United States Securities and Exchange Commission
                             Washington, D.C. 20549
                                   Form 10QSB
(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, 2003

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

            For the transition period from __________ to ___________

Commission file number         0-19049

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

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

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

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

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

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes  X  No
                                                              ---    ---
On July 14, 2003, there were 93,656,237 shares of the Company's Common Stock
outstanding.

<PAGE>

PART 1 - FINANCIAL INFORMATION Item 1. Financial Statements.

              FORTUNE DIVERSIFIED INDUSTRIES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                ASSETS

                                                              Unaudited         Audited
                                                                May 31         August 31,
                                                                 2003             2002
<S>                                                          <C>              <C>
CURRENT ASSETS
     Cash and equivalents                                    $   196,000      $   291,000
     Accounts receivable, net                                  2,672,000        2,141,000
     Purchase adjustment receivable                                   --          600,000
     Inventory, net                                              844,000          509,000
     Other current assets                                        123,000           69,000
                                                             -----------      -----------
        Total Current Assets                                   3,835,000        3,610,000
                                                             -----------      -----------

OTHER ASSETS
     Notes receivable                                                 --           30,000
     Office equipment, net                                       306,000          281,000
     Vehicles, net                                               123,000          133,000
     Leasehold improvements, net                                 155,000          166,000
     Loan origination fees, net                                   12,000           15,000
     Goodwill                                                    946,000          876,000
     Other intangible assets, net                                668,000          751,000
                                                             -----------      -----------
        Total Other Assets                                     2,210,000        2,252,000
                                                             -----------      -----------

        TOTAL ASSETS                                         $ 6,045,000      $ 5,862,000
                                                             ===========      ===========


                                LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Line of credit                                          $ 1,333,000      $ 1,277,000
     Accounts payable                                            492,000          477,000
     Current maturities of long-term debt                        441,000          442,000
     Current maturities of capital lease obligations               8,000            8,000
     Accrued payroll and related expenses                         67,000           44,000
     Accrued expenses                                            147,000          197,000
     Deferred revenue                                            187,000          241,000
     Related party unearned revenue                               41,000               --
                                                             -----------      -----------
        Total Current Liabilities                              2,716,000        2,686,000
                                                             -----------      -----------

LONG-TERM LIABILITIES
     Long-term debt, less current maturities                   2,304,000        2,589,000
     Capital lease obligations, less current maturities           11,000           17,000
                                                             -----------      -----------
        Total Long-term Liabilities                            2,315,000        2,606,000
                                                             -----------      -----------

STOCKHOLDERS' EQUITY
     Common stock                                                736,000          735,000
     Additional paid-in capital and warrants outstanding       6,413,000        6,441,000
     Accumulated deficit                                      (6,135,000)      (6,606,000)
                                                             -----------      -----------
        Total Stockholders' Equity                             1,014,000          570,000
                                                             -----------      -----------

        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY           $ 6,045,000      $ 5,862,000
                                                             ===========      ===========
</TABLE>
See Accompanying Summary of Accounting Policies and Notes to Unaudited Interim
Consolidated Financial Statements.

                                       1
<PAGE>

              FORTUNE DIVERSIFIED INDUSTRIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                  Three Months Ended
                                                               May 31,          May 31,
                                                                2003             2002
<S>                                                          <C>              <C>
REVENUES                                                     $ 3,385,000      $   394,000

COST OF REVENUES                                               2,484,000          301,000
                                                             -----------      -----------

GROSS PROFIT                                                     901,000           93,000

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES                    881,000          351,000
                                                             -----------      -----------

Operating Income (Loss)                                           20,000         (258,000)
                                                             -----------      -----------

OTHER INCOME (EXPENSE)
     Interest income                                                  --            6,000
     Interest expense                                            (41,000)          (5,000)
     Losses on investments in marketable securities, net              --          (39,000)
     Loss on sale of assets                                           --          (19,000)
     Bad debt expense                                                 --          (25,000)
     Other income                                                 57,000               --
                                                             -----------      -----------
         Total Other Income (Expense)                             16,000          (82,000)
                                                             -----------      -----------

Net Income (Loss) before Provision for Income Taxes               36,000         (340,000)

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

NET INCOME (LOSS)                                            $    36,000      $  (340,000)
                                                             ===========      ===========


BASIC INCOME (LOSS) PER SHARE                                $        --      $     (0.01)
                                                             ===========      ===========


DILUTED INCOME (LOSS) PER SHARE                              $        --      $     (0.01)
                                                             ===========      ===========
</TABLE>
See Accompanying Summary of Accounting Policies and Notes to Unaudited Interim
Consolidated Financial Statements.

                                       2
<PAGE>

              FORTUNE DIVERSIFIED INDUSTRIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                   Nine Months Ended
                                                               May 31,           May 31,
                                                                2003              2002
<S>                                                         <C>               <C>
REVENUES                                                    $ 10,318,000      $    485,000

COST OF REVENUES                                               7,321,000           593,000
                                                            ------------      ------------

GROSS PROFIT (LOSS)                                            2,997,000          (108,000)

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES                  2,493,000         1,037,000
                                                            ------------      ------------

Operating Income (Loss)                                          504,000        (1,145,000)

OTHER INCOME (EXPENSE)
     Interest income                                                  --            50,000
     Interest expense                                           (114,000)           (5,000)
     Gains on investments in marketable securities, net               --           168,000
     Gain (loss) on sale of assets                                    --           (23,000)
     Bad debt recovery (expense)                                  24,000           (26,000)
     Other income                                                 57,000                --
                                                            ------------      ------------
         Total Other Income (Expense)                            (33,000)          164,000
                                                            ------------      ------------

Net Income (Loss) before Provision for Income Taxes              471,000          (981,000)

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

NET INCOME (LOSS)                                           $    471,000      $   (981,000)
                                                            ============      ============


BASIC INCOME (LOSS) PER SHARE                               $       0.01      $      (0.01)
                                                            ============      ============


DILUTED INCOME (LOSS) PER SHARE                             $       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

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                         Three Months Ended
                                                                       May 31,        May 31,
                                                                        2003           2002
<S>                                                                  <C>            <C>
OPERATING ACTIVITIES
     Net income (loss)                                               $  36,000      $(340,000)
     Adjustments to reconcile net income (loss) to net cash used
      by operating activities:
        Depreciation and amortization                                   82,000         12,000
        Net loss on sale of assets                                          --         19,000
        Net realized loss from sale of available for
          sale securities                                                   --         39,000
        Changes in certain operating assets
         and liabilities:
            Accounts receivable                                       (618,000)        88,000
            Merchandise inventories                                    (14,000)            --
            Other current assets                                       (52,000)        38,000
            Accounts payable, accrued expenses and other
             current liabilities                                        84,000       (106,000)
            Deferred revenue                                            51,000             --
                                                                     ---------      ---------
               Net Cash Used by Operating Activities                  (431,000)      (250,000)
                                                                     ---------      ---------

INVESTING ACTIVITIES
     Purchases of vehicles, equipment and leashold                      (9,000)        (3,000)
             improvements, net
     Proceeds from sale of office equipment                            100,000         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                91,000        235,000
                                                                     ---------      ---------

FINANCING ACTIVITIES
     Net borrowings on line of credit                                  537,000             --
     Repayments on long-term debt                                     (154,000)            --
     Repayments of capital lease obligations                            (2,000)            --
                                                                     ---------      ---------
               Net Cash Provided by Financing Activities               381,000             --
                                                                     ---------      ---------

NET INCREASE (DECREASE) IN CASH                                         41,000        (15,000)

CASH
     Beginning of Period                                               155,000        135,000
                                                                     ---------      ---------

     End of Period                                                   $ 196,000      $ 120,000
                                                                     =========      =========
</TABLE>
See Accompanying Summary of Accounting Policies and Notes to Unaudited Interim
Consolidated Financial Statements.

                                       4
<PAGE>

              FORTUNE DIVERSIFIED INDUSTRIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                            Nine Months Ended
                                                                         May 31,          May 31,
                                                                          2003             2002
<S>                                                                   <C>              <C>
OPERATING ACTIVITIES
     Net income (loss)                                                $   471,000      $  (981,000)
     Adjustments to reconcile net income/ (loss) to net cash used
      by operating activities:
        Depreciation and amortization                                     199,000           22,000
        Net loss on sale of assets                                             --           23,000
        Net realized gain from sale of available for
          sale securities                                                      --         (169,000)
        Changes in certain operating assets
         and liabilities:
            Accounts receivable                                          (531,000)        (366,000)
            Merchandise inventories                                      (335,000)
            Other current assets                                          (54,000)          44,000
            Accounts payable, accrued expenses and other
             current liabilities                                           29,000          (13,000)
            Deferred revenue                                              (54,000)              --
                                                                      -----------      -----------
               Net Cash Used by Operating Activities                     (275,000)      (1,440,000)
                                                                      -----------      -----------

INVESTING ACTIVITIES
     Purchases of vehicles, equipment and leashold
             improvements, net                                           (217,000)        (226,000)
     Proceeds from sale of office equipment                               100,000           15,000
     Purchases of available for sale securities                                --       (4,266,000)
     Proceeds from sales of available for sale securities                      --        3,499,000
     Acquisition of productive assets and businesses, net cash            (70,000)              --
                                                                      -----------      -----------
               Net Cash Used by Investing Activities                     (187,000)        (978,000)
                                                                      -----------      -----------

FINANCING ACTIVITIES
     Collection of purchase adjustment receivables                        600,000               --
     Net borrowings on line of credit                                      56,000               --
     Borrowings on long-term debt                                          23,000               --
     Repayments on long-term debt                                        (309,000)              --
     Repayments of capital lease obligations                               (6,000)              --
     Issuance of common stock                                               3,000               --
                                                                      -----------      -----------
               Net Cash Provided by Financing Activities                  367,000               --
                                                                      -----------      -----------

NET DECREASE IN CASH                                                      (95,000)      (2,418,000)

CASH
     Beginning of Period                                                  291,000        2,538,000
                                                                      -----------      -----------

     End of Period                                                    $   196,000      $   120,000
                                                                      ===========      ===========
</TABLE>
See Accompanying Summary of Accounting Policies and Notes to Unaudited Interim
Consolidated Financial Statements.

                                       5
<PAGE>

              FORTUNE DIVERSIFIED INDUSTRIES, INC. AND SUBSIDIARIES

                   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. 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 in conformity with accounting
principles generally accepted in the United States. The operating results for
the nine-month period ended May 31, 2003, 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),is a
Delaware corporation organized in 1988. The Company has conducted its business
directly and through wholly-owned subsidiaries. The Company is the parent
company of Kingston Sales Corp. (Kingston), PDH, Inc. (PDH), Cornerstone
Wireless Services, Inc., Murphy Development, Ltd. Women of Wrestling, Inc.
(WOW), Telecom Technology Corp. (TTC), and StarQuest Wireless Services, Inc.
(StarQuest). As described in Note 2, the Company purchased Nor-Cote
International, Inc. and its subsidiaries (NCI), effective July 1, 2003.

Principles of Consolidation: The accompanying consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries as of May
31, 2003. All significant inter-company accounts and transactions have been
eliminated.

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

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

                                       6
<PAGE>

Supplemental Disclosures to Consolidated Statement of Cash Flows:

<TABLE>
<CAPTION>
                                                               Three Months Ended
                                                               May 31,     May 31,
                                                                2003        2002
<S>                                                           <C>          <C>
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


                                                                Nine Months Ended
                                                               May 31,     May 31,
                                                                2003        2002

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
Acquisition of Telecom Technology and StarQuest:
Accounts receivable                                            $ 33,000        -
Inventory                                                        44,000        -
Vehicles, equipment and leasehold improvements                   22,000        -
Accounts payable                                                 33,000        -
Accrued expenses and other current liabilities                    7,000        -
Goodwill                                                         70,000        -
</TABLE>

During the period ended February 28, 2003, the Company purchased 200,000 shares
of the Company's stock in lieu of a $30,000 note receivable due from a former
employee.

Property, Equipment, and Depreciation: The provision for depreciation amounted
to $47,000 at May 31, 2003.

Advertising and Exploitation Costs: Advertising and exploitation costs including
marketing, advertising, publicity, promotion and other distribution costs, are
expensed as incurred. For the nine-month period ended May 31, 2003 the expense
was $49,000.

NOTE 2 - ACQUISITIONS

Effective as of July 1, 2003, the Company has entered into a Stock Exchange
Agreement ("Agreement") by and among Nor-Cote International, Inc., an Illinois
corporation ("NCI"), and its subsidiaries; Norman G. Wolcott, Jr., individually
("Norm Wolcott"); Norman G. Wolcott, Jr. and Norman G. Wolcott, Sr., as
co-trustees of the Norman G. Wolcott, Sr. and Lucile H. Wolcott Revocable Trust
of 1995 ("Wolcott Trust"); First Bankers Trust Company, as trustee under the
Trust Agreement for the Nor-Cote International, Inc. Employee Stock Ownership
Plan Trust ("Trustee"); and the Company as Buyer. NCI is engaged in the business
of developing, producing and selling ultraviolet ink products.

The Stock Exchange Agreement's terms include, among other things, the exchange
of a total of 1,451,985.47 shares of NCI's common stock by Norm Wolcott and the
Wolcott Trust, and a total of 747,992.51 shares of NCI's preferred stock by the
Trustee, in exchange for certain shares of the Company held by its wholly owned
subsidiary, Nor-Cote Acquisition, Inc. NCI's shares were exchanged at a ratio of
eight and five hundred and thirty four thousandths (8.534) shares of the
Company's shares for each share of NCI's common stock and thirteen and two
hundred and forty seven thousandths (13.247) shares for each share of NCI's
preferred shares exchanged. The Company exchanged 12,391,244 of its own shares
to Norm Wolcott and the Wolcott Trust and exchanged 7,668,364 of its own shares
to the Trustee.

In addition to the exchange described above, Norm Wolcott and the Wolcott Trust
received one million eight hundred thousand dollars ($1,800,000.00) in cash. The
Trustee received eight hundred ninety three thousand, six hundred eight dollars
($893,608.00) for one hundred sixty nine thousand one hundred sixteen and
998/1000 (169,116.998) preferred shares of NCI held by the Trustee that have
been allocated to NCI's Employee Stock Ownership Plan participants. The
exchanged common and preferred shares constituted all of NCI's outstanding
shares.

Norm Wolcott is party to the Agreement and is subject to an Employment
Agreement. Prior to the Agreement, there was no material relationship between
the Company and Norm Wolcott.

                                       7
<PAGE>

NOTE 2 - ACQUISITIONS (CONTINUED)

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

                                                  Nine Months      Nine Months
                                                    Ended            Ended
                                                    May 31,          May 31,
                                                     2003             2002

Net revenue                                      $ 18,332,000     $ 17,852,000
Cost of revenues                                   11,548,000       12,388,000
                                                 ------------     ------------
Gross profit                                        6,784,000        5,464,000
Operating expenses                                  6,088,000        5,843,000
                                                 ------------     -----------
Operating income (loss)                               696,000         (379,000)
Other income (expenses)                               (26,000)        (276,000)
                                                 ------------     ------------
Net Income (loss)                                     670,000         (655,000)
Dividends                                                  --               --
                                                 ------------     ------------
Net Income (Loss) Available for Common
 Stockholders                                    $    670,000     $   (655,000)
                                                   ============     ===========

Basic Income (Loss) Per Share:                   $        .01    $        (.01)
                                                 ============     =============

Diluted Income (Loss) Per Share:                 $        .01    $        (.01)

                                                 ============     =============
Shares Outstanding:

Basic weighted average number of common
shares outstanding                                 93,656,237       93,656,237
Dilutive effect of conversion of options               --               --
                                                 ------------     ------------
         Total Shares Outstanding                  93,656,237       93,656,237
                                                 ============     ============

At May 31, 2002, all common stock equivalents were anti-dilutive.

It is impracticable to provide the required financial statements for the NCI
acquisition at this time. The Company will file the required financial
statements as they are available which is anticipated to be not later than 60
days after the effective date of the purchase. Consequently, any unaudited pro
forma adjustments related to this acquisition are omitted from the above pro
forma data.

The following is a condensed balance sheet disclosing the amount assigned to
each major asset and liability caption of Telecom Technology and StarQuest at
the acquisition date:

        Accounts receivable                                     $   33,000
        Inventory                                                   44,000
        Vehicles, equipment and leasehold improvements              22,000
        Goodwill                                                    70,000
                                                                ----------
                                                                   169,000
                                                                ----------
        Accounts payable                                            33,000
        Accrued expenses and other current liabilities               7,000
                                                                ----------
                                                                    40,000
                                                                ----------
                                                                $  129,000
                                                                ==========

        Cash consideration                                      $  126,000

        Fair value of common stock consideration                     3,000
                                                                ----------
                                                                $  129,000
                                                                ==========
                                       8
<PAGE>

NOTE 3 - ACCOUNTS RECEIVABLE

     Accounts receivable include the following:


                                                    Unaudited          Audited
                                                      May 31,         August 31,
                                                       2003              2002
                                                    ----------       ----------
      Amounts currently due                         $2,788,000       $2,341,000
      Less allowance for doubtful accounts            (106,000)        (100,000)
      Less allowance for sales returns                 (10,000)        (100,000)
                                                    ----------       ----------
                                                    $2,672,000       $2,141,000
                                                    ==========       ==========
NOTE 4 - INVENTORIES

     Inventories reflected on the accompanying balance sheets are summarized as
     follows:
                                                    Unaudited          Audited
                                                      May 28,         August 31,
                                                       2003              2002
                                                    ----------       ----------
      Finished goods                                $  894,000       $  559,000
      Less inventory reserve                           (50,000)         (50,000)
                                                    ----------       ----------
                                                    $  844,000       $  509,000
                                                    ==========       ==========
NOTE 5 - PROPERTY AND EQUIPMENT

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

                                                    Unaudited         Audited
                                                      May 31         August 31,
                                                       2003             2002
                                                    ----------       ----------
      Office equipment                              $  441,000       $  325,000
      Vehicles                                         210,000          190,000
      Leasehold improvements                           184,000          178,000
                                                    ----------       ----------
                                                       835,000          693,000
                                                    ----------       ----------
      Less accumulated depreciation                   (251,000)        (113,000)
                                                    ----------       ----------
                                                    $  584,000       $  580,000
                                                    ==========       ==========

NOTE 6 - GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill, as reclassified for the adoption
of SFAS 142, are as follows:

                                       9
<PAGE>

<TABLE>
<CAPTION>
                                                                 HOLDING      SEGMENT
                DISTRIBUTION     TELECOM      ENTERTAINMENT      COMPANY      TOTALS
<S>           <C>               <C>            <C>              <C>         <C>
Goodwill
at August
30, 2002         $ 876,000      $    -0-       $     -0-       $     -0-    $  876,000

Goodwill
acquired during
quarter end
November
30, 2002               -0-      $  70,000             -0-             -0-   $   70,000

Impairment
losses                 -0-            -0-             -0-             -0-          -0-
                 ---------      ---------       ---------       ---------    ---------
Goodwill
at May
31, 2003         $ 876,000      $  70,000       $     -0-             -0-    $ 946,000
                 =========      =========       =========       =========    =========
</TABLE>

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

<TABLE>
<CAPTION>
                                            AT MAY 31, 2003                          AT AUGUST 31, 2002
                                ----------------------------------------   -------------------------------------
                                                                WEIGHTED                                WEIGHTED
                                   GROSS                        AVERAGE      GROSS                      AVERAGE
                                 CARRYING       ACCUMULATED      AMORT      CARRYING     ACCUMULATED     AMORT
                                  AMOUNT       AMORTIZATION      PERIOD      AMOUNT     AMORTIZATION     PERIOD
<S>                             <C>            <C>               <C>        <C>          <C>             <C>
      Customer Relationships    $  526,000     $     39,000      10 YRS     $526,000     $      4,000    10 YRS
      Non-compete                  234,000           53,000       4 YRS      234,000            5,000     4 YRS
                                ----------     ------------      ------     --------     ------------    ------
      Total                     $  760,000     $     92,000       8 YRS     $760,000     $      9,000     8 YRS
                                ==========     ============      ======     ========     ============    ======
</TABLE>

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

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

NOTE 7 - LINES OF CREDIT

The Company has a $1,500,000 line of credit available through July 31, 2003.
Interest on the line is charged at 2.40% plus the one-month London Interbank
Offered Rate (one-month LIBOR). Outstanding borrowings amounted to approximately
$1,333,000 at May 31, 2003 and $1,277,000 at August 31, 2002.

The Company also has a $250,000, unsecured line of credit with a Stockholder.
There were no outstanding borrowings at May 31, 2003 or August 31, 2002,
respectively.

                                       10
<PAGE>

NOTE 8 - LONG-TERM DEBT

     Long-term debt consisted of the following:

<TABLE>
<CAPTION>
                                                                                Unaudited         Audited
                                                                                  May 31,        August 31,
                                                                                   2003             2002
                                                                                ----------       ----------
<S>                                                                             <C>              <C>
     Notes payable to financial institutions:

       $3,000,000 reducing revolving loan with monthly line reductions equal to
       1/84th of the loan amount per month for the first 59 months, with a
       balloon payment due at maturity 7/31/07. Interest is variable at 2.40%
       plus one-month LIBOR. The loan is secured by the business assets of
       Kingston Sales Corp., with a second lien on assets pledged
       by a shareholder                                                         $2,715,000       $3,005,000

       Due in monthly installments of $434, including interest at 4.9% Through
       January 2005.
       Secured by a vehicle                                                     $    8,000       $   12,000

       Due in monthly installments of $418, including interest at 9.03% through
       December 2004.
       Secured by a vehicle                                                     $    8,000       $   10,000

       Due in monthly installments of $563, including interest at 9% through
       March 2003.
       Secured by a vehicle                                                     $        0       $    4,000

       Due in monthly installments of $295, including interest at 7.24% through
       October 2007.
       Secured by a vehicle                                                     $   14,000       $        0

                                                                                ----------       ----------
                                                                                $2,745,000       $3,031,000
       Less current maturities                                                  $ (441,000)      $ (442,000)
                                                                                ----------       ----------
                                                                                $2,304,000       $2,589,000
                                                                                ==========       ==========
</TABLE>

Principal payments due on long-term debt outstanding at May 31, 2003, are
approximately as follows:

           Year Ending August 31,
           ----------------------
                  2003                                     $  441,000
                  2004                                        441,000
                  2005                                        435,000
                  2006                                        432,000
                  2007                                        996,000
                                                           ----------
                                                           $2,745,000
                                                           ==========
NOTE 9 - CAPITAL LEASES

Long-term leases relating to the financing of fixed assets are accounted for as
installment purchases. The following is an analysis of fixed assets and
obligations under capital leases:

                                                    Unaudited         Audited
                                                      May 31,        August 31,
                                                       2003             2002
                                                    ----------       ----------
      Equipment                                        $26,000          $26,000
      Less allowance for depreciation                   (7,000)          (1,000)
                                                    ----------       ----------
                                                       $19,000          $25,000
                                                    ==========       ==========

Following is a schedule of future minimum lease payments due under the capital
lease obligations together with the present value of net minimum lease payments
as of May 31, 2003:

           Year Ending August 31,
           ----------------------
                  2003                                     $    5,000
                  2004                                         10,000
                  2005                                          6,000
                                                           ----------
           Total minimum lease payments                        21,000
           Less amounts representing interest                   2,000
                                                           ----------
           Present value of net minimum lease payments         19,000
           Less current portion                                 8,000
                                                           ----------
           Long-term portion                               $   11,000
                                                           ==========

                                       11
<PAGE>

NOTE 10 - STOCKHOLDERS' EQUITY

     The following are the details of the Company's common stock as of May 31,
2003 and August 31, 2002:

<TABLE>
<CAPTION>
                                              Number of Shares
                                   Authorized       Issued     Outstanding      Amount
     <S>                           <C>            <C>           <C>           <C>
      May 31, 2003 (Unaudited)
         Common stock, $0.01 par
          value                    500,000,000    73,596,629    73,596,629    $  736,000
                                                                              ==========

      August 31, 2002 (Audited)
         Common stock, $0.01 par
          value                    500,000,000    73,496,629    73,496,629    $  735,000
                                                                              ==========
</TABLE>

NOTE 11 - INCOME TAXES

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

<TABLE>
<CAPTION>
                                                                    Nine Months
                                                                      Ended      Year End
                                                                      May 31,    August 31
                                                                       2003         2002
<S>                                                                 <C>          <C>
         Federal and state income tax (benefit) at statutory rate   $  36,000    $(824,000)
         Other                                                       (219,000)          --
         Change in valuation allowance                                183,000      824,000
                                                                    ---------    ---------

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

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

                                                May 31,       August 31,
                                                 2003            2002
     Deferred Tax Assets:
         Net operating loss carryforwards    $ 2,208,000     $ 2,294,000
         Capital loss carryforwards              376,000              --
         Reserves                                 72,000          52,000
         Deferred Revenue                         84,000          96,000
         Stock warrants                          190,000         170,000
         Property and Equipment                  (46,000)             --
         Intangible Assets                       (89,000)             --
         Valuation allowance                  (2,795,000)     (2,612,000)
                                             -----------     -----------

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

At May 31, 2003, the Company's had federal tax operating loss carryforwards of
approximately $5,200,000, which expire during the years of 2020, 2021 and 2022.
The state tax operating loss carryforwards were approximately $1,400,000. The
difference between federal and state net operating loss carryforwards represent
a change in business venue.

                                       12
<PAGE>

NOTE 12 - PER SHARE DATA

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

<TABLE>
<CAPTION>
                                                      Unaudited           Unaudited
                                                 Three Months Ended   Three Months Ended
                                                       May 31,             May 31,
                                                        2003                2002
<S>                                                  <C>                <C>
Net Income (loss)                                    $   36,000        $  (340,000)
Dividends                                                     --                 --
                                                     -----------        -----------
Net Income (Loss) Available for Common
 Stockholders                                        $   36,000        $  (340,000)
                                                     ===========        ===========

Basic Income (Loss) Per Share:                       $     0.00        $      (.01)

Diluted Income (Loss) Per Share:                     $     0.00        $      (.01)


Shares Outstanding:
    Basic weighted average number of common shares
     outstanding                                      73,776,629         69,496,629
    Dilutive effect of conversion of options                  --                 --
                                                     -----------        -----------
         Total Shares Outstanding                     73,776,629         69,496,629
                                                     ===========        ===========
</TABLE>

At May 31, 2002, all common stock equivalents were anti-dilutive.

<TABLE>
<CAPTION>
                                                     Unaudited           Unaudited
                                                 Nine Months Ended   Nine Months Ended
                                                       May 31,              May 31,
                                                        2003                 2002
<S>                                                  <C>                <C>
Net Income(loss)                                     $   471,000        $  (981,000)
Dividends                                                     --                 --
                                                     -----------        -----------
Net Income (Loss) Available for Common
 Stockholders                                        $   471,000        $  (981,000)
                                                     ===========        ===========

Basic Income (Loss) Per Share:                       $      0.01       $       (.01)

Diluted Income (Loss) Per Share:                     $      0.01       $       (.01)


Shares Outstanding:
    Basic weighted average number of common shares
     outstanding                                      73,776,629         69,496,629
    Dilutive effect of conversion of options                  --                 --
                                                     -----------        -----------
         Total Shares Outstanding                     73,776,629         69,496,629
                                                     ===========        ===========
</TABLE>

At May 31, 2002, all common stock equivalents were anti-dilutive.

NOTE 13 - ECONOMIC DEPENDENCY ON SUPPLIERS

In its Distribution segment the Company purchased approximately 40% of its
inventories from one vendor for the nine months ended May 31, 2003.

NOTE 14 - COMMITMENTS AND CONTINGENCIES

As part of the Stock Purchase Agreement to acquire KSC, there is a $250,000
contingent payment due on or before December 15, 2004, to Mr. Kingston.

                                       13
<PAGE>

NOTE 15 - SEGMENT INFORMATION
<TABLE>
<CAPTION>
                                                                                                 Holding          Segment
                                               Distribution       Telecom      Entertainment     Company          Totals
<S>                                            <C>             <C>             <C>             <C>             <C>
Three Months Ended May 31, 2003
Sales                                          $  2,308,000    $  1,077,000    $         --    $         --    $  3,385,000
Cost of sales                                    (1,737,000)       (747,000)             --              --      (2,484,000)
Selling, general and administrative expenses       (451,000)       (293,000)         (2,000)       (135,000)       (881,000)
                                               ------------    ------------    ------------    ------------    ------------

Segment Operating Income (Loss)                $    120,000    $     37,000    $     (2,000)   $   (135,000)   $     20,000
                                               ============    ============    ============    ============    ============

Nine Months Ended May 31, 2003
Sales                                          $  7,144,000    $  3,174,000              --              --    $ 10,318,000
Cost of sales                                    (5,305,000)     (2,016,000)             --              --      (7,321,000)
Selling, general and administrative expenses     (1,082,000)     (1,007,000)         (4,000)       (400,000)     (2,493,000)
                                               ------------    ------------    ------------    ------------    ------------

Segment Operating Income (Loss)                $    757,000    $    151,000    $     (4,000)   $   (400,000)   $    504,000
                                               ============    ============    ============    ============    ============

As of May 31, 2003
Cash                                           $    149,000    $     26,000    $      1,000    $     20,000    $    196,000
Accounts receivable                               1,563,000       1,090,000          14,000           5,000       2,672,000
Inventory, net                                      754,000          90,000              --              --         844,000
Other current assets                                 21,000          34,000              --          68,000         123,000
Office equipment, net                                85,000         192,000              --          29,000         306,000
Vehicles, net                                       104,000          19,000              --              --         123,000
Leasehold improvements, net                         151,000           4,000              --              --         155,000
Loan origination fees, net                           12,000              --              --          12,000
Goodwill                                            876,000          70,000              --              --         946,000
Other intangible assets, net                        668,000              --              --              --         668,000
                                               ------------    ------------    ------------    ------------    ------------

Total Segment Assets                           $  4,383,000    $  1,525,000    $     15,000    $    122,000    $  6,045,000
                                               ============    ============    ============    ============    ============

Three Months Ended May 31, 2002
Sales                                          $         --    $    394,000    $         --    $         --    $    394,000
Cost of sales                                            --        (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
Sales                                          $         --    $    485,000    $         --    $         --    $    485,000
Cost of sales                                            --        (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 August 31, 2002
Cash                                           $    133,000    $    108,000    $      1,000    $     49,000    $    291,000
Accounts receivable                               1,617,000         266,000              --         258,000       2,141,000
Purchase adjustment receivable                           --              --              --         600,000         600,000
Inventory, net                                      509,000              --              --              --         509,000
Other current assets                                 18,000          51,000              --          15,000          84,000
Notes receivable                                         --              --              --          30,000          30,000
Office equipment, net                                69,000         193,000              --          19,000         281,000
Vehicles, net                                       133,000              --              --              --         133,000
Leasehold improvements, net                         156,000          10,000              --              --         166,000
Goodwill                                            876,000              --              --              --         876,000
Other intangible assets, net                        751,000              --              --              --         751,000
                                               ------------    ------------    ------------    ------------    ------------

Total Segment Assets                           $  4,262,000    $    628,000    $      1,000    $    971,000    $  5,862,000
                                               ============    ============    ============    ============    ============
</TABLE>

                                       14
<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-KSB for the fiscal
year ended August 31, 2002 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, Inc.; Kingston Sales Corp.; Telecom
Technology Corp.; StarQuest Wireless 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 two years from the entertainment industry to the
telecommunication and distribution 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.OB effective August 16,
2001.

     The Company's current operating focus is achieved through its Distribution
Segment (Kingston Sales Corporation) and its Telecom Segment (PDH, Inc.,
Cornerstone Wireless Services, Inc., Telecom Technology Corp, and StarQuest
Wireless Services, Inc.).

Distribution Segment
--------------------

     The Company's Distribution segment is conducted through its Kingston Sales
Corporation ("Kingston") subsidiary, which is a distributor for prominent
national companies in the electronic, sound, security, and video markets.
Kingston offers the latest technology in TVs, sound systems, electronic locking
devices, wire, cable and fiber optics, and intercom systems. Kingston's role as
a distributor is to serve as the mutually beneficial link between the customer
and the manufacturer. By working closely with each, Kingston is able to provide
strong customer service and develop a solid relationship with vendors.

     Products and manufacturers represented by Kingston include, but are not
limited to, Dedicated Micros (Video Multiplexers & Digital Video Recorders);
Lowell Manufacturing (Speakers, cabinets, and accessories); Lucasey (Mounts and
television accessories); Net TV (Multimedia Digital Displays); Panasonic
Presentation (LCD Projectors & Plasma); R.L. Drake (Video distribution
products); RCA Commercial Products (Television and Satellite products);
Securitron Maganlock Corp.(Electromagnetic door locking systems); TOA
Electronics, Inc. (Sound, paging, and background music products); Video Alarm
CCT (Housing and mounts); West Penn Wire (Wire, cable, connectors, and fiber
optics). Starting in February 2003 Kingston started a national alliance with
ASA, Audiovox Specialized Applications, to offer the latest in mobile
electronics for the bus/coach sector.

                                       15
<PAGE>

Telecom Segment
---------------

     The Company's Telecom segment is conducted through its PDH, Inc. ("PDH"),
Cornerstone Wireless Services, Inc. ("Cornerstone"), Telecom Technology Corp.
("TTC") and StarQuest Wireless Services, Inc. ("StarQuest"). The Company can
assist its customers with the telecom site development process from network
infrastructure real estate planning including site acquisition, architectural
and engineering services through infrastructure construction, as well as
marketing and management. PDH's business strategy is to offer a full range of
network infrastructure real estate development services to the
telecommunications industry, among other types of real estate network critical
industries. PDH intends to provide its clients with the most experienced
personnel and deliver the highest level of services, systems and support
necessary to achieve its clients' goals and objectives on a local, regional or
national basis.

     PDH's focus is to meet the demanding timelines associated with the
development of a network by ensuring that each individual site reaches the
construction phase as quickly as possible. This is achieved by avoiding costly
delays up-front through effective management of the site acquisition process
with its site development real estate professionals. PDH's full service list of
network real estate development services includes program management, site
acquisition, zoning and permitting, architectural & engineering design,
construction management, co-location facilitation, environmental services, lease
capitalization, lease renegotiation, site marketing and asset management.
Cornerstone specializes in engineering and architectural services for the
telecommunications industry and the real estate development industry.

     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. 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. Real estate development engineering includes interior
design/space planning, exterior design, remodel and additions, tenant build-out
improvements; structural design/analysis, site utilities/grading/drainage, site
design/development, landscape design; HVAC systems analysis, plumbing design,
building systems criteria; power distribution design, interior/exterior lighting
design, video/data/telecommunication systems, security/life safety systems and
all areas covering project management. Cornerstone is pursuing assignments and
projects anywhere within the United States.

     TTC specializes in the design, engineering and installation of structured
cabling systems for the commercial marketplace. In addition to these services,
they also sell telecommunications equipment, mainly telephone systems.

     StarQuest is a leading provider of premium communication/ information
services, including digital satellite television, high speed (broadband)
Internet, both wired and wireless, exclusively to the United States
multi-dwelling unit (MDU) marketplace.

     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 with the reporting period ended
February 28, 2002, the company consolidated its Murphy Development financial
information in with its telecom segment.

Competition
-----------

     The markets in which the Company operates are highly competitive, requiring
substantial resources and skilled and experienced personnel. The Company
competes with other independent contractors and distributor firms in most of the
geographic markets in which it operates, and several of its competitors are
large companies that have greater financial, technical and marketing resources
than the Company does. In addition, there are relatively few barriers to entry
into the industries in which the Company operates and, as a result, any
organization that has adequate financial resources and access to technical
expertise may become a competitor.

                                       16
<PAGE>

     Management believes that a significant portion of the Company's revenue
will be derived from direct bidding on products as well as unit price
agreements, and price will often be an important factor in the award of such
business and agreements. Accordingly, the Company could be underbid by its
competitors in an effort by them to procure such business. The Company believes
that as demand for its products and services increases, customers will
increasingly consider other factors in choosing a distributor and service
provider, including technical expertise and experience, financial and
operational resources, nationwide presence, industry reputation and
dependability, which management of the Company believes will benefit it. There
can be no assurance, however, that the Company's competitors will not develop
the expertise, experience and resources to provide services that are superior in
both price and quality to the Company's services, or that the Company will be
able to maintain or enhance its competitive position.

     The Company may also face competition from the in-house service
organizations of its existing or prospective customers that employ personnel who
perform some of the same types of services as those provided by the Company.
Although a significant portion of these services are currently outsourced, there
can be no assurance that its existing or prospective customers will continue to
outsource services in the future.

Intellectual Property
---------------------

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

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




                                       17
<PAGE>

Revenues and Earnings
---------------------

Revenues for the three months ended May 31, 2003 were $3,385,000, compared to
$394,000 for the three months ended May 31, 2002, a 759% increase. This increase
was primarily due to the Company's Distribution segment revenues of $2,308,000
which was acquired in July 2002. In addition to the increase in revenues from
the Distribution segment there was an increase in revenues in the Telecom
segment of $683,000 which was due primarily to the acquisition of Telecom
Technology Corp. in September 2002 and StarQuest Wireless Services, Inc. in
October 2002. During the quarter ended May 31, 2003 the Company recorded net
earnings in the amount of $36,000.

Costs and Expenses
------------------

Cost of revenues were $2,484,000 for the three months ended May 31, 2003,
compared to $301,000 for the three months ended May 31, 2002. This increase was
primarily due to the Company's Distribution segment expenses of $1,737,000 which
was acquired in July 2002. In addition to the increase in expenses from the
Distribution segment there was an increase in expenses in the Telecom segment of
$446,000 due primarily to the acquisition of Telecom Technology Corp. in
September 2002 and StarQuest Wireless Services, Inc. in October 2002.

Selling, general and administrative expenses were $881,000 for the three months
ended May 31, 2003, compared to $351,000 for the three months ended May 31,
2002. The increase in expenses was primarily due to the Company's Distribution
segment expenses of $451,000 which was acquired in July 2002. In addition to the
increase in expenses from the Distribution segment there was an increase in
expenses in the Telecom segment of $47,000 due primarily to the acquisition of
TTC in September 2002 and StarQuest in October 2002.

Interest expense for the three months ended May 31, 2003 was approximately
$41,000, compared to $5,000 for the three months ended May 31, 2002. The
increase was due to the financing of Company's Distribution segment acquired in
July 2002. The Company obtained a $3,000,000 reducing revolving loan which is
amortized over 7 years, with a loan balloon payment due at end of a 5 year term.
In addition the Company obtained a $1,500,000 line of credit facility. As of May
31, 2003, $2,745,000 was outstanding on the reducing revolving loan and
$1,333,000 was outstanding on the line of credit.

Losses on investments in marketable securities, net for the three months ended
May 31, 2003 was $0 as compared to $39,000 for the three months ended May 31,
2002. The Company did not have any investments in marketable securities for the
three month period ended May 31, 2003.






                                       18
<PAGE>

Revenues and Earnings
---------------------

Revenues for the nine months ended May 31, 2003 were $10,318,000, compared to
$485,000 for the nine months ended May 31, 2002, a 2,027% increase. This
increase was primarily due to the Company's Distribution segment revenues of
$7,144,000 which was acquired in July 2002. In addition to the increase in
revenues from the Distribution segment there was an increase in revenues in the
Telecom segment of $2,689,000 due primarily to the acquisition of PDH, Inc. in
January 2002, Telecom Technology Corp. in September 2002 and StarQuest Wireless
Services, Inc. in October 2002. During the nine months ended May 31, 2003 the
Company recorded net earnings in the amount of $471,000.

Costs and Expenses
-------------------

Cost of revenues were $7,321,000 for the nine months ended May 31, 2003 compared
to $593,000 for the nine months ended May 31, 2002. This increase was primarily
due to the Company's Distribution segment expenses of $5,305,000 which was
acquired in July 2002. In addition to the increase in expenses from the
Distribution segment there was an increase in expenses in the Telecom segment of
$1,423,000 due primarily to the acquisition of PDH, Inc. in January 2002,
Telecom Technology Corp. in September 2002 and StarQuest Wireless Services, Inc.
in October 2002.

Selling, general and administrative expenses were $2,493,000 for the nine months
ended May 31, 2003, compared to $1,037,000 for the nine months ended May 31,
2002. The increase in expenses was primarily due to the Company's Distribution
segment expenses of $1,082,000 which was acquired in July 2002. In addition to
the increase in expenses from the Distribution segment there was an increase in
expenses in the Telecom segment of $352,000 due primarily to the acquisition of
PDH in January 2002, TTC in September 2002 and StarQuest in October 2002.

Interest income for the nine months ended May 31, 2003 was approximately $0,
compared to $50,000 for the nine months ended May 31, 2002. This decrease was
due to a decrease 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, 2003 was approximately
$114,000, compared to $5,000 for the nine months ended May 31, 2002. The
increase was due to the financing of Company's Distribution segment acquired in
July 2002. The Company obtained a $3,000,000 reducing revolving loan which is
amortized over 7 years, with a loan balloon payment due at end of a 5 year term.
In addition the Company obtained a $1,500,000 line of credit facility. As of May
31, 2003, $2,745,000 was outstanding on the reducing revolving loan and
$1,333,000 was outstanding on the line of credit.

Gains on investments in marketable securities, net for the nine months ended May
31, 2003 was $0 as compared to $168,000 for the nine months ended May 31, 2002.
The Company did not have any investments in marketable securities for the nine
month period ended May 31, 2003.

LIQUIDITY AND CAPITAL RESOURCES

As of May 31, 2003, the Company reported cash of approximately $196,000. In June
2002, the Company entered into a one year, 5% demand note for $250,000 with
Carter M. Fortune, the Company's Chairman and CEO. There were no outstanding
borrowings on the note as of May 31, 2003. In July 2002, the Company obtained a
$3,000,000 reducing revolving loan which is amortized over 7 years, with a
balloon payment due at the end of a 5 year term. In addition the Company
obtained a $1,500,000 line of credit facility. As of May 31, 2003, the Company
had $2,745,000 outstanding on the reducing revolving loan and $1,333,000
outstanding on the line of credit, respectively.

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.

                                       19
<PAGE>

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 Infrastructure Development segment and
Distribution segment. Many of these and other factors are beyond the Company's
control.

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

For the nine months ended May 31, 2003, cash flows used by operating activities
were $275,000, as compared to cash flows used for operating activities of
$1,440,000 for the nine months ended May 31, 2002. The change is primarily due
to the increase in operating profits of $1,671,000 in the Distribution and
Telecom segments. The company's distribution segment includes Kingston which was
acquired in July 2002 and reported $757,000 operating income nine months ended
May 31, 2003. The company's telecom segment reported $151,000 operating income
for the nine months ended May 31, 2003 as compared to $763,000 operating loss
for the nine months ended May 31, 2002.

For the nine months ended May 31, 2003, cash flows used for investing activities
were $187,000, as compared to $978,000 for the nine months ended May 31, 2002.
The decrease in cash flows used in this period is primarily due to a decrease in
investments in marketable securities.

For the nine months ended May 31, 2003, cash flows provided by financing
activities were $367,000 as compared to $0 for the nine months ended May 31,
2002. The increase was primarily related to the collection of $600,000 related
to a receivable booked as part of the Kingston sales purchase. The company also
made payments totaling $309,000 on long-term debt.

Other than as discussed above, the Company has not made any material commitments
for capital expenditures during the reporting period. During the reporting
period, the Company has had no significant income which does not arise from the
Company's continuing operations.

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 as of December 31, 2002 Douglas E. May's employment as Chief
Financial Officer, Vice President of Finance and Corporate Secretary and as a
Director of Fortune Diversified Industries, Inc. and all of its subsidiaries was
terminated.

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

     (a) Exhibits

Exhibit    Number    Description

     None

     (b) Reports on Form 8-K.

     The following reports were filed by the Company during the third quarter of
fiscal year 2003: None

                                       20
<PAGE>

                                 CERTIFICATIONS

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

1. I have reviewed this quarterly report on Form 10-QSB of Fortune Diversified
Industries, Inc., as amended;

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

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

4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Securities Exchange Act Rules 13a-14 and 15d-14) for
Fortune Diversified Industries, Inc. and I have done the following:

     a) designed such disclosure controls and procedures to ensure that material
     information relating to Fortune Diversified Industries, Inc. is made known
     to us by others within Fortune Diversified Industries, Inc., particularly
     during the period in which this quarterly report is being prepared;

     b) evaluated the effectiveness of Fortune Diversified Industries, Inc.'s
     disclosure controls and procedures as of a date within 90 days prior to the
     filing date of this quarterly report (the "Evaluation Date"); and

     c) presented in this quarterly report our conclusions about the
     effectiveness of the disclosure controls and procedures based on our
     evaluation as of the Evaluation Date;

5. I have disclosed, based on our most recent evaluation, to Fortune Diversified
Industries, Inc.'s auditors and the audit committee of Fortune Diversified
Industries, Inc.'s board of directors (or persons performing similar functions):

     a) all significant deficiencies in the design or operation of internal
     controls which could adversely affect Fortune Diversified Industries,
     Inc.'s ability to record, process, summarize and report financial data and
     have identified for Fortune Diversified Industries, Inc.'s auditors any
     material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other
     employees who have a significant role in Fortune Diversified Industries,
     Inc.'s internal controls; and

6. I have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.


7/14/03                    /s/ Carter M. Fortune
-------                    ------------------------------------------
Date                       Carter M. Fortune, Chief Executive Officer


                                       21
<PAGE>

                                  CERTIFICATION

          I, Amy Schumacher, principal financial officer, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Fortune Diversified
Industries, Inc., as amended;

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

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

4. Fortune Diversified Industries, Inc.'s other certifying officer and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Securities Exchange Act Rules 13a-14 and 15d-14) for Fortune
Diversified Industries, Inc. and we have done the following:

     a) designed such disclosure controls and procedures to ensure that material
     information relating to Fortune Diversified Industries, Inc. is made known
     to us by others within Fortune Diversified Industries, Inc., particularly
     during the period in which this quarterly report is being prepared;

     b) evaluated the effectiveness of Fortune Diversified Industries, Inc.'s
     disclosure controls and procedures as of a date within 90 days prior to the
     filing date of this quarterly report (the "Evaluation Date"); and

     c) presented in this quarterly report our conclusions about the
     effectiveness of the disclosure controls and procedures based on our
     evaluation as of the Evaluation Date;

5. Fortune Diversified Industries, Inc.'s other certifying officer and I have
disclosed, based on our most recent evaluation, to Fortune Diversified
Industries, Inc.'s auditors and the audit committee of Fortune Diversified
Industries, Inc.'s board of directors (or others performing similar functions):

     a) all significant deficiencies in the design or operation of internal
     controls which could adversely affect Fortune Diversified Industries,
     Inc.'s ability to record, process, summarize and report financial data and
     have identified for Fortune Diversified Industries, Inc.'s auditors any
     material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other
     employees who have a significant role in Fortune Diversified Industries,
     Inc.'s internal controls; and

6. Fortune Diversified Industries, Inc.'s other certifying officer and I have
indicated in this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies and
material weaknesses.

7/14/03                /s/ Amy Schumacher
-------                --------------------------------------------------------
Date                   Amy Schumacher, principal financial officer (Controller)


                                       22
<PAGE>

                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
                       ADOPTED PURSUANT TO SECTION 906 OF
                         THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of Fortune Diversified Industries,
Inc., a Delaware corporation, (the "Company") on Form 10-QSB for the period
ending May 31, 2003, as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), I, Carter M. Fortune, Chief Executive Officer of the
Company, certify the following pursuant to Section 18, U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and

2. The information contained in the report fairly presents, in all material
respects, the financial condition and results of operations of the Company.

7/14/03   /s/ Carter M. Fortune        7/14/03    /s/ Amy Schumacher
-------   ---------------------        -------    ------------------
Date      Carter M. Fortune,           Date       Amy Schumacher, principal
          Chief Executive Officer                 financial officer (Controller)







                                       23