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 May 31, 2002

[ ] 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
 incorporation or organization)                     Identification No.)


                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 July 10, 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
                                                                     May 31,       August 31,
                                                                       2002           2001
<S>                                                                <C>            <C>
CURRENT ASSETS
     Cash and equivalents                                          $   120,000    $ 2,538,000
     Investment in available for sale marketable securities,
         less related margin debt of $488,000                          434,000             --
     Accounts receivable                                               366,000             --
     Other current assets                                               63,000        107,000
                                                                   -----------    -----------
         Total Current Assets                                          983,000      2,645,000
                                                                   -----------    -----------

OTHER ASSETS
     Notes receivable-Note 2                                            30,000        630,000
     Investment in land development                                      6,000          6,000
     Office equipment-Note 1                                           201,000         35,000
                                                                   -----------    -----------
         Total Other Assets                                            237,000        671,000
                                                                   -----------    -----------

         TOTAL ASSETS                                              $ 1,220,000    $ 3,316,000
                                                                   ===========    ===========

                            LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Accounts payable                                              $    42,000    $    73,000
     Accrued payroll and related expenses                               38,000         28,000
     Accrued expenses                                                   58,000         50,000
                                                                   -----------    -----------
         Total Current Liabilities                                     138,000        151,000
                                                                   -----------    -----------

STOCKHOLDERS' EQUITY-Notes 2 and 3
     Common stock                                                      695,000        695,000
     Additional paid-in capital and warrants outstanding             6,441,000      7,001,000
     Accumulated deficit, since July 21, 2000, when a
      deficit of $60,099,000 was eliminated-Note 5                  (5,512,000)    (4,531,000)
     Accumulated other comprehensive income (loss)                    (502,000)            --
                                                                   -----------    -----------
                                                                     1,122,000      3,165,000
     Less:  Treasury stock at cost (4,000,000 shares)                  (40,000)            --
                                                                   -----------    -----------
         Total Stockholders' Equity                                  1,082,000      3,165,000
                                                                   -----------    -----------

         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                $ 1,220,000    $ 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
                                                            May 31,      May 31,
                                                             2002         2001
<S>                                                        <C>          <C>
REVENUES                                                   $ 394,000    $ 118,000

COST OF REVENUES                                             301,000      294,000
                                                           ---------    ---------

GROSS PROFIT (LOSS)                                           93,000     (176,000)

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES                351,000      526,000
                                                           ---------    ---------

Operating Loss                                              (258,000)    (702,000)
                                                           ---------    ---------

OTHER INCOME (EXPENSE)
     Interest income                                           6,000        5,000
     Interest expense                                         (5,000)     (75,000)
     Losses on investments in marketable securities, net     (39,000)          --
     Net loss on sale of equipment                           (19,000)          --
     Other expenses                                          (25,000)          --
                                                           ---------    ---------
         Total Other Income (Expense)                        (82,000)     (70,000)
                                                           ---------    ---------

Net Loss before Provision for Income Taxes                  (340,000)    (772,000)

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

NET LOSS                                                   $(340,000)   $(772,000)
                                                           =========    =========

BASIC LOSS PER SHARE-Note 4                                $   (0.01)   $   (0.01)
                                                           =========    =========

DILUTED LOSS PER SHARE-Note 4                              $   (0.01)   $   (0.01)
                                                           =========    =========
</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 OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                Nine Months Ended
                                                            May 31,         May 31,
                                                             2002            2001
<S>                                                       <C>            <C>
REVENUE                                                   $   485,000    $   425,000

COST OF REVENUE                                               593,000      5,206,000
                                                          -----------    -----------

GROSS PROFIT (LOSS)                                          (108,000)    (4,781,000)

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES               1,037,000      1,672,000
                                                          -----------    -----------

Operating Loss                                             (1,145,000)    (6,453,000)

OTHER INCOME (EXPENSE)
     Interest income                                           50,000         19,000
     Interest expense                                          (5,000)      (153,000)
     Gains on investments in marketable securities, net       168,000             --
     Net loss on sale of equipment                            (23,000)            --
     Other expenses                                           (26,000)            --
                                                          -----------    -----------
         Total Other Income (Expense)                         164,000       (134,000)
                                                          -----------    -----------

Net Loss before Provision for Income Taxes                   (981,000)    (6,587,000)

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

NET LOSS                                                  $  (981,000)   $(6,587,000)
                                                          ===========    ===========


BASIC LOSS PER SHARE-Note 4                               $     (0.01)   $     (0.11)
                                                          ===========    ===========


DILUTED LOSS PER SHARE-Note 4                             $     (0.01)   $     (0.11)
                                                          ===========    ===========
</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)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                 Three Months Ended
                                                                May 31,        May 31,
                                                                 2002           2001
<S>                                                          <C>            <C>
OPERATING ACTIVITIES
     Net loss                                                $  (340,000)   $  (772,000)
     Adjustments to reconcile net loss to net cash used
      by operating activities:
         Depreciation and amortization                            12,000        106,000
         Loss on disposal of equipment                            19,000        145,000
         Net realized loss from sale of available for
           sale securities                                        39,000             --
         Changes in certain operating assets
          and liabilities:
             Accounts receivable                                  88,000        277,000
             Merchandise inventories                                  --         22,000
             Other current assets                                 38,000         20,000
             Accounts payable, accrued expenses and other
              current liabilities                               (106,000)      (665,000)
                                                             -----------    -----------
                 Net Cash (Used) by Operating Activities        (250,000)      (867,000)
                                                             -----------    -----------

INVESTING ACTIVITIES
     Purchases of property and equipment                          (3,000)            --
     Proceeds from sale of office equipment                       15,000             --
     Purchases of available for sale securities                 (355,000)            --
     Proceeds from sales of available for sale securities        578,000             --
                                                             -----------    -----------
                 Net Cash Provided by Investing Activities       235,000             --
                                                             -----------    -----------

FINANCING ACTIVITIES
     Repurchase of common stock                                       --        (18,000)
     Dividends paid to preferred stockholders                         --       (120,000)
     Borrowings on line of credit                                     --      1,000,000
                                                             -----------    -----------
                 Net Cash Provided by Financing Activities            --        862,000
                                                             -----------    -----------

NET DECREASE IN CASH AND EQUIVALENTS                             (15,000)        (5,000)

CASH AND EQUIVALENTS
     Beginning of Period                                         135,000         76,000
                                                             -----------    -----------

     End of Period                                           $   120,000    $    71,000
                                                             ===========    ===========

SUPPLEMENTAL DISCLOSURES
     Noncash investing and financing activities:
      Unrealized net loss on marketable securities           $  (236,000)
      Reduction in note receivable for redemption
         of common stock                                        (600,000)
      Investment securities acquired via margin debt             488,000
</TABLE>

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

                                       5
<PAGE>

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

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                  Nine Months Ended
                                                                May 31,       May 31,
                                                                 2002           2001
<S>                                                          <C>            <C>
OPERATING ACTIVITIES
     Net loss                                                $  (981,000)   $(6,587,000)
     Adjustments to reconcile net loss to net cash used
      by operating activities:
         Depreciation and amortization                            22,000        237,000
         Net loss on disposal of equipment                        23,000        145,000
         Net realized gain from sale of available for
           sale securities                                      (169,000)            --
         Changes in certain operating assets
          and liabilities:
             Accounts receivable                                (366,000)        (5,000)
             Production costs                                         --         60,000
             Other current assets                                 44,000        299,000
             Accounts payable, accrued expenses and other
              current liabilities                                (13,000)       (64,000)
                                                             -----------    -----------
                 Net Cash (Used) by Operating Activities      (1,440,000)    (5,915,000)
                                                             -----------    -----------

INVESTING ACTIVITIES
     Purchases of office equipment                              (226,000)        (5,000)
     Proceeds from sale of office equipment                       15,000             --
     Purchases of available for sale securities               (4,266,000)            --
     Proceeds from sales of available for sale securities      3,499,000             --
     Web-site development costs incurred                              --        (49,000)
                                                             -----------    -----------
                 Net Cash (Used) by Investing Activities        (978,000)       (54,000)
                                                             -----------    -----------

FINANCING ACTIVITIES
     Issuance of common stock                                         --         34,000
     Repurchase of common stock                                       --        (18,000)
     Dividends paid to preferred stockholders                         --       (220,000)
     Proceeds from issuance of preferred stock                        --        700,000
     Borrowings on line of credit                                     --      5,250,000
                                                             -----------    -----------
                 Net Cash Provided by Financing Activities            --      5,746,000
                                                             -----------    -----------

NET DECREASE IN CASH AND EQUIVALENTS                          (2,418,000)      (223,000)

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

     End of Period                                           $   120,000    $    71,000
                                                             ===========    ===========

SUPPLEMENTAL DISCLOSURES
     Noncash investing and financing activities:
      Unrealized net loss on marketable securities           $  (502,000)
      Reduction in note receivable for redemption
         of common stock                                        (600,000)
      Investment securities acquired via margin debt             488,000
</TABLE>

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

                                       6
<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

     Basis of Presentation: The accompanying unaudited consolidated financial
     statements have been prepared by the Company without audit and therefore do
     not include all information and disclosures necessary for a fair
     presentation of financial position, results of operations, and cash flows
     in conformity with accounting principles generally accepted in the United
     States. These unaudited financial statements contain, in the opinion of
     management, all adjustments (consisting of normal accruals and other
     recurring adjustments) necessary for a fair presentation of the
     consolidated financial position, results of operations, and cash flows for
     the periods presented. The operating results for the nine-month and
     three-month periods ended May 31, 2002, are not necessarily indicative of
     the operating results to be expected for the full fiscal year.

     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 five wholly-owned subsidiaries: PDH, Inc.,
     Cornerstone Wireless Services, Inc., Cornerstone Wireless Construction
     Services, Inc., Women of Wrestling, Inc., and Murphy Development, Ltd.

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

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

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

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

     o    Site construction, and;

     o    Existing site marketing and management.

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

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

                                       7
<PAGE>

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

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

     Revenues: 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 unit price or fixed price basis in
     which the Company agrees to do the work for units of work performed (unit
     price) or for a fixed amount for the entire project (fixed 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 utilizing output measures, such as when services are
     performed, units are delivered or when contract milestones are reached. The
     Company will, at times, record revenues from longer term, fixed price
     contracts on a percentage-of-completion basis, using input measures such as
     the cost-to-cost method based on the percentage of total costs incurred to
     date in proportion to total estimated costs to complete the contract.

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

     Cost of revenues 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.

     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 stockholders' equity. At
     May 31, 2002, the accumulated other comprehensive losses on marketable
     equity securities were comprised entirely of gross unrealized losses of
     $502,000. The cost of securities used to compute realized gains and losses
     is based on specifically-identified securities.

     Office Equipment is recorded at cost. Depreciation is provided by the
     straight-line method over the estimated useful lives (3 to 10 years) of the
     respective assets.

                                                    May 31,        August 31,
                                                     2002             2001

        Office equipment                           $225,000         $40,000
        Less:  Accumulated depreciation             (24,000)         (5,000)
                                                   --------         -------

        Office Equipment, Net                      $201,000         $35,000
                                                   ========         =======
                                       8
<PAGE>

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

     Leases: The Company's facilities are leased pursuant to a three-year lease
     agreement which expires in August 2004.

     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, marketable
     securities, 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.

     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 - STOCKHOLDERS' EQUITY

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

                                                Number of Shares
                                   Authorized    Issued    Outstanding   Amount

     May 31, 2002 (Unaudited)
        Common stock, $0.01 par
         value (1)(2)             500,000,000  69,496,629   69,496,629  $695,000
                                                                        ========

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

(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. 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 major
           stockholder of the Company.

                                       9
<PAGE>

NOTE 2 - STOCKHOLDERS' EQUITY (CONTINUED)

(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.

     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.

     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 Carter Fortune,
     the Company's largest shareholder and the holder of certain debt and
     preferred stock of the Company, allowed the Company to eliminate its
     existing debt, acquire Murphy Development, Ltd. ("Murphy Development"), a
     commercial and retail real estate development company 50% owned by Mr.
     Fortune, and issue new convertible debt to be used to purchase and operate
     the Company's existing and future businesses.

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

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

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

     Mr. Fortune also agreed to make available to Murphy Development an
     operating line of credit of up to $2,250,000, if and as needed. The line of
     credit was secured by all of the assets of Murphy Development and 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.

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

                                       10
<PAGE>

NOTE 3 - STOCK OPTIONS, WARRANTS AND OTHER COMPENSATION

     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. The Company agreed to grant 50,000 new warrants to the
     Company's former CEO on June 30, 2001. 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:

                                Unaudited     Weighted                  Weighted
                                  Nine        Average    Audited        Average
                               Months Ended   Exercise  Year Ended      Exercise
                                 May 31,       Price    August 31,       Price
                                  2002       Per Share     2001        Per Share
        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
                                 =======               ==========

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

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

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

     The Company accounts for employee stock-based transactions under Accounting
     Principles Board Opinion No. 25. Accordingly, no compensation cost has been
     recognized for options issued with an exercise price equal to the market
     value of the common stock at the date of grant. The Company has adopted the
     disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based
     Compensation," which defines a fair value method of accounting for stock
     options and other equity instruments. Under the fair value method,
     compensation cost is measured at the grant date based on the fair value of
     the award and is recognized over the service period, which is usually the
     vesting period. Management believes that had compensation cost been
     determined based on the fair value at the grant dates consistent with the
     provisions of SFAS No. 123, there would have been no material effect on the
     Company's net loss and its loss per common share for the eight months ended
     August 31, 2000.

     The Company agreed to grant 50,000 warrants to the Company's former CEO on
     September 1, 2000. Each warrant is convertible into one share of common
     stock at an exercise price of $1.00 per share exercisable June 30, 2002
     through June 30, 2008.

                                       11
<PAGE>

NOTE 4 - PER SHARE DATA

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

                                                     Unaudited       Unaudited
                                                    Three Months    Three Months
                                                       Ended           Ended
                                                    May 31, 2002   May 31, 2001

Net Loss                                            $   (340,000)  $   (772,000)

Dividends and accretion on preferred stock                    --       (120,000)
                                                    ------------   ------------

Net Loss Available for Common Stockholders          $   (340,000)  $   (892,000)
                                                    ============   ============

Basic Loss Per Share                                $      (0.01)  $      (0.01)
                                                    ============   ============

Diluted Loss Per Share                              $      (0.01)  $      (0.01)
                                                    ============   ============

Shares Outstanding
   Basic weighted average number of common shares
    outstanding                                       69,496,629     60,704,108
   Dilutive effect of conversion of preferred stock
    Series A, C, D & E and exercise of options                --      1,350,000
                                                    ------------   ------------

                                                      69,496,629     62,054,108
                                                    ============   ============


                                                     Unaudited      Unaudited
                                                    Nine Months    Nine Months
                                                        Ended          Ended
                                                    May 31, 2002   May 31, 2001

Net Loss                                            $   (981,000)  $ (6,587,000)

Dividends and accretion on preferred stock                    --       (220,000)
                                                    ------------   ------------

Net Loss Available for Common Stockholders          $   (981,000)  $ (6,807,000)
                                                    ============   ============

Basic Loss Per Share                                $      (0.01)  $       (.11)
                                                    ============   ============

Diluted Loss Per Share                              $      (0.01)  $       (.11)
                                                    ============   ============

Shares Outstanding
   Basic weighted average number of common shares
    outstanding                                       69,496,629     60,704,108
   Dilutive effect of conversion of preferred stock
    Series A, C, D & E and exercise of options                --      1,350,000
                                                    ------------   ------------

                                                      69,496,629     62,054,108
                                                    ============   ============

     At May 31, 2002 and 2001, all outstanding options and warrants were
     anti-dilutive.

NOTE 5 - 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.

                                       12
<PAGE>

NOTE 6 - COMPREHENSIVE INCOME

     The following is the calculation of comprehensive income for the periods
     presented:

<TABLE>
<CAPTION>
                                        Three Months Ended       Nine Months Ended
                                        May 31,     May 31,     May 31,       May 31,
                                         2002        2001        2002          2001
<S>                                   <C>         <C>         <C>           <C>
     Comprehensive income:
        Net loss                      $(340,000)  $(772,000)  $  (981,000)  $(6,587,000)

        Unrealized losses on
         Available for sale
         securities, net of income
         taxes                         (541,000)          -      (334,000)            -
        Add: Reclassification
         adjustment for net
         (gains) losses realized         39,000           -      (168,000)            -
                                      ---------   ---------    ----------   -----------
                                       (502,000)          -      (502,000)            -
                                      ---------   ---------    ----------   -----------
           Total Comprehensive
            Income                    $(842,000)  $(772,000)  $(1,483,000)  $(6,587,000)
                                      =========   =========   ===========   ===========
</TABLE>

NOTE 7 - SEGMENT INFORMATION

     The Company has decided to focus its efforts in areas other than gaming
     projects. Future operations of the Company will be organized around three
     primary segments:

     o    Telecom Site Development
     o    Entertainment
     o    Holding Company

NOTE 7 - SEGMENT INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
                                                 Telecom Site                        Holding          Segment
                                                 Development      Entertainment      Company          Totals
<S>                                              <C>              <C>              <C>              <C>
Three Months Ended May 31, 2002
Revenues                                         $   394,000      $        --      $        --      $   394,000
Cost of revenues                                    (301,000)              --               --         (301,000)
Selling, general and administrative expenses        (247,000)          (1,000)        (103,000)        (351,000)
                                                 -----------      -----------      -----------      -----------

Segment Operating Loss                           $  (154,000)     $    (1,000)     $  (103,000)     $  (258,000)
                                                 ===========      ===========      ===========      ===========

Nine Months Ended May 31, 2002
Revenues                                         $   485,000      $        --      $        --      $   485,000
Cost of revenues                                    (593,000)              --               --         (593,000)
Selling, general and administrative expenses        (655,000)          (6,000)        (376,000)      (1,037,000)
                                                 -----------      -----------      -----------      -----------

Segment Operating Loss                           $  (763,000)     $    (6,000)     $  (376,000)     $(1,145,000)
                                                 ===========      ===========      ===========      ===========

As of May 31, 2002
Cash                                             $    99,000      $     2,000      $    19,000      $   120,000
Accounts receivable                                  364,000            2,000               --          366,000
Other current assets                                  26,000               --           37,000           63,000
Office equipment, net                                181,000               --           20,000          201,000
Investments in available-for-sale securities              --               --          434,000          434,000
Notes receivable                                          --               --           30,000           30,000
Other assets                                           6,000               --               --            6,000
                                                 -----------      -----------      -----------      -----------

Total Segment Assets                             $   676,000      $     4,000      $   540,000      $ 1,220,000
                                                 ===========      ===========      ===========      ===========

Three Months Ended May 31, 2001
Revenues                                         $        --      $   118,000      $        --      $   118,000
Cost of revenues                                          --         (294,000)              --         (294,000)
Selling, general and administrative expenses              --         (526,000)              --         (526,000)
                                                 -----------      -----------      -----------      -----------

Segment Operating Loss                           $        --      $  (702,000)     $        --      $  (702,000)
                                                 ===========      ===========      ===========      ===========

Nine Months Ended May 31, 2001
Revenues                                         $        --      $   425,000      $        --      $   425,000
Cost of revenues                                          --       (5,206,000)              --       (5,206,000)
Selling, general and administrative expenses              --       (1,616,000)         (56,000)      (1,672,000)
                                                 -----------      -----------      -----------      -----------

Segment Operating Loss                           $        --      $(6,397,000)     $   (56,000)     $(6,453,000)
                                                 ===========      ===========      ===========      ===========

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

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

                                       13
<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 PDH,
Inc.; 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 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 PDH, Inc. ("PDH"),
Cornerstone Wireless Services, Incorporated and Cornerstone Wireless
Construction Services, Inc. subsidiaries and their affiliates ("Cornerstone").
The Company has the capability to assist its customers with the telecom site
development process from network infrastructure real estate planning through
infrastructure construction, as well as site marketing and management. Through
its subsidiaries and affiliates, the Company can assist its clients with any and
all of the following: 1) telecom site acquisition (e.g., raw-land property,

                                       14
<PAGE>

building rooftop or existing antenna structure for co-location); 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 marketing and asset management.

PDH acquired certain assets of DicksonHughes Group, LLC, ("DHG") a real estate
development company established in 1989, through an Asset Purchase Agreement
dated January 18, 2002. The assets acquired included certain of DHG's accounts
receivable, work-in-process, prepaid expenses, software, computer hardware and
fixtures, and backlog. PDH intends to devote the physical assets to its existing
telecommunications business. PDH also hired eighteen employees of DHG, including
S. David Dickson who leads the PDH subsidiary. PDH's business strategy is to
offer a full range of network infrastructure real estate development services to
the telecommunications industry, among other types of real estate network
critical industries. PDH intends to provide its clients with the most
experienced personnel and deliver the highest level of services, systems and
support necessary to achieve its clients' goals and objectives on a local,
regional or national basis. PDH's focus is to meet the demanding timelines
associated with the development of a network by ensuring that each individual
site reaches the construction phase as quickly as possible. This is achieved by
avoiding costly delays up-front through effective management of the site
acquisition process with its site development real estate professionals. PDH's
full service list of network real estate development services includes program
management, site acquisition, zoning and permitting, architectural & engineering
design, construction management, co-location facilitation, environmental
services, lease capitalization, lease renegotiation, site marketing and asset
management.

Cornerstone Wireless Services, Incorporated was acquired by the Company in July,
2001. Cornerstone Wireless Construction Services, Inc. was incorporated in
October, 2001 and began operations shortly thereafter. Cornerstone specializes
in engineering and architectural services for the telecommunications and the
traditional real estate development industries. The telecommunications industry
includes cellular, personal communication services (PCS), specialized mobile
radio (SMR), enhanced specialized mobile radio (ESMR), microwave systems, fixed
wireless, broadband and fiber optics technologies for carriers, tower
consolidators and utilities. Detailed services for the telecommunications
industry include site surveys, site layout drawings, architectural aesthetic
designs, foundation designs, antenna mount designs, geo-technical investigation
and reports, structural analysis and environmental assessments. Cornerstone also
offers construction management of telecommunications infrastructure.

Traditional real estate development is comprised of architectural, structural
and civil engineering, mechanical engineering, electrical engineering and
project management. These disciplines are used in residential, commercial and
industrial markets. Traditional real estate development engineering includes
interior design/space planning, exterior design, remodel and additions, tenant
build-out improvements; structural design/analysis, site
utilities/grading/drainage, site design/development, landscape design; HVAC
systems analysis, plumbing design, building systems criteria; power distribution

                                       15
<PAGE>

design, interior/exterior lighting design, video/data/telecommunication systems,
security/life safety systems and all areas covering project management.
Cornerstone is pursuing assignments and projects anywhere within the United
States.

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

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

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

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

WOW was organized in May, 2000, began production of its weekly syndicated
television series, WOW - Women of Wrestling(R) in September, 2000 and began

                                       16
<PAGE>

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.

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
unit price or fixed price basis in which the Company agrees to do the work for
units of work performed (unit price) or for a fixed amount for the entire
project (fixed 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 utilizing output measures, such as when
services are performed, units are delivered, or contract milestones are reached,
which also typically are billing points. The Company will at times record
revenues from longer term, fixed price contracts on a percentage-of-completion
basis, using input measures such as the cost-to-cost method based on the
percentage of total costs incurred to date in proportion to total estimated
costs to complete the contract.

During the period covered by this report, WOW 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.

                                       17
<PAGE>

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. As the Company had effectively
recognized revenues from the initial airing of all of the episodes produced
through the periods ended May 31, 2001, August 31, 2001 and May 31, 2002, all
production costs as of those dates were expensed, and the Company did not have
any capitalized production costs as of those dates.

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.

                                       18
<PAGE>

RESULTS OF OPERATIONS:  COMPARISON OF THE THREE MONTH PERIODS ENDED
                        MAY 31, 2002 AND May 31, 2001

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

                                 Telecom Site                Holding    Segment
                                 Development  Entertainment  Company    Totals
Three months ended May 31, 2002

Revenues                            394,000        -0-           -0-     394,000
Cost of revenues                  (301,000)        -0-           -0-   (301,000)
Selling, general and
administrative                    (247,000)    (1,000)     (103,000)   (351,000)
                                 ----------   --------    ----------  ----------
Operating income (loss)           (154,000)    (1,000)     (103,000)   (258,000)
                                 ==========   ========    ==========  ==========

As of May 31, 2002

Total segment assets                676,000       4,000     540,000    1,220,000

Three-months ended May 31, 2001

Revenues                                -0-     118,000         -0-      118,000
Cost of revenues                        -0-   (294,000)         -0-    (294,000)
Selling, general and
administrative                          -0-   (526,000)         -0-    (526,000)
                                 ----------   --------    ----------  ----------
Operating income (loss)                 -0-   (702,000)         -0-    (702,000)
                                 ==========   ========    ==========  ==========

As of August 31, 2001

Total segment assets                344,000      35,000   2,937,000    3,316,000


Revenues

Revenues for the three months ended May 31, 2002 were $394,000, compared to
$118,000 for the three months ended May 31, 2001, an increase of $276,000. The
increase in revenues was primarily due to an increase in revenues in the Telecom
Site Development segment of $394,000, which resulted from the Company beginning
operations in the segment subsequent to last year. The Company had a decrease in
revenues from the prior fiscal year in the Women of Wrestling segment of
$118,000, which was a result of the Company not producing and distributing the
television show WOW Women of Wrestling and related pay-per-view events for the
2001 and 2002 season. The Company did not recognize operating revenue in its
Holding Company for either the quarter ended May 31, 2002 or for the same period
in the previous fiscal year.

Costs and Expenses

The Company began additional operations, primarily the operation of its Telecom
Site Development segment and scaled back significantly other operations,
primarily the Entertainment segment for the comparable periods. Cost of revenues
were $301,000 for the three months ended May 31, 2002 compared to $294,000 for
the three months ended May 31, 2001, an increase of $7,000. This increase was
attributable to an increase of $301,000 in the Company's Telecom Site
Development segment, which was 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. In the Entertainment segment, the Company had a
decrease of $294,000 in cost of revenues for the quarter ended May 31, 2002
compared to the same period in the previous fiscal year. This decrease was the
result of the Company not producing and distributing the television show WOW
Women of Wrestling and related pay-per-view events for the 2001 and 2002 season.
The Company did not incur any cost of revenues in its Holding Company for either
the quarter ended May 31, 2002 or for the same period in the previous fiscal
year.

                                       19
<PAGE>

Selling, general and administrative expenses were $351,000 for the three months
ended May 31, 2002, compared to $526,000 for the three months ended May 31,
2001, a decrease of $175,000. This decrease was primarily due to a decrease of
$525,000 in the Company's Entertainment segment, which was the result of the
Company significantly scaling back operations in the Entertainment segment for
the comparable periods.

In the Telecom Site Development segment, the Company had an increase of $247,000
in selling, general and administrative expenses for the three months ended May
31, 2002 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 Holding Company, there was an increase of $103,000 in selling, general
and administrative expenses for the three months ended May 31, 2002 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 May 31, 2002 was approximately
$6,000, compared to $5,000 for the three months ended May 31, 2001, an increase
of $1,000. 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 May 31, 2002 was approximately
$5,000, all from a margin balance. Interest expense for the three months ended
May 31, 2001 was approximately $75,000 from a line of credit. The line of credit
expired during the year ended August 31, 2001.

Losses on investments in marketable securities, net for the three months ended
May 31, 2002 was approximately $39,000. No such loss was recorded for the three
months ended May 31, 2001.

Net loss on sale of assets for the three months ended May 31, 2002 was
approximately $19,000 from the sale of fixed assets. No such loss was recorded
for the three months ended May 31, 2001.


                                       20
<PAGE>

RESULTS OF OPERATIONS:  COMPARISON OF THE NINE MONTH PERIODS ENDED
                        MAY 31, 2002 AND MAY 31, 2001

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

                               Telecom Site                Holding    Segment
                               Development  Entertainment  Company    Totals
Nine months ended May 31, 2002

Revenues                          485,000          -0-         -0-       485,000
Cost of revenues                (593,000)          -0-         -0-     (593,000)
Selling, general and
administrative                  (655,000)      (6,000)    (376,000)  (1,037,000)
                               ----------  -----------  ----------  -----------
Operating income (loss)         (763,000)      (6,000)    (376,000)  (1,145,000)
                               ==========  ===========  ==========  ===========

As of May 31, 2002

Total segment assets              676,000        4,000      540,000    1,220,000

Nine-months ended May 31, 2001

Revenues                              -0-      425,000        -0-        425,000
Cost of revenues                      -0-  (5,206,000)        -0-    (5,206,000)
Selling, general and
administrative                        -0-  (1,616,000)    (56,000)   (1,672,000)
                               ----------  -----------  ----------  -----------
Operating income (loss)               -0-  (6,397,000)   (56,000)   (6,453,000)
                               ==========  ===========  ==========  ===========


As of August 31, 2001

Total segment assets              344,000      35,000   2,937,000    3,316,000

Revenues

Revenues for the nine months ended May 31, 2002 were $485,000, compared to
$425,000 for the nine months ended May 31, 2001, an increase of $60,000. The
increase in revenues was primarily due to an increase in revenues in the Telecom
Site Development segment of $485,000, which resulted from the Company beginning
operations in the segment subsequent to last year. The revenue in the Telecom
Site Development segment for the nine months ended May 31, 2002 is net of
approximately $137,000 of work-in-process purchased from DHG. The Company had a
decrease in revenues from the prior fiscal year in its Women of Wrestling
segment of $425,000, which was a result of the Company not producing and
distributing the television show WOW Women of Wrestling and related pay-per-view
events for the 2001 and 2002 season. The Company did not recognize operating
revenue in its Holding Company for either the nine months ended May 31, 2002 or
for the same period in the previous fiscal year.

Costs and Expenses

The Company began additional operations, primarily the operation of its Telecom
Site Development segment and scaled back significantly other operations,
primarily the Entertainment segment for the comparable periods. Cost of revenues
were $593,000 for the nine months ended May 31, 2002 compared to $5,206,000 for
the nine months ended May 31, 2001, a decrease of $4,613,000. This decrease was
primarily due to a decrease of $5,206,000 in the Company's Entertainment
segment, which was a result of the Company not producing and distributing the
television show WOW Women of Wrestling and related pay-per-view events for the
2001 and 2002 season. In the Telecom Site Development segment, the Company had
an increase of $593,000 in cost of revenues for the nine months ended May 31,
2002 compared to the same period in the previous fiscal year. This increase was
attributable 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 Holding Company for either
the nine months ended May 31, 2002 or for the same period in the previous fiscal
year.

                                       21
<PAGE>

Selling, general and administrative expenses were $1,037,000 for the nine months
ended May 31, 2002, compared to $1,672,000 for the nine months ended May 31,
2001, a decrease of $635,000. This decrease was primarily due to a decrease of
$1,610,000 in the Company's Entertainment segment. This decrease was primarily
the result of the Company significantly scaling back operations in the
Entertainment 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 Telecom Site Development segment, the Company had an increase of $655,000
in selling, general and administrative expenses for the nine months ended May
31, 2002 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 Holding Company, there was an increase of $320,000 in selling, general
and administrative expenses for the nine months ended May 31, 2002 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 nine months ended May 31, 2002 was approximately
$50,000, compared to $19,000 for the nine months ended May 31, 2001, an increase
of $31,000. 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 nine months ended May 31, 2002 was approximately
$5,000, all from a margin balance. Interest expense for the nine months ended
May 31, 2001 was approximately $153,000 from a line of credit. The line of
credit expired during the year ended August 31, 2001.

Gain on investments in marketable securities, net for the nine months ended May
31, 2002 was approximately $168,000. No such gain was recorded for the nine
months ended May 31, 2001.

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

LIQUIDITY AND CAPITAL RESOURCES

The Company had cash and investments in other liquid securities (i.e., publicly
traded stocks and bonds net of any margin balances) of approximately $554,000 as
of May 31, 2002. As of May 31, 2002, the Company had no outstanding bank
borrowings or other indebtedness.

As of June 30, 2002, the Company had cash and net investments in other liquid
securities (i.e., publicly traded stocks and bonds net of margin balances) of
approximately $383,000. In June, 2002, The Company entered into a one year,
5.00% demand note for $250,000 with Carter M. Fortune, the Company's Chairman
and CEO.

                                       22
<PAGE>

The Company has reduced its monthly operating expenditures approximately 35% in
the past quarter to offset lower than expected operating revenues. Management of
the Company is committed to its currently active, telecom site development
operations during this period of weakness in the sector and overall economy,
which it believes it will benefit from when the economy rebounds and strong
growth returns to the sector. However, in the meantime, management is pursuing
non-telecom revenue sources as a means to enhance and diversify its revenue
sources within the segment. Furthermore, management of the Company is committed,
at a minimum, to bringing all monthly operating expenditures in line with
revenues by year end. The Company's management believes that its capital
resources will be 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 its Telecom Site Development segment, and the potential
license of the WOW - Women of Wrestling(R) property. Many of these and other
factors are beyond the Company's control.

Over the next 12 months, the Company plans to hire additional employees in its
Telecom Site Development segment. However, the hiring of these employees will be
approximately correlated, as a percentage, with an increase in operating
revenue.

PDH, Inc., a wholly owned subsidiary of the Company, acquired certain assets of
DicksonHughes Group, LLC, ("DHG") a real estate development company established
in 1989, through an Asset Purchase Agreement dated January 18, 2002. The assets
acquired included certain of DHG's accounts receivable with a book value of
approximately $386,000; work-in-process with a book value of approximately
$137,000; prepaid expenses with a book value of approximately $8,000; software,
computer hardware and fixtures with a book value of approximately $209,000; and
backlog. The nature and amount of consideration given for the acquired assets
was Seven Hundred Forty Thousand Two Hundred Seven Dollars ($740,207), which is
subject to adjustments as described in the Agreement. PDH intends to devote the
physical assets to its existing telecommunications business. PDH also hired
eighteen employees of DHG.

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.

                                       23
<PAGE>

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.

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.

                                       24
<PAGE>

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 extended through September 30, 2001 for domestic
distribution and December 31, 2001 for foreign distribution. Perin was entitled
to collect and retain all domestic distribution and foreign television
advertising or licensing revenues relating to any licensing of WOW's programs
that occurred 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 was paying all expenses relating to
distribution of WOW's programs, Perin had the right to discontinue the
distribution of the programs at any time, provided Perin gave as much advance
notice to WOW as reasonably practicable. In the event a substantial portion of
the assets or stock of WOW were sold or licensed, Perin's rights to continue to
distribute WOW's programs would have terminated 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 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 nine months ended May 31, 2002, cash flows used for operating activities
were $1,440,000, as compared to cash flows used for operating activities of
$5,915,000 for the nine months ended May 31, 2001. The change is primarily
related to a decrease in net losses associated with the Company's Women of
Wrestling operations.

For the nine months ended May 31, 2002, cash flows used for investing activities
were $978,000, as compared to $54,000 for the nine months ended May 31, 2001.
The increase in cash flows used in this period is primarily due to an increase
in investments in marketable securities, as well as the use of funds to purchase
fixed assets.

For the nine months ended May 31, 2002, cash flows provided by financing
activities were zero as compared to $5,746,000 for the nine months ended May 31,
2001. The decrease was primarily related to a reduction in net cash inflows from
preferred stock and line of credit borrowings.

                                       25
<PAGE>

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

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

None

Item 5.  Other Information.

Effective April 16, 2002, William A. Shoemake's employment as a Director of
Fortune Diversified Industries, Inc. and Chief Executive Officer of Cornerstone
Wireless Services, Inc. was terminated.

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 third quarter of fiscal year 2001-2002:

None


                                       26
<PAGE>


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: 7/10/02                       By: /s/ Douglas E. May
      -------                           ------------------------------
                                        Douglas E. May
                                        Vice President of Finance and
                                        Chief Financial Officer

EXHIBIT INDEX

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

None




                                       27