABLE>

(1)        As of May 22, 2001, the Company and its subsidiary, Women of
           Wrestling, Inc. ("WOW"), executed an Amendment to its Distribution
           Agreement with M/G Perin, Inc. and Richard Perin (collectively
           "Perin") in which they agreed to terminate their Distribution
           Agreement dated January 18, 2000 and enter into a new agreement
           covering only WOW's free television programs created through May 22,
           2001.

                                       8
<PAGE>

NOTE 4 - STOCKHOLDERS' EQUITY (CONTINUED)

           Also as part of the agreement, Mr. Perin returned for cancellation by
           the Company 1,839,556 restricted shares which represented all of his
           common stock in the Company. All rights to warrants issuable under
           the Distribution Agreement were also voided. Perin also received
           funding from WOW sufficient to pay certain payables incurred in
           connection with its representation of WOW. The funds used to pay
           Perin were loaned to WOW by Carter Fortune, a member of the Control
           Group of the Company.

(2)        As of June 26, 2001, the Company redeemed 19,007,585 shares of common
           stock of the Company from David B. McLane, which represented all the
           shares owned by Mr. McLane, and cancelled the outstanding warrant.
           Concurrently with the redemption, Mr. McLane resigned from the Board
           of Directors of the Company and as President of the Company and its
           subsidiaries. As a result of the redemption, Mr. McLane is no longer
           a member of the Control Group.

     On May 5, 2000, the Company authorized 5,000,000 shares of cumulative
     voting Series A preferred stock. Dividends are payable quarterly at the
     rate of Libor plus 1%. Preferred stockholders have preference over common
     stockholders in dividends and liquidation rights. The preferred stock has
     voting rights similar to those of the common stockholders. At the Company's
     option, the Series A preferred stock may be redeemed at a purchase price of
     $100 per share plus any unpaid dividends. The outstanding and subscribed
     preferred stock was purchased by a member of the Control Group.

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

     As part of the restructuring, Mr. Fortune received $3,250,000 of the
     Company's common stock at the June 28, 2001 closing price of $0.20 a share,
     or 16,250,000 restricted shares, in exchange for his $2,000,000 of WOW
     preferred stock and in full satisfaction of his approximately $5,424,000 of
     WOW debt. This resulted in an extraordinary credit of $4,174,000.

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

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

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

                                       9
<PAGE>

NOTE 4 - STOCKHOLDERS' EQUITY (CONTINUED)

     In July 2001, the Company entered into several restricted stock agreements
     with key employees. Pursuant to these agreements, the Company advanced
     $630,000 to purchase 4,200,000 shares of restricted stock. The restrictions
     are pursuant to the respective stock purchase agreements. The loans are
     repayable in 2006.

NOTE 5 - STOCK OPTIONS, WARRANTS AND OTHER COMPENSATION

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

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

     Transactions related to the stock option plan were as follows:

<TABLE>
<CAPTION>
                                                     Weighted                         Weighted
                                        Three        Average                          Average
                                    Months Ended     Exercise     Year Ended          Exercise
                                     November 30,      Price       August 31,           Price
                                        2001         Per Share        2001            Per Share
<S>                                     <C>            <C>        <C>                  <C>
        Options outstanding at
         beginning of period            350,000        $0.46          83,334           $0.42
        Options exercised                     -                      (83,334)           0.42
        Options issued                        -                    1,350,000 (1)(3)     0.12
        Options canceled                      -                   (1,000,000)(2)        0.01
                                        -------                   ----------

        Options outstanding at
         end of period                  350,000        $0.46         350,000           $0.46
                                        =======                   ==========
</TABLE>

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

     (2)  The Company and the CEO agreed in principle on August 31, 2001 and
          entered into an agreement on November 15, 2001 to cancel the options
          to purchase 1,000,000 shares of common stock previously granted to the
          CEO.

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

                                       10
<PAGE>

NOTE 5 - STOCK OPTIONS, WARRANTS AND OTHER COMPENSATION (CONTINUED)

     The Company accounts for employee stock-based transactions under Accounting
     Principles Board Opinion No. 25. Accordingly, no compensation cost has been
     recognized for options issued with an exercise price equal to the market
     value of the common stock at the date of grant. The Company has adopted the
     disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based
     Compensation," which defines a fair value method of accounting for stock
     options and other equity instruments. Under the fair value method,
     compensation cost is measured at the grant date based on the fair value of
     the award and is recognized over the service period, which is usually the
     vesting period. Management believes that had compensation cost been
     determined based on the fair value at the grant dates consistent with the
     provisions of SFAS No. 123, there would have been no material effect on the
     Company's net loss and its earnings per common share for the three months
     ended November 30, 2001 and 2000.

     In connection with the change in control discussed in Note 2, the Company
     agreed to grant 50,000 warrants to the Company's former CEO on June 30,
     2002. Each warrant is convertible into one share of common stock at an
     exercise price of $1.00 per share exercisable June 30, 2002 through June
     30, 2008.

NOTE 6 - PER SHARE DATA

     The following presents the computation of basic earnings per share and
     diluted earnings per share:

<TABLE>
<CAPTION>
                                                                 Three           Three
                                                              Months Ended    Months Ended
                                                              November 30,    November 30,
                                                                  2001            2000
<S>                                                           <C>              <C>
        Net (loss)                                            $  (191,000)     $(2,921,000)

        Dividends on preferred stock                                -              (28,000)
                                                              -----------      -----------

        Net Income (Loss) Available for Common
         Stockholders                                         $  (191,000)     $(2,949,000)
                                                              ===========      ===========

        Basic Income (Loss) Per Share                         $         -      $     (0.05)
                                                              -----------      ===========

        Diluted Income (Loss) Per Share                       $         -      $     (0.05)
                                                              -----------      ===========

        Shares Outstanding:
           Basic weighted average number of common shares
            outstanding                                        69,496,629       62,509,164
</TABLE>

     At November 30, 2001 and 2000, all outstanding options and warrants were
     anti-dilutive.

NOTE 7 - QUASI-REORGANIZATION

     Effective July 21, 2000, the Company's Board of Directors approved a
     quasi-reorganization. The effect of the quasi-reorganization was to
     eliminate the accumulated deficit of $60,099,000 by application of the
     Company's paid-in capital. The quasi-reorganization had no impact on the
     Company's cash flows, total stockholders' equity or the tax basis of its
     assets, but resulted in a consolidated balance sheet which better reflects
     the Company's current financial position.


                                       11
<PAGE>

NOTE 8 - SEGMENT INFORMATION

     Prior to 2000, the Company operated various gaming operations through
     wholly-owned subsidiaries. The Company has decided to focus its efforts in
     other areas and is currently not seeking to develop gaming projects. Future
     operations of the Company will be organized around four primary segments:

          o    Cornerstone Wireless (Wireless Site Development)
          o    Murphy Development (Real Estate Development)
          o    Women of Wrestling (Entertainment)
          o    Fortune Diversified (Holding Company)

<TABLE>
<CAPTION>
                                         Cornerstone        Murphy                           Fortune
                                          Wireless        Development       Women of       Diversified
                                       (Wireless Site    (Real Estate       Wrestling        (Holding          Segment
                                         Development)     Development)   (Entertainment)     Company)          Totals
<S>                                      <C>              <C>              <C>              <C>              <C>
Three Months Ended November 30, 2001

Revenues                                 $    20,000      $        --      $        --      $        --      $    20,000
Cost of revenues                             (85,000)              --               --               --          (85,000)
Selling, general and administrative
 expenses                                   (141,000)         (18,000)          (5,000)        (101,000)        (265,000)
                                         -----------      -----------      -----------      -----------      -----------

Segment Operating (Loss)                 $  (206,000)     $   (18,000)     $    (5,000)     $  (101,000)     $  (330,000)
                                         ===========      ===========      ===========      ===========      ===========

As of November 30, 2001

Cash                                     $    70,000      $    25,000      $    29,000      $ 1,651,000      $ 1,775,000
Accounts receivable                           18,000               --               --               --           18,000
Other current assets                          10,000               --               --          101,000          111,000
Other assets                                  29,000            6,000               --        1,326,000        1,361,000
                                         -----------      -----------      -----------      -----------      -----------

Total Segment Assets                     $   127,000      $    31,000      $    29,000      $ 3,078,000      $ 3,265,000
                                         ===========      ===========      ===========      ===========      ===========


Three Months Ended November 30, 2000

Revenues                                 $        --      $        --      $    92,000      $        --      $    92,000
Cost of revenues                                  --               --       (2,641,000)              --       (2,641,000)
Selling, general and administrative
 expenses                                         --               --         (333,000)         (33,000)        (366,000)
                                         -----------      -----------      -----------      -----------      -----------

Segment Operating (Loss)                 $        --      $        --      $(2,882,000)     $   (33,000)     $(2,915,000)
                                         ===========      ===========      ===========      ===========      ===========

As of August 31, 2001

Cash                                     $   280,000      $    25,000      $    30,000      $ 2,203,000      $ 2,538,000
Other current assets                          10,000               --            5,000           92,000          107,000
Other assets                                  23,000            6,000               --          642,000          671,000
                                         -----------      -----------      -----------      -----------      -----------

Total segment assets                     $   313,000      $    31,000      $    35,000      $ 2,937,000      $ 3,316,000
                                         ===========      ===========      ===========      ===========      ===========
</TABLE>

                                       12
<PAGE>

Item 2.  Management's Discussion And Analysis Or Plan Of Operations.

This document contains statements that constitute "forward-looking statements"
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and Section 27A of the Securities Act of 1933, as amended. The words
"expect," "estimate," "anticipate," "predict," "believe" and similar expressions
and variations thereof are intended to identify forward-looking statements.
These statements appear in a number of places in this document and include
statements regarding the intent, belief or current expectations of Fortune
Diversified Industries, Inc. (the "Company"), its directors or its officers with
respect to, among other things, trends affecting the Company's financial
condition or results of operations. The readers of this document are cautioned
that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, those risks and uncertainties
are discussed under the headings "Risk Factors" and "Management's Discussion and
Analysis Or Plan of Operations," in the Company's Form 10-KSB40 for the fiscal
year ended August 31, 2001 as well as the information set forth below. The
Company does not ordinarily make projections of its future operating results and
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
Readers should carefully review other documents filed by the Company with the
Securities and Exchange Commission. This section should be read in conjunction
with the unaudited financial statements of the Company and related notes set
forth elsewhere herein.

Fortune Diversified Industries, Inc. (formerly known as WOW Entertainment, Inc.
and prior to that American Gaming & Entertainment, Ltd.), is a Delaware
corporation incorporated in 1988. The Company has conducted its business
directly and through wholly-owned subsidiaries. The term "Company" as used
herein refers to Fortune Diversified Industries, Inc. and such subsidiaries
unless the context otherwise requires. The Company is the parent company of
Cornerstone Wireless Services, Incorporated; Cornerstone Wireless Construction
Services, Inc.; Women of Wrestling, Inc.; and Murphy Development, Ltd. Prior to
2000, the Company owned equity interests in various properties that were
utilized in casino gaming projects. The Company is no longer seeking to develop
gaming projects.

The Company's primary operating focus shifted in the past year from the
entertainment industry to the wireless telecommunications industry. Because of
the Company's change in operating focus and expanded current and future
anticipated holdings, the Company changed its name from "WOW Entertainment,
Inc." to "Fortune Diversified Industries, Inc." and stock Symbol from WOWI to
FDVI effective August 16, 2001.

The Company's current operating focus is achieved through its Cornerstone
Wireless subsidiaries Cornerstone Wireless Services Incorporated and Cornerstone
Wireless Construction Services, Inc. and their affiliates ("Cornerstone").
Cornerstone has the capability to assist its customers with the wireless site
development process from visualization to completion, as well as site
maintenance and upgrades. Simply stated, Cornerstone can assist its clients with
any and all of the following: 1) wireless site acquisition (e.g., raw-land
property along an interstate or a building rooftop for co-location of an

                                       13
<PAGE>

antenna); 2) architectural and engineering analysis and drawings (e.g., analysis
of an existing cell tower or construction drawings of cell towers and switches);
3) site construction; and 4) existing site maintenance and upgrades.

Cornerstone Wireless Services, Incorporated was acquired by the Company in July,
2001. William A. Shoemake serves as its President and Chief Executive Officer.
Cornerstone Wireless Construction Services, Inc. was incorporated in October,
2001 and began operations shortly thereafter, with Anthony Sutton serving as its
President. Mr. Shoemake and Mr. Sutton are both seasoned telecommunications
professionals. Mr. Shoemake and his team direct the development of a full line
of architectural and engineering services specializing in the telecommunications
industry. Mr. Sutton and his team, through Cornerstone Wireless Construction
Services, Inc. (the Company's wireless construction subsidiary), enables the
Company to offer its customers a complete, turnkey wireless site development
option.

Through all phases of a project, Cornerstone's objective is to utilize its own
staff to perform the required services. It is Cornerstone's dedication to the
industry, detail, productivity and quality that are the keystones of its mission
and its plan to set itself apart from the competition. Cornerstone Wireless
Services, Incorporated specializes in the engineering and architectural services
for the telecommunication's industry including the cellular, personal
communication services (PCS), specialized mobile radio (SMR), enhanced
specialized mobile radio (ESMR), microwave systems, fixed wireless, broadband
and fiber optics technologies for carriers, consolidators and utilities.
Detailed services include site surveys, site layout drawings, architectural
aesthetic designs, foundation designs, antenna mount designs, geo-technical
investigation and reports, structural analysis and environmental assessments.
Cornerstone Wireless Construction Services, Inc. specializes in construction of
wireless telecommunications infrastructure. Cornerstone is pursuing assignments
and projects anywhere within the United States. Cornerstone also plans to open
additional branches as market opportunities arise.

Management believes that the need for Cornerstone's services in the coming years
will be significant. In order to meet the bandwidth and usage needs of consumers
that management believes will be required in the coming years for second
generation to third generation wireless data applications (commonly referred to
as 2G, 2.5G and 3G), cell site density will need to increase anywhere from four
to eight fold. In addition to the build-out of additional sites, as usage
changes occur, existing tower and base station configurations will also need to
change. Cornerstone is positioned to provide to the industry the re-engineering
and design services necessary to meet its evolving needs.

The past year has seen a significant downturn in the economy and management has
witnessed many companies in the telecommunications industry significantly reduce
their operations. Management has observed the number of builds within the
industry decline in conjunction with the economy. Management has also observed,
as a result of this decline, many architectural and engineering and construction
companies leaving the wireless segment. It was during this downturn when
Cornerstone began operations, viewing the downturn as an opportunity to position
for future growth. Because of

                                       14
<PAGE>

Cornerstone's experienced management team and focus in the wireless telecom
industry, it is in the process of becoming a qualified provider of services to
most major carriers and consolidators in the industry. Cornerstone has also been
building and training its staff and increasing its capacity in a planned growth
strategy over the past quarter, which will continue in the coming year. While
the number of builds within the industry declined in conjunction with the
economy, the infrastructure capacity needs did not. When the industry resumes
the infrastructure build out for 2G to 2.5G to 3G and beyond, management
believes that Cornerstone will be positioned as a recognized provider with the
capacity to meet and exceed the industry's needs.

Women of Wrestling, Inc. (WOW), owns the WOW - Women of Wrestling(R) property
consisting of certain intellectual property, including trademark rights in the
"WOW-Women of Wrestling(R) " name, logos and character names of performers;
rights in characters portrayed by performers; publicity rights of performers
with respect to their performances; and copyrights in recorded performances,
events, programs, advertisements and promotional materials. Beginning in
September, 2000, WOW operated as an integrated media company engaged in the
production and marketing of live events featuring women's professional
wrestling, which were filmed for pay-per-view, Internet and television
broadcast, including the weekly syndicated television series, WOW - Women of
Wrestling(R).

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

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

Murphy Development, Ltd., is a commercial and retail real estate development
company. On July 2, 2001, the Company purchased Murphy Development, Ltd. from
Carter Fortune, the Company's largest shareholder, and Julie Fisbeck, who is the
sister of John Fisbeck, one of the members of the Control Group. The primary
assets of Murphy Development, Ltd the past fiscal year were pre-acquisition
development costs of a northeast, Ohio commercial development, to include
several options to purchase real estate. Recently, Murphy Development, Ltd.
exercised the options. However, it does not anticipate closing on the

                                       15
<PAGE>

real estate due to the unavailability of financing under terms acceptable to
Murphy Development, Ltd. and the lack of a commitment from a major anchor
tenant. The options will expire at the end of 2001 unless further negotiations
to extend the options occur.

The Company enters into contracts principally on the basis of competitive bids,
the final terms and prices of which are frequently negotiated with the customer.
Although the terms of its contracts vary considerably, most are made on either a
fixed price or unit price basis in which the Company agrees to do the work for a
fixed amount for the entire project (fixed price) or for units of work performed
(unit price). The Company also performs services on a cost-plus or time and
materials basis. The Company completes most projects within one year. The
Company generally recognizes revenue when services are performed. The Company
will at times record revenues from longer term, fixed price contracts on a
percentage-of-completion basis.

During the period covered by this report, the Company received license fees for
its production of television programming through its distribution agreement with
its distributor. Revenue was recognized by the Company from its direct
distribution, exploitation, or licensing of its films and television programs,
before deduction for any of the Company's direct costs of distribution. For
markets and territories in which the Company's fully or jointly-owned films and
television programs were distributed by third parties, revenue was the net
amounts payable to the entity by third party distributors. Revenue was reduced
by appropriate allowances, estimated returns, price concessions, and similar
adjustments, as applicable.

Cost of revenues consist primarily of salaries, wages and benefits to employees,
depreciation, fuel and other vehicle expenses, equipment rentals, subcontracted
services, insurance, facilities expenses, materials and parts and supplies.

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

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

                                       16
<PAGE>

costs as of November 30, 2000 were all considered in process and were expensed
in the prior operating cycle as episodic revenue was recognized. Furthermore, as
the Company had effectively recognized revenues from the initial airing of all
of the episodes produced through the current reporting period end, all
production costs as of November 30, 2001, were expensed. As such, the Company
did not have any capitalized production costs as of November 30, 2001.

Advertising and exploitation costs, which include marketing, advertising,
publicity, promotion, and other distribution expenses incurred in connection
with the distribution of a film or television program, were expensed as
incurred.

The Company accounts for all stock based compensation under the provision of
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation", which uses the term "compensation" in its broadest
sense to refer to consideration paid for goods and services, regardless of
whether the supplier is an employee or not. On January 12, 2001, the Company
hired Jeffrey J. Lewis as its CEO. In connection with his hiring, he was granted
an option to purchase 1,200,000 shares of common stock at an aggregate purchase
price of $12,000. The options vest at the rate of 200,000 shares every six
months beginning July 12, 2001. Effective July 13, 2001, after Mr. Lewis had
vested options on 200,000 shares of the Company's stock, the Company and Mr.
Lewis agreed to terminate the option program.

In connection with the change in control of the Company in September, 2000, the
Company issued 50,000 new warrants to the Company's former CEO. Each new warrant
is convertible into one share of common stock at an exercise price of $1.00 per
share exercisable from June 30, 2002 through June 30, 2008. In connection with a
certain distribution agreement, the Company's former distributor was granted a
warrant to purchase 1% of the common stock owned by the Control Group at an
aggregate exercise price of $1,000,000. This agreement was terminated in May
2001 and the warrant rights were voided. In connection with a certain consulting
agreement, the Company's investment banker was granted an option to purchase
150,000 shares of common stock at an aggregate exercise price of approximately
$143,000. The option is exercisable immediately and expires in 2005. The Company
values stock options and warrants issued based upon an option-pricing model and
recognizes this value as an expense over the period in which the option vests.


                                       17
<PAGE>


RESULTS OF OPERATIONS:  COMPARISON OF THE THREE MONTH PERIODS ENDED
NOVEMBER 30, 2001 AND NOVEMBER 30, 2000

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

<TABLE>
<CAPTION>
                                     Cornerstone      Murphy           Women        Fortune
                                       Wireless     Development         of        Diversified
                                    (Wireless Site  (Real Estate     Wrestling      (Holding       Segment
                                      Development)  Development)  (Entertainment)   Company)       Totals
<S>                                   <C>             <C>           <C>           <C>          <C>
Three months ended November 30, 2001

Revenues                                 20,000            -0-             -0-          -0-         20,000
Cost of revenues                        (85,000)           -0-             -0-          -0-        (85,000)
Selling, general and administrative    (141,000)       (18,000)         (5,000)    (101,000)      (265,000)
                                      ---------       --------      ----------    ---------    -----------
Operating income (loss)                (206,000)       (18,000)         (5,000)    (101,000)      (330,000)

As of November 30, 2001

Total segment assets                    127,000         31,000          29,000    3,078,000      3,265,000

Three months ended November 30, 2000

Revenues                                    -0-            -0-          92,000          -0-         92,000
Cost of revenues                            -0-            -0-      (2,641,000)         -0-     (2,641,000)
Selling, general and administrative         -0-            -0-        (333,000)     (33,000)      (366,000)
                                      ---------       --------      ----------    ---------    -----------
Operating income (loss)                     -0-            -0-      (2,882,000)     (33,000)    (2,915,000)
                                      =========       ========      ==========    =========    ===========

As of August 31, 2001

Total segment assets                    313,000         31,000          35,000    2,937,000      3,316,000
</TABLE>

Revenues

Revenues for the three months ended November 30, 2001 were $20,000, compared to
$92,000 for the three months ended November 30, 2000, a decrease of $72,000. The
decrease in revenues were primarily due to a decrease in revenues in the Women
of Wrestling segment of $92,000, which was a result of the Company not producing
and distributing the television show WOW Women of Wrestling for the 2001 and
2002 season. The Company had an increase in revenues from the prior fiscal year
in its Cornerstone Wireless segment of $20,000. This increase was primarily the
result of the Company only beginning operations in the segment subsequent to
last year. The Company did not recognize revenue in its Murphy Development and
Fortune Diversified segments for either the quarter ended November 30, 2001 or
for the same period in the previous fiscal year.

Costs and Expenses

The Company began additional operations, primarily the operation of its
Cornerstone Wireless segment and scaled back significantly other operations,
primarily the Women of Wrestling segment for the comparable periods. Cost of
revenues were $85,000 for the three months ended November 30, 2001 compared to
$2,641,000 for the three months ended November 30, 2000, a decrease of
$2,556,000. This decrease was primarily due to a decrease of $2,641,000 in the
Company's Women of Wrestling segment, which was a result of the Company not
producing and distributing the television show WOW Women of Wrestling for the
2001 and 2002 season. In the Cornerstone Wireless segment, the Company had an
increase of $85,000 in Cost of revenues for the quarter ended November 30, 2001
compared to the same period in the previous fiscal year. This increase was
primarily related to salaries and benefits and the fact that the Company did not
commence operations in the segment until subsequent to the previous fiscal year.
The Company did not incur any Cost of revenues in its Murphy Development and
Fortune Diversified segments for either the quarter ended November 30, 2001 or
for the same period in the previous fiscal year.

                                       18
<PAGE>

Selling, general and administrative expenses were $265,000 for the three months
ended November 30, 2001, compared to $366,000 for the three months ended
November 30, 2000, a decrease of $101,000. This decrease was primarily due to a
decrease of $328,000 in the Company's Women of Wrestling segment. This decrease
was primarily the result of the Company significantly scaling back operations in
the Women of Wrestling segment for the comparable periods. Also there were legal
and accounting and consulting fees related to the Company's change in control
that occurred in September, 2000 and allocated to the Women of Wrestling
segment.

In the Cornerstone Wireless segment, the Company had an increase of $141,000 in
selling, general and administrative expenses for the quarter ended November 30,
2001 compared to the same period in the previous fiscal year. This increase was
primarily attributable to an increase in employee compensation and benefits,
legal, accounting and consulting fees and the fact that the Company did not
commence operations in the segment until July 2001.

In the Murphy Development segment, the Company had an increase of $18,000 in
selling, general and administrative expenses for the quarter ended November 30,
2001 compared to the same period in the previous fiscal year. This increase was
primarily related to legal, accounting and consulting costs and the fact that
the Company did not commence operations in the segment until subsequent to the
previous fiscal year.

In the Fortune Diversified segment, the Company had an increase of $68,000 in
selling, general and administrative expenses for the quarter ended November 30,
2001 compared to the same period in the previous fiscal year. This increase was
primarily related to an increase in employee compensation and benefits, legal,
accounting and consulting fees.

Interest income for the three months ended November 30, 2001 was approximately
$26,000, compared to $1,000 for the three months ended November 30, 2000, an
increase of $25,000. This increase was primarily due to an increase in funds
held in money market accounts and accrued interest income from employee held
recourse promissory notes.

Interest expense for the three months ended November 30, 2001 was zero. Interest
expense for the three months ended November 30, 2000 was approximately $7,000
from a line of credit. There were no outstanding borrowings at November 30,
2000, and the line of credit expired during the year ended August 31, 2001.

Gain on investments in marketable securities, net for the three months ended
November 30, 2001 was approximately $113,000. No such gain was recorded for the
three months ended November 30, 2000.

LIQUIDITY AND CAPITAL RESOURCES

The Company had cash and investments in other liquid securities (i.e., publicly
traded stocks and bonds) of approximately $2,452,000 as of November 30, 2001. As
of November 30, 2001, the Company had no outstanding bank borrowings or other
indebtedness.

                                       19
<PAGE>

As of December 31, 2001, the Company had cash and investments in other liquid
securities (i.e., publicly traded stocks and bonds) of approximately $2,292,000,
and did not have any outstanding debt.

The Company's 2002 capital budget provides for expenditures of approximately
$1,645,000, for which management of the Company believes will be significantly
if not entirely offset by revenues from operations and investments. The
Company's management believes that its capital resources are adequate to satisfy
its cash requirements over the next 12 months.

The Company reviews, as opportunities arise, the potential acquisition and/or
operation of other businesses. Any such action will be based upon management's
analysis of the specific business and the respective industry, as well as the
Company's ability to utilize a capital structure that is beneficial to the
Company's shareholders. If funding through the equity and debt markets can be
obtained on attractive terms, the Company would consider financing its
acquisition and operating activities by such means.

The Company's short and long term capital requirements will depend upon many
factors, including whether it acquires and/or operates other businesses, the
operating success of Cornerstone Wireless, the potential license of the WOW -
Women of Wrestling(R) property, and the success of various real estate
developments undertaken by Murphy Development. Many of these and other factors
are beyond the Company's control.

Over the next 12 months, the Company plans to hire a significant number of
additional employees in its Cornerstone Wireless segment; however, the hiring of
these employees will be approximately correlated with an increase in operating
revenue.

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

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

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

                                       20
<PAGE>

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

Mr. Fortune also agreed to make available to Murphy Development a line of credit
of up to $2,250,000, if and as needed, to fund its operations. The line of
credit was secured by all of the assets of Murphy Development and convertible at
Mr. Fortune's option into shares of the Company's common stock at $0.407401 a
share. On August 27, 2001, the Company drew down the entire $2,250,000 line of
credit. Also on August 27, 2001, Mr. Fortune exercised the conversion feature on
the full principal amount, and received 5,522,814 restricted shares of the
Company's common stock.

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

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

As of May 22, 2001, the Company and its subsidiary, Women of Wrestling, Inc.
("WOW"), executed an Amendment to its Distribution Agreement with M/G Perin,
Inc. and Richard Perin (collectively "Perin") in which they agreed to terminate
their Distribution Agreement dated January 18, 2000 and enter into a new
agreement covering only WOW's free television programs created through May 22,
2001. The new agreement will extend no later than through September 30, 2001 for
domestic distribution and December 31, 2001 for foreign distribution. Perin will
be entitled to collect and retain all domestic distribution and foreign
television advertising or licensing revenues relating to any licensing of WOW's
programs that occurs during Perin's continued representation through September
30, 2001 or December 31, 2001, respectively (with the exception only of amounts,
if any, already paid to WOW). Since Perin is paying all expenses relating to
distribution of WOW's programs, Perin shall have the right to discontinue the
distribution of the programs at any time, provided Perin gives as much advance
notice to WOW as is

                                       21
<PAGE>

reasonably practicable. In the event a substantial portion of the assets or
stock of WOW are sold or licensed, Perin's rights to continue to distribute
WOW's programs shall terminate thirty days after the consummation of such a sale
or license.

Also as part of the agreement, Mr. Perin returned for cancellation by the
Company 1,839,556 restricted shares which represented all of his common stock in
the Company. All rights to warrants issuable under the Distribution Agreement
were also voided. Perin also received funding from WOW sufficient to pay certain
payables incurred in connection with its representation of WOW. The funds used
to pay Perin were loaned to WOW by Carter Fortune, a member of the Control Group
of the Company.

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

The Company's subsidiary, Women of Wrestling, Inc., no longer leases space at
The Great Western Forum located 3900 W. Manchester Blvd., Los Angeles,
California.

For the three months ended November 30, 2001, cash flows used for operating
activities were $313,000, as compared to cash flows used for operating
activities of $2,798,000 million for the three months ended November 30, 2000.
The change is primarily related to a decrease in net losses associated with the
Company's Women of Wrestling Operations.

For the three months ended November 30, 2001, cash flows used for investing
activities were $450,000, as compared to $54,000 for the three months ended
November 30, 2000. The increase in cash flows used for 2001 is primarily due to
an increase in investments in marketable securities, partially offset by a
decrease in cash flows used for web-site development costs.

For the three months ended November 30, 2001, cash flows provided by financing
activities were zero as compared to $2,706,000 for the three months ended
November 30, 2000. The decrease was primarily related to a reduction in net cash
inflows from preferred stock and line of credit borrowings.

PART II--OTHER INFORMATION.

Item 1.  Legal Proceedings.

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

Item 2.  Changes in Securities and Use of Proceeds.

None

Item 3.  Defaults upon Senior Securities.

None

                                       22
<PAGE>

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

None

Item 5.  Other Information.

In January, 2002, the Company appointed and the Control Group elected by written
consent in lieu of a meeting Carter M. Fortune as Chief Executive Officer, a
Director, and Chairman of the Board. Also, at the same time, the Company
appointed and the Control Group elected by written consent in lieu of a meeting
William A. Shoemake to the Company's Board of Directors. Douglas E. May remained
as a Director.

Effective December 31, 2001, Jeffrey J. Lewis resigned as a Director and Chief
Executive Officer of Fortune Diversified Industries, Inc., Women of Wrestling,
Inc., WOW Women of Wrestling Music I, Inc., and Murphy Development, Ltd.

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

(a)     Exhibits

Exhibit Number    Description
--------------    -----------

None

(b)  Reports on Form 8-K. The following report was filed by the Company during
     the first quarter of fiscal year 2000-2001:

     (1)  Form 8-K dated September 14, 2001 with respect to the acquisition of a
          subsidiary by the Company.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.


                             FORTUNE DIVERSIFIED INDUSTRIES, INC.


Date: 1/14/02                By: /s/ Douglas E. May
      -------                    ----------------------------
                                 Douglas E. May
                                 Vice President of Finance and
                                 Chief Financial Officer



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EXHIBIT INDEX

EXHIBIT
  NO.        DESCRIPTION                             PAGE NO.
--------     -----------                             --------

None







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