United States Securities and Exchange Commission
                             Washington, D.C. 20549
                                  Form 10QSB/A
                                (Amendment No. 1)
(Mark One)

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

                For the quarterly period ended November 30, 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)

                6402 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
                                                              ---    ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: On January 14, 2004, there were
101,316,444 shares of the Company's Common Stock outstanding.

Transitional Small Business Disclosure Format (Check one):  Yes     No  X
                                                                ---    ---

                                EXPLANATORY NOTE

This Amendment No. 1 to our quarterly Report on Form 10-QSB/A amends our
Quarterly Report on Form 10-QSB for the fiscal quarter ended November 30, 2003
that was originally filed on January 14, 2004. This amendment is in response to
a review of the Company's filings by the Securities Exchange Commission and
recommendations made during that review and the Company's and Securities
Exchange Commission's subsequent responses. None of the amendments affected net
income previously reported on the Company's Form 10-QSB filed on January 14,
2004. The following Items have been amended:

1)   Item 1. Financial Statements have been re-stated to include changes that
     were made to the Company's August 31, 2003 consolidated financial
     statements and notes to the consolidated financial statements as reported
     on the Company's Form 10-KSB/A filed November 29, 2004. Additionally, the
     consolidated balance sheet for the quarter ended November 30, 2003 was
     amended to reflect a change in the valuation of the Company's stock issued
     in the PSM acquisition. Note 1 was updated to expand the Company's revenue
     recognition policy in its Business Solutions segment and a sentence was
     deleted for shipping and handling fees in this segment due to
     immateriality, Note 15, segment information, was amended to report the
     updates to the Company's Goodwill due to the re-valuation of Kingston
     Sales, Telecom Technology, Nor-Cote and PSM acquisitions.


<PAGE>

For the convenience of the reader, this Amendment No. 1 amends and restates in
its entirety the entire Form 10-QSB, amending only the aforementioned
disclosures made in the Management's Discussions and Analysis of Results of
Operation and Financial Condition and Consolidated Financial Statements.


























                                        2
<PAGE>

PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements.

             FORTUNE DIVERSIFIED INDUSTRIES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

                                                   Unaudited           Audited
                                                  November 30,        August 31,
                                                     2003                2003
                                                  -----------        -----------
CURRENT ASSETS
     Cash and equivalents                         $ 4,818,000        $   885,000
     Restricted savings account                       246,000                 --
     Certificates of deposit                           93,000                 --
     Available for sale investments                        --            337,000
     Accounts receivable, net                       5,439,000          4,306,000
     Inventory, net                                 2,129,000          1,856,000
     Prepaid expenses                                 356,000            385,000
     Recoverable income taxes                         194,000            220,000
     Other current assets                             110,000             58,000
                                                  -----------        -----------

         Total Current Assets                      13,385,000          8,047,000
                                                  -----------        -----------

PROPERTY, PLANT AND EQUIPMENT, NET                  2,852,000          2,703,000

OTHER ASSETS
     Loan origination fees, net                        47,000             50,000
     Goodwill                                       9,619,000          6,039,000
     Other intangible assets, net                   2,211,000          1,180,000
     Other long term assets                            59,000             14,000
                                                  -----------        -----------

         Total Other Assets                        11,936,000          9,986,000
                                                  -----------        -----------

TOTAL ASSETS                                      $28,173,000        $18,033,000
                                                  ===========        ===========


                                        3
<PAGE>

<TABLE>
<CAPTION>
                      LIABILITIES AND STOCKHOLDERS' EQUITY
                                                                   Unaudited           Audited
                                                                  November 30,        August 31,
                                                                      2003              2003
                                                                  ------------       ------------
<S>                                                               <C>                <C>
CURRENT LIABILITIES
     Lines of credit                                              $  1,851,000       $  1,038,000
     Current maturities of long-term debt                              961,000            861,000
     Current maturities of long-term debt - related party               24,000                 --
     Current maturities of capital lease obligations                     9,000              9,000
     Accounts payable                                                1,343,000          1,062,000
     Payroll taxes and withholdings                                    459,000                 --
     Health and workers' compensation reserves                       3,387,000                 --
     Accrued worksite employee payroll cost                            239,000                 --
     Due to related party                                                7,000            230,000
     Customer deposits                                                 106,000                 --
     Accrued expenses                                                2,211,000          1,489,000
                                                                  ------------       ------------

         Total Current Liabilities                                  10,597,000          4,689,000
                                                                  ------------       ------------

LONG-TERM LIABILITIES
     Line of credit - related party                                  2,000,000          2,000,000
     Long-term debt - related party, less current maturities           100,000                 --
     Long-term debt, less current maturities                         5,049,000          5,202,000
     Capital lease obligations, less current maturities                  6,000              8,000
                                                                  ------------       ------------

         Total Long-term Liabilities                                 7,155,000          7,210,000
                                                                  ------------       ------------

TEMPORARY EQUITY                                                       480,000            480,000
                                                                  ------------       ------------

STOCKHOLDERS' EQUITY
     Common stock                                                      933,000            802,000
     Additional paid-in capital and warrants outstanding            15,205,000         11,406,000
     Accumulated deficit                                            (6,257,000)        (6,491,000)
     Accumulated other comprehensive income (loss)                      60,000            (63,000)
                                                                  ------------       ------------

         Total Stockholders' Equity                                  9,941,000          5,654,000
                                                                  ------------       ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                        $ 28,173,000       $ 18,033,000
                                                                  ============       ============
</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 OPERATIONS
                                   (UNAUDITED)

                                                       Three Months Ended
                                                    November 30,  November 30,
                                                        2003          2002
                                                    ------------  ------------

NET REVENUES BUSINESS SOLUTIONS SEGMENT              $  2,826,000  $         --
     (gross billings of $21,451,000 less worksite
     employee payroll cost of $18,625,000)
NET REVENUES WIRELESS INFRASTRUCTURE SERVICES           1,862,000     1,013,000
NET REVENUES MANUFACTURING AND DISTRIBUTION SEGMENT     5,518,000     2,558,000
                                                     ------------  ------------

TOTAL NET REVENUES                                     10,206,000     3,571,000

COST OF REVENUES BUSINESS SOLUTIONS SEGMENT             2,269,000            --
COST OF REVENUES WIRELESS INFRASTRUCTURE SERVICES       1,471,000       610,000
COST OF REVENUES MANUFACTURING AND DISTRIBUTION SEGMENT 3,711,000     1,821,000
                                                     ------------  ------------

TOTAL COST OF REVENUES                                  7,451,000     2,431,000
                                                     ------------  ------------

GROSS PROFIT                                            2,755,000     1,140,000

OPERATING EXPENSES
Selling, general and administrative expenses            2,202,000       738,000
Depreciation and amortization                             215,000        56,000
                                                     ------------  ------------
     Total Operating Expenses                           2,417,000       794,000
                                                     ------------  ------------

OPERATING INCOME                                          338,000       346,000
                                                     ------------  ------------

OTHER INCOME (EXPENSE)
Interest income                                             3,000         1,000
Interest expense                                          (95,000)      (38,000)
Gain on investments in marketable securities, net          29,000            --
Other income (expense)                                    (41,000)       24,000
                                                     ------------  ------------
         Total Other Income (Expense)                    (104,000)      (13,000)
                                                     ------------  ------------

NET INCOME  BEFORE PROVISION FOR
INCOME TAXES                                              234,000       333,000

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

NET INCOME                                           $    234,000  $    333,000
                                                     ============  ============

BASIC INCOME PER SHARE                               $       0.00  $       0.00
                                                     ============  ============

DILUTED INCOME PER SHARE                             $       0.00  $       0.00
                                                     ============  ============

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

                                        5
<PAGE>

              FORTUNE DIVERSIFIED INDUSTRIES, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                     Additional
                                                  Paid-in Capital  Cost of  Accumulated Accumulated Other   Total    Comprehensive
                                          Common    and Warrants  Treasury   Earnings     Comprehensive  Stockholders   Income
                                          Stock     Outstanding    Stock     (Deficit)       Income         Equity      (Loss)
<S>                                     <C>         <C>         <C>         <C>             <C>           <C>          <C>
BALANCE AT AUGUST 31, 2002              $  655,000  $6,441,000  $       --  $(6,606,000)    $      --     $  490,000   $      --
                                        ----------  ----------  ----------  -----------     ---------     ----------   ---------

Purchase of 200,000 shares of common
 stock in treasury                              --     (28,000)     (2,000)          --            --        (30,000)         --
Issuance of 200,000 shares of
 common stock                                2,000      12,000          --           --            --         14,000          --
Issuance of 22,388,179 shares of common
  stock for acquisitions                   224,000   4,904,000          --           --            --       5,128,000         --
Cancellation of 7,668,364 shares of
  common stock                             (77,000)     77,000          --           --            --             ---         --
Cancellation of 200,000 shares of
 treasury stock                             (2,000)         --       2,000          --             --             --          --
Net income                                      --          --          --      115,000            --        115,000     115,000
Translation adjustments, net of tax             --          --          --           --       (76,000)       (76,000)    (76,000)
Net unrealized investments gains,
  net of tax                                    --          --          --           --        13,000         13,000      13,000
Net income                                      --          --          --           --            --             --          --
                                        ----------  ----------  ----------  -----------     ---------     ----------   ---------

BALANCE AT AUGUST 31, 2003              $  802,000  $11,406,000  $      --  $(6,491,000)    $ (63,000)    $5,654,000   $  52,000
                                        ----------  ----------  ----------  -----------     ---------     ----------   ---------


Issuance of 13,100,000 shares of common
  stock for acquisitions                   131,000   3,799,000          --           --            --      3,930,000          --
Net income                                      --          --          --      234,000            --        234,000     234,000
Translation adjustments, net of tax             --          --          --           --       136,000        136,000     136,000
Net unrealized investments gains,
  net of tax                                    --          --          --           --       (13,000)       (13,000)    (13,000)
Net income                                      --          --          --           --            --             --          --
                                        ----------  ----------   ----------  -----------     ---------     ----------   ---------

BALANCE AT NOVEMBER 30, 2003             $ 933,000  $15,205,000  $      --  $(6,257,000)    $  60,000     $9,941,000   $ 357,000
                                        ==========  ==========   ==========  ===========     =========     ==========   =========
</TABLE>

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

                                        6
<PAGE>

              FORTUNE DIVERSIFIED INDUSTRIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                Three Months Ended
                                                                            November 30,  November 30,
                                                                               2003          2002
                                                                            -----------   -----------
<S>                                                                         <C>           <C>
OPERATING ACTIVITIES
     Net Income                                                             $   234,000   $   333,000
     Adjustments to reconcile net income to net cash
     provided (used) by operating activities:
         Depreciation and amortization                                          215,000        56,000
         Gain on sale of investments                                            (29,000)           --
         (Increase) decrease in certain operating assets:
         Accounts receivable                                                   (477,000)     (219,000)
         Inventory                                                             (273,000)      (51,000)
         Prepaid expenses                                                       150,000            --
         Recoverable income taxes                                                26,000            --
         Other current assets                                                   (49,000)       27,000
         Other long term assets                                                  (2,000)           --
     Increase (decrease) in certain operating liabilities:
         Accounts payable                                                       162,000       231,000
         Accrued expenses and other current liabilities                        (240,000)       21,000
         Payroll taxes and withholdings                                         (65,000)           --
         Health and workers' compensation reserves                              116,000            --
         Accrued worksite employee payroll cost                                  (1,000)           --
         Deferred revenue                                                            --        90,000
                                                                            -----------   -----------

              Net Cash Provided (Used) by Operating Activities                 (233,000)      488,000
                                                                            -----------   -----------

INVESTING ACTIVITIES
     Purchases of vehicles, equipment and leasehold
          improvements, net                                                    (264,000)      (42,000)
     Sales of available for sale securities                                     344,000            --
     Acquisition of productive assets and businesses, net of cash received    3,302,000       (70,000)
                                                                            -----------   -----------

              Net Cash Provided (Used) by Investing Activities                3,382,000      (112,000)
                                                                            -----------   -----------

FINANCING ACTIVITIES
     Collection of purchase adjustment receivables                                   --       600,000
     Payments on due to related party                                          (230,000)           --
     Net borrowings (repayments) under line of credit                           813,000      (574,000)
     Borrowings on long-term debt                                               265,000            --
     Payments on long-term debt                                                (198,000)      (76,000)
     Payments on capital lease obligations                                       (2,000)       (2,000)
     Issuance of common stock                                                        --         3,000
                                                                            -----------   -----------

              Net Cash Provided (Used) by Financing Activities                  648,000       (49,000)
                                                                            -----------   -----------

              Effect of exchange rate changes on cash                           136,000            --

NET INCREASE  IN CASH AND EQUIVALENTS                                         3,933,000       327,000

CASH AND EQUIVALENTS
     Beginning of Period                                                        885,000       291,000
                                                                            -----------   -----------

     End of Period                                                          $ 4,818,000   $   618,000
                                                                            ===========   ===========
</TABLE>
See Accompanying Summary of Accounting Policies and Notes to Unaudited Interim
Consolidated Financial Statements.

                                        7
<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 three-month period ended November 30, 2003, are not necessarily indicative
of the operating results to be expected for the full fiscal year.

Nature of Business: The Company is the parent company of Nor-Cote International,
Inc. (Nor-Cote); Kingston Sales Corporation (Kingston); PDH, Inc. (PDH);
Cornerstone Wireless Services, Inc. (Cornerstone Wireless); Cornerstone Wireless
Construction Services, Inc. (Cornerstone Construction); Telecom Technology Corp.
(TTC); StarQuest Wireless Services, Inc. (StarQuest); Women of Wrestling, Inc.
(WOW); and Murphy Development, Ltd (Murphy). In addition, on October 1, 2003 the
Company acquired Professional Staff Management, Inc., Professional Staff
Management, Inc. II and Pro Staff, Inc. (collectively "PSM"). The financial
statements included in this report contain two months of activity for PSM.

Principles of Consolidation: The accompanying consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries. Nor-Cote
contains foreign subsidiaries from the United Kingdom, Singapore, and Malaysia,
which have been eliminated in consolidation at the Nor-Cote subsidiary level.
All significant inter-company accounts and transactions have been eliminated.

Revenue Recognition: In the Company's Manufacturing and 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. Revenues are recognized, net of estimated costs of returns,
allowances and sales incentives, when products are shipped to customers and
title and risk of ownership transfers. Products are generally sold on open
account under credit terms customary to the geographic region of distribution.
Ongoing credit evaluations are performed on customers and the Company does not
generally require collateral to secure accounts receivable.

In its Wireless Infrastructure Segment, PDH, Cornerstone Wireless and
Cornerstone Construction enter 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 a unit price basis in which the Company agrees to do the work for
units of work performed. The Company also performs services on a cost-plus or
time and materials basis. The Company completes most projects within six months.
The Company generally recognizes revenue utilizing output measures, such as when
services are performed, units are delivered or when contract milestones are
reached. Additionally, in the Wireless Infrastructure Segment, TTC and StarQuest
recognize revenue when product is shipped and installation is complete.

In its Business Solutions Segment, PSM, a licensed Professional Employer
Organization (PEO), bills clients under its Professional Services Agreement,
which includes each worksite employee's gross wages, plus additional charges for
employment related taxes, benefits, workers' compensation insurance,
administrative and record keeping, as well as safety, human resources, and
regulatory compliance consultation. All wages, taxes and insurance coverages are
provided under the PSM federal, state, and local or vendor identification
numbers. No identification or recognition is given to the client when these
monies are remitted or calculations are reported. All calculations or amounts
PSM owes the government and its employment insurance vendors are based on the
experience levels and activity of PSM with no consideration to client detail.
There is no direct relationship between what PSM pays versus what is billed to a
client. PSM bills the client its worksite employees' gross wages plus an overall
service fee that includes all components of employment related taxes, employment
benefits insurance, and administration of those items. This service fee is
intended to cover PSM's cost of

                                        8
<PAGE>

those items and yield a profit to PSM. What is paid to the government and
vendors is different than what is charged to the client due to the different
methods of calculation as to what PSM owes those entities versus what the client
is charged.

The component of the service fee related to administration varies, in part,
according to the size of the client, the amount and frequency of payroll
payments and the method of delivery of such payments. The component of the
service fee related to workers' compensation and unemployment insurance is
based, in part, on the client's historical claims experience. All charges by PSM
are invoiced along with each periodic payroll delivered to the client.

PSM reports revenues in accordance with Emerging Issues Task Force ("EITF") No.
99-19, Reporting Revenue Gross as a Principal versus Net as an Agent. PSM
reports revenues on a gross basis, the total amount billed to clients for
service fees which includes health and welfare benefit plan fees, workers'
compensation insurance, unemployment insurance fees, and employment-related
taxes. PSM reports revenues on a gross basis for such fees because PSM is the
primary obligor and deemed to be the principal in these transactions under EITF
No. 99-19. However, PSM reports revenues on a net basis for the amount billed to
clients for worksite employee salaries and wages. The Company as a result of
recommendations by the Securities and Exchange Commission staff to public
companies in the PEO industry subject to reporting requirements under section 13
or 15(d) of the Securities Exchange Act of 1934, adopted this accounting policy
of reporting revenues net as an agent. This accounting policy of reporting
revenue net as an agent versus gross as a principal has no effect on gross
profit, operating income, or net income.

PSM accounts for their revenues using the accrual method of accounting. Under
the accrual method of accounting, PSM recognizes their revenues in the period in
which the worksite employee performs work. PSM accrues revenues for service
fees, health and welfare benefit plan fees, workers' compensation and
unemployment insurance fees relating to work performed by worksite employees but
unpaid at the end of each period. PSM accrues unbilled receivables for payroll
and payroll taxes, service fees, health and welfare benefits plan fees, workers'
compensation and unemployment insurance fees relating to work performed by
worksite employees but unpaid at the end of each period. In addition, the
related costs of services are accrued as a liability for the same period.
Subsequent to the end of each year, such costs are paid and the related service
fees are billed.

Consistent with its revenue recognition policy, PSM's direct costs do not
include the payroll cost of its worksite employees. The Company's direct costs
associated with its revenue generating activities are comprised of all other
costs related to its worksite employees, such as the employer portion of
payroll-related taxes, employee benefit plan premiums and workers' compensation
insurance costs.

Revenue is reduced by appropriate allowances, estimated returns, price
concessions, and similar adjustments, as applicable.

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.

Shipping and Handling: Costs incurred for shipping and handling in the Company's
Manufacturing and Distribution Segment is included as a component of costs of
revenue.

Property, Equipment, and Depreciation: The provision for depreciation amounted
to $144,000 at November 30, 2003.

                                        9
<PAGE>

Goodwill and Other Intangible Assets: The Company has adopted Statement of
Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible
Assets". With the adoption of SFAS No. 142, goodwill is no longer amortized but
instead is assessed for impairment at least as often as annually and as
triggering events occurs. In making this assessment, management relies on a
number of factors including operating results, business plans, economic
projections, anticipated future cash flows, and transactions and market place
data. There are inherent uncertainties related to these factors and management's
judgment in applying them to the analysis of goodwill impairment. Since
management's judgment is involved in performing goodwill and other intangible
assets valuation analyses, there is risk that the carrying value of the goodwill
and other intangible assets may be overstated or understated.

The Company has elected to perform the annual impairment test of recorded
goodwill as required by SFAS 142 as of the end of the fiscal year. The results
of this annual impairment test indicated that the fair value of each of the
reporting units as of May 31, 2003, exceeded the carrying, or book value,
including goodwill, and therefore recorded goodwill was not subject to
impairment.

Advertising and Exploitation Costs: Advertising and exploitation costs including
marketing, advertising, publicity, promotion and other distribution costs, are
expensed as incurred. For the period ended November 30, 2003 the expense was
$40,000.

Self Insurance:

The Company's Nor-Cote subsidiary has elected to act as a self-insurer for
certain costs related to employee health and accident benefit programs. Costs
resulting from non-insured losses are estimated and charged to income when
incurred. The Company has purchased insurance which limits its annual exposure
for individual claims to $30,000 and which limits its aggregate annual exposure
to approximately $250,000.

The Company's PSM subsidiary has elected to act as a self-insurer for certain
costs related to employee health and accident benefit programs. A portion of
that coverage is self-funded by PSM. Under the insurance policy with the Plan's
underwriter, PSM's self-funded liability is limited to $150,000 per employee,
with an aggregate liability limit of $10,578,000. The liability limits are
adjusted monthly, based on the number of participants.

NOTE 2 - ACQUISITIONS

On October 1, 2003, the Company acquired all of the outstanding shares of common
stock, no par value, of Professional Staff Management, Inc., Professional Staff
Management, Inc. II, and Pro Staff, Inc. pursuant to the following agreements:

     AGREEMENT AND PLAN OF MERGER entered into the 1st day of October, 2003, by
     and among Professional Staff Management, Inc., an Indiana corporation, PSM
     Acquisition, Inc., an Indiana corporation and wholly owned subsidiary of
     Registrant, Harlan M. Schafir, and Registrant.

     AGREEMENT AND PLAN OF MERGER entered into the 1st day of October, 2003 by
     and among Professional Staff Management, Inc. II, an Indiana corporation,
     PSM Acquisition II, Inc., an Indiana corporation and wholly owned
     subsidiary of Registrant, Harlan M. Schafir, and Registrant.

     AGREEMENT AND PLAN OF MERGER entered into the 1st day of October, 2003 by
     and among Pro Staff, Inc., an Indiana corporation, PSM Acquisition III,
     Inc., an Indiana corporation and wholly owned subsidiary of Registrant,
     Harlan M. Schafir, and Registrant.


The agreements were intended to qualify as a "reorganization" pursuant to the
provisions of Section 368 of the Internal Revenue Code and specifically as a
reverse-triangular merger under Code Section 368(a)(2)(E). For accounting
purposes the business combination is being accounted for as a purchase under
SFAS No. 141, "Business Combinations". The Merger Agreements' terms include,
among other things, the exchange of all of the outstanding shares of
Professional Staff Management, Inc. (125 shares); Professional Staff Management,
Inc., II (500 shares); and Pro Staff, Inc. (500 shares), all held by Harlan M.

                                       10
<PAGE>

Schafir, for a total of 13,100,000 shares of the Company's common shares. The
Company formed three wholly-owned subsidiaries, PSM Acquisition, Inc.; PSM
Acquisition II, Inc.; and PSM Acquisition III, Inc. The Company's shares were
exchanged at the following ratios: Sixty-Six Thousand, Twenty-Four (66,024)
shares of The Company's common stock for each share of Professional Staff
Management, Inc.; Four Thousand, Four Hundred Fifty-Four (4,454) shares of The
Company's common stock for each share of Professional Staff Management, Inc. II;
and, Five Thousand, Two Hundred Forty (5,240) shares of The Company's common
stock for each share of Pro Staff, Inc. The Company exchanged a total of
13,100,000 shares as follows: Eight Million, Two Hundred Fifty Three Thousand
(8,253,000) shares for the shares of Professional Staff Management, Inc.; Two
Million, Two Hundred Twenty Seven Thousand (2,227,000) shares for the shares of
Professional Staff Management, Inc. II; and Two Million, Six Hundred Twenty
Thousand (2,620,000) shares for the shares of Pro Staff, Inc.


The following is a condensed balance sheet disclosing the amount assigned to
each major asset and liability caption of PSM at the acquisition date (amounts
in thousands): In addition to the exchanges described above, Mr. Schafir
received a total of one million dollars ($1,000,000.00) in cash. The cash was
allocated as follows: Six Hundred Thirty Thousand Dollars ($630,000.00) for
Professional Staff Management, Inc.; One Hundred Seventy Thousand Dollars
($170,000.00) for the Professional Staff Management, Inc. II; and Two Hundred
Thousand Dollars ($200,000.00) for Pro Staff, Inc.

The principle followed in determining the amount of consideration paid was the
ongoing value of the three companies, with adjustments thereto for certain
aspects of the transaction, including earnings benchmarks as defined by the
Agreement. PSM was acquired through the parties identified above. Prior to the
Merger Agreements, there was no material relationship between the Company or any
of its subsidiaries and the exchanging parties identified above. The source of
the Company's consideration included the Company's shares, and cash held by the
Company prior to the Agreement.

The source of the Company's consideration included the Company's shares, and
cash held by the Company prior to the Agreement. The fair market value of the
13,100,000 Company's common shares issued was $3.93 million (which was based
upon the quoted market price of the Company's stock traded for a reasonable
period before and after the acquisition. The stock price was discounted due to
historical trading volume being significantly lower than shares issued in the
transaction) and was included as part of the purchase price. In addition to the
assumed liabilities, the aggregate purchase price of the acquisition was $4.93
million of which $4.679 million consists of goodwill and other intangible
assets.

PSM provides cost-effective employee administrative solutions to companies in
more than 20 states nationwide. The three companies are engaged in providing
services in employment-related matters, such as Payroll and Tax Processing,
Worker's Compensation and Risk Management, Benefits Administration, Unemployment
Administration, Legal and Regulatory Employer Compliance, 401k and Retirement
Plan Administration and Employee Assessments. The Company intends to continue to
operate and expand the three companies' business.







                                       11
<PAGE>

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

     Cash and cash equivalents                        $4,403,000
     Restricted savings account                          246,000
     Certificates of deposit                              93,000
     Accounts receivable, net                            656,000
     Interest receivable                                   3,000
     Prepaid expense                                     121,000
     Property and equipment, net                          20,000
     Other assets                                         42,000
     Goodwill                                          3,580,000
     Customer base                                       700,000
     Non-Compete agreement                               399,000
                                                      ----------
                                                      10,263,000
                                                      ----------

     Current maturities of notes payable                   4,000
     Accounts payable                                    119,000
     Payroll taxes and withholdings                      525,000
     Accrued worksite employee payroll cost              240,000
     Health and workers' compensation reserves         3,271,000
     Other accrued compensation                          545,000
     Due to shareholder                                    7,000
     Customer deposits                                   106,000
     Other accrued liabilities                           516,000
                                                      ----------
                                                       5,333,000
                                                      ----------

                                                      $4,930,000
                                                      ==========


Cash consideration                                    $1,000,000

Fair value of common stock consideration               3,930,000
                                                      ----------

                                                      $4,930,000
                                                      ==========

The following unaudited pro forma data summarize the results of operations for
the periods indicated as if the PSM, Nor-Cote, Kingston, 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.

                                          Three Months    Three Months
                                             Ended           Ended
                                          November 30,    November 30,
                                              2003            2002
                                          -------------   -------------

Net revenue                               $  11,619,000   $  10,155,000
Cost of revenues                              8,586,000       7,026,000
                                          -------------   -------------

Gross profit                                  3,033,000       3,129,000
Operating expenses                            2,576,000       2,477,000
                                          -------------   -------------

Operating income                                457,000         652,000
Other income (expenses)                        (104,000)         80,000
                                          -------------   -------------


                                       12
<PAGE>

Net Income                                      353,000         732,000
Dividends                                            --              --
                                          -------------   -------------

Net Income Available for Common
 Stockholders                             $     353,000   $     732,000
                                          =============   =============

Basic Income Per Share:                   $         .00   $         .01
                                          =============   =============

Diluted Income Per Share:                 $         .00   $         .01
                                          =============   =============

Shares Outstanding:

Basic weighted average number of common
shares outstanding                          101,316,444     101,316,444
Dilutive effect of conversion of options             --              --
                                          -------------   -------------

         Total Shares Outstanding           101,316,444     101,316,444
                                          =============   =============


NOTE 3 - ACCOUNTS RECEIVABLE

Accounts receivable include the following:


                                            Unaudited      Audited
                                           November 30,   August 31,
                                              2003           2003
                                           -----------   -----------

     Amounts currently due                 $ 5,950,000   $ 4,779,000
     Less allowance for doubtful accounts     (376,000)     (338,000)
     Less allowance for sales returns         (135,000)     (135,000)
                                           -----------   -----------

                                           $ 5,439,000   $ 4,306,000
                                           ===========   ===========

NOTE 4 - INVENTORIES

Inventories reflected on the accompanying consolidated balance sheets are
summarized as follows:

     Raw materials                  $   340,000   $   354,000
     Work-in-process                     34,000        22,000
     Finished goods                   1,840,000     1,619,000
     Less inventory reserve             (85,000)     (139,000)
                                    -----------   -----------

                                    $ 2,129,000   $ 1,856,000
                                    ===========   ===========

                                       13
<PAGE>

NOTE 5 - PROPERTY AND EQUIPMENT

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

                                     Unaudited      Audited
                                    November 30,   August 31,
                                       2003           2003
                                    -----------   -----------

     Land and building              $ 1,861,000   $ 1,821,000
     Machinery and equipment          2,133,000     1,620,000
     Research equipment                 338,000       338,000
     Office equipment                 2,568,000     2,734,000
     Vehicles                           522,000       439,000
     Leasehold improvements             257,000       263,000
                                    -----------   -----------
                                      7,679,000     7,215,000

     Less accumulated depreciation   (4,827,000)   (4,512,000)
                                    -----------   -----------

                                    $ 2,852,000   $ 2,703,000
                                    ===========   ===========

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:
<TABLE>
<CAPTION>
                 PROFESSIONAL      MANUFACTURING AND       WIRELESS        ENTER-      HOLDING      SEGMENT
              BUSINESS SOLUTIONS     DISTRIBUTION       INFRASTRUCTURE     TAINMENT    COMPANY      TOTALS
<S>             <C>                  <C>                   <C>             <C>         <C>        <C>
Goodwill
at August
31, 2003        $       -0-          $ 5,957,000           $ 82,000        $   -0-     $   -0-    $ 6,039,000

Goodwill
acquired
during
quarter           3,580,000                  -0-                -0-            -0-         -0-      3,580,000

Impairment
Losses                  -0-                  -0-                -0-            -0-         -0-            -0-
                -----------          -----------           --------        -------     --------   -----------


Goodwill
at November
30, 2003        $ 3,580,000          $ 5,957,000           $ 82,000        $   -0-     $   -0-    $ 9,619,000
                ===========          ===========           ========        =======     =======    ===========

</TABLE>
The following table sets forth the gross carrying amount and accumulated
amortization of the Company's intangible assets:
<TABLE>
<CAPTION>
                             AT NOVEMBER 30, 2003                  AT AUGUST 31, 2003
                     ----------------------------------    -----------------------------------
                                               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 Base        $1,774 000    $105,000     10 YRS     $1,075,000     $66,000      10 YRS
Non-compete             633,000      78,000      4 YRS        234,000      63,000       4 YRS
Non-compete             399,000      13,000      5 YRS              -           -           -
                     ----------    --------    -------     ----------    --------     -------

Total                $2,407,000    $196,000      8 YRS     $1,309,000    $129,000       8 YRS
                     ==========    ========    =======     ==========    ========     =======
</TABLE>
                                       14
<PAGE>

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,
     ----------------------
              2004                          303,000
              2005                          316,000
              2006                          311,000
              2007                          257,000
              2008                          257,000
          later years                       767,000
                                          ---------
                                          2,211,000
                                          =========

The total amount of goodwill that is deductible for tax purposes is $1,276,000
at November 30, 2004.


NOTE 7 - LINES OF CREDIT AND DEBT ARRANGEMENTS

    Lines of Credit:

    The Company has a $1,500,000 line of credit available through July 31, 2004.
    Interest on the line is charged at 2.40% plus the one-month London Interbank
    Offered Rate (one-month LIBOR). Outstanding borrowings amounted to
    $1,396,000 at November 30, 2003 and $953,000 at August 31, 2003.

    The Company also has a $500,000 line of credit available through June 30,
    2004. Interest on the line is charged at 2.50% plus the one-month London
    Interbank Offered Rate (one-month LIBOR). Outstanding borrowings amounted to
    $455,000 at November 30, 2003 and $85,000 at August 31, 2003.

    The lines of credit are secured by substantially all assets of the Company
    and personal guarantees of the Company's majority stockholder.

    The Company also has a $3,000,000 long-term unsecured line of credit with a
    stockholder available through July 1, 2006. Interest on the line is charged
    at 3% plus the one-month London Interbank Offered Rate (one-month LIBOR).
    Outstanding borrowings amounted to $2,000,000 at November 30, 2003 and
    August 31, 2003.


Long-term debt arrangements:

    Long-term debt consisted of the following at November 30, 2003 and August
    31, 2003:
<TABLE>
<CAPTION>

                                                                        Unaudited           Audited
                                                                       November 30,        August 31,
                                                                           2003               2003
                                                                       ------------        ----------
<S>                                                                     <C>               <C>
Notes payable to financial institutions:

     $3,000,000 reducing revolver 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 July 31, 2007. 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 stockholder.                                                  $2,500,000        $2,607,000

     $3,600,000 reducing revolver 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 June 30, 2008.
     Interest is variable at 2.50% plus one-month LIBOR. The loan is
     secured by the business assets of Nor-Cote International, Inc.,
     with a second lien on assets pledged by a stockholder.              3,471,000         3,416,000

                                       15
<PAGE>
     Due in monthly installments of $434, including interest at
     4.9% through January 2005.
     Secured by a vehicle                                                    6,000             7,000

     Due in monthly installments of $418, including interest at
     9.03% through December 2004.
     Secured by a vehicle                                                    6,000             7,000

     Due in monthly installments of $295, including interest at
     9.03% through December 2004.
     Secured by a vehicle                                                   12,000            13,000

     Due in monthly installments of $385, including interest at
     5.55% through August 2006.
     Secured by a vehicle                                                   12,000            13,000

     Due in monthly installments of $652, including interest at
     7.00% through March 2004.
     Secured by a vehicle                                                    3,000               -0-


Debt with majority stockholder:
-------------------------------

     Due in monthly installments of $2,345, including interest at
     4.00% through September 2008.
     Secured by 6 vehicles                                                 124,000               -0-
                                                                        ----------        ----------

                                                                         6,134,000         6,063,000
     Less current maturities                                              (985,000)         (861,000)
                                                                        ----------        ----------
                                                                        $5,149,000        $5,202,000
                                                                        ==========        ==========
</TABLE>

Principal payments due on long-term debt outstanding at November 30, 2003 are
approximately as follows:

        Year Ending August 31,
        ----------------------
                  2004                  $   985,000
                  2005                      978,000
                  2006                      976,000
                  2007                      973,000
                  2008 & after            2,222,000
                                        -----------

                                        $ 6,134,000
                                        ===========

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:
<TABLE>
<CAPTION>
                                                                        Unaudited          Audited
                                                                       November 30,       August 31,
                                                                           2003              2003
                                                                        ----------        ----------
<S>                                                                     <C>               <C>
     Equipment                                                          $   26,000        $   26,000
     Less allowance for depreciation                                        (8,000)           (8,000)
                                                                        ----------        ----------
                                                                        $   18,000        $   18,000
                                                                        ==========        ==========
</TABLE>

                                       16
<PAGE>

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 November 30, 2003:


          2004                                             $10,000
          2005                                               8,000
                                                           -------

     Total minimum lease payments                           18,000
     Less amounts representing interest                      3,000
                                                           -------

     Present value of net minimum lease payments            15,000
     Less current portion                                   (9,000)
                                                           -------

     Long-term portion                                     $ 6,000
                                                           =======

NOTE 10 - STOCKHOLDERS' EQUITY

     The following are the details of the Company's common stock as of November
30, 2003 and August 31, 2003:

                                             Number of Shares
                               -----------------------------------------------
                               Authorized     Issued     Outstanding    Amount
                               ----------     ------     -----------    ------
November 30, 2003 (Unaudited)
Common stock, $0.01 par value  150,000,000  101,316,444  101,316,444  $  933,000
                                                                      ==========

August 31, 2003 (Audited)
Common stock, $0.01 par value  150,000,000   88,216,444   88,216,444  $  802,000
                                                                      ==========


Of the amount issued and outstanding, 8,000,000 shares or $80,000 of common
stock, is classified as temporary equity related to the acquisition Kingston
Sales Corporation in 2002 since redemption of the Kingston stock is outside the
control of the Company at November 30, 2003 and August 31, 2003, respectively.

NOTE 11 - INCOME TAXES

The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes", requires
deferred tax assets and liabilities be recognized using enacted tax rates for
the effect of temporary differences between book and tax basis of assets and
liabilities. SFAS No. 109 also requires deferred tax assets be reduced by a
valuation allowance if it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Recognition of a deferred tax
asset is dependent on generating sufficient future taxable income in the United
States prior to the expiration of the tax operating loss and capital loss
carryforwards which expire over various periods ranging from 2007 to 2023. In
its evaluation of the adequacy of the valuation allowance, the Company assesses
prudent and feasible tax planning strategies. Due to the uncertainties of
realizing these tax benefits, the Company has recorded a full valuation
allowance against these loss carryforwards.

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

                                       17
<PAGE>

<TABLE>
<CAPTION>
                                                            Three Months      Year
                                                               Ended          Ended
                                                             November 30,   August 31,
                                                                2003           2003
                                                             -----------   -----------
<S>                                                          <C>           <C>
   Federal and state income tax (benefit) at statutory rate  $    55,000   $   (54,000)
   Other                                                              --            --
   Change in valuation allowance                                 (55,000)       54,000
                                                             -----------   -----------

      Provision for Income Taxes                             $        --   $        --
                                                             ===========   ===========
</TABLE>
     The significant components of the Company's deferred tax asset are as
     follows:
<TABLE>
<CAPTION>
                                                             November 30,   August 31,
                                                                2003          2003
                                                             -----------   -----------
<S>                                                          <C>           <C>
Deferred Tax Assets:
   Net operating loss carryforwards                          $ 2,226,000   $ 2,446,000
   Capital loss carryforwards                                    460,000       460,000
   Reserves                                                    1,880,000       461,000
   Valuation allowance                                        (4,566,000)   (3,367,000)
                                                             -----------   -----------
   Net Deferred Tax Asset                                    $        --   $        --
                                                             ===========   ===========
</TABLE>

At November 30, 2003, the Company had federal tax operating loss carryforwards
of approximately $5,565,000, which expire during the years of 2020, 2021, 2022
and 2023. At August 31, 2003, the Company had federal tax operating loss
carryforwards of approximately $6,116,000, which expire during the years of
2020, 2021, 2022 and 2023. The state tax operating loss carryforwards were
approximately $2,157,000 and $2,357,000 at November 30, 2003 and August 31,
2003, respectively. The difference between federal and state net operating loss
carryforwards represents a change in business venue in a prior period. The
Company's capital loss carryforward is $1,151,000 and it expires in the fiscal
year ending August 31, 2007.

No provision is made for U.S. federal income taxes on undistributed earnings of
the UK subsidiary as management intends to permanently reinvest such earnings in
the Company's operations in the UK. The subsidiaries in Singapore and Malaysia
are treated as branches for U.S. income tax purposes.



                                       18
<PAGE>

NOTE 12 - PER SHARE DATA

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

                                                      Unaudited    Unaudited
                                                     Three Months Three Months
                                                        Ended        Ended
                                                     November 30, November 30,
                                                         2003         2002
                                                     -----------  -----------

Net Income                                           $   234,000  $   333,000
Dividends                                                     --           --
                                                     -----------  -----------

Net Income Available for Common
     Stockholders                                    $   234,000  $   333,000
                                                     ===========  ===========


Basic Income Per Share:                              $      0.00  $      0.00

Diluted Income Per Share:                            $      0.00  $      0.00


Shares Outstanding:
     Basic weighted average number of common shares
       outstanding                                    89,070,000   73,796,629
     Dilutive effect of conversion of options            400,000           --
                                                     -----------  -----------

         Total Shares Outstanding                     89,470,000   73,796,629
                                                     ===========  ===========


NOTE 13 - ECONOMIC DEPENDENCY ON SUPPLIERS

In the Manufacturing and Distribution segment the Company purchased
approximately 40% of its inventories from one vendor for the three months ended
November 30, 2003.

NOTE 14 - COMMITMENTS AND CONTINGENCIES

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

As part of the Stock Purchase Agreement to acquire Kingston, Mr. Kingston shall
have the option to put any or all of the Company's stock received by him to the
Company.

The Company has entered into an agreement with a related party to purchase
property pursuant to an "Agreement for Purchase and Sale of Real Estate" entered
into July 3, 2003. The purchase price of the property between the related
parties has not been determined at November 30, 2003.

As part of the Stock Exchange Agreement with Nor-Cote, Common Stock Sellers
shall each have the option to put any or all of the Company's stock received by
them to Mr. Fortune and Mr. Fortune shall have the option to call any or all of
the Company's stock from each of the Common Stock Sellers.

As part of the Stock Exchange Agreement with PSM, Harlan M. Schafir shall have
the option to put any or all of the Company's stock received by him to Mr.
Fortune, Mr. Kingston and the Company.

                                       19
<PAGE>

NOTE 15 - SEGMENT INFORMATION
<TABLE>
<CAPTION>
                                              Professional  Manufacturing
                                                Business         and          Wireless                     Holding       Segment
                                                Solutions    Distribution  Infrastructure  Entertainment   Company       Totals
<S>                                           <C>            <C>            <C>            <C>           <C>           <C>
Three Months Ended November 30, 2003
Revenues                                      $  2,826,000   $  5,518,000   $  1,862,000   $         --  $         --  $ 10,206,000
Cost of revenues                                (2,269,000)    (3,711,000)    (1,471,000)            --            --    (7,451,000)
Selling, general and administrative expenses      (344,000)    (1,450,000)      (423,000)        (2,000)     (198,000)   (2,417,000)
                                              ------------   ------------   ------------   ------------  ------------  ------------

Segment Operating Income (Loss)               $    213,000   $    357,000   $    (32,000)  $     (2,000) $   (198,000) $    338,000
                                              ============   ============   ============   ============  ============  ============

As of November 30, 2003
Cash                                          $  3,663,000   $    765,000   $     30,000   $      1,000  $    359,000  $  4,818,000
Restricted savings account                         246,000             --             --             --            --       246,000
Certificates of deposit                             93,000             --             --             --            --        93,000
Accounts receivable                                638,000      3,167,000      1,629,000             --         5,000     5,439,000
Inventory, net                                      23,000      2,018,000         88,000             --            --     2,129,000
Prepaid expenses                                    64,000        251,000         28,000             --        13,000       356,000
Recoverable income taxes                                --        194,000             --             --            --       194,000
Loan origination fees, net                              --         47,000             --             --            --        47,000
Other current assets                                 1,000         16,000         93,000             --            --       110,000
Notes receivable                                        --             --             --             --            --            --
Property and equipment, net                         14,000      2,324,000        429,000             --        85,000     2,852,000
Goodwill                                         3,580,000      5,957,000         82,000             --            --     9,619,000
Other intangible assets, net                     1,073,000      1,138,000             --             --            --     2,211,000
Other long term assets                              45,000         14,000             --             --            --        59,000
                                              ------------   ------------   ------------   ------------  ------------  ------------

Total Segment Assets                          $  9,440,000   $ 15,891,000   $  2,379,000   $      1,000  $    462,000  $ 28,173,000
                                              ============   ============   ============   ============  ============  ============

Three Months Ended November 30, 2002
Revenues                                      $         --   $  2,558,000   $  1,013,000   $         --  $         --  $  3,571,000
Cost of revenues                                        --     (1,821,000)      (610,000)            --            --    (2,431,000)
Selling, general and administrative expenses            --       (347,000)      (315,000)            --      (132,000)     (794,000)
                                              ------------   ------------   ------------   ------------  ------------  ------------

Segment Operating Income (Loss)               $         --   $    390,000   $     88,000   $         --  $   (132,000) $    346,000
                                              ============   ============   ============   ============  ============  ============

As of August 31, 2003
Cash                                          $         --   $    792,000   $     59,000   $      1,000  $     33,000  $    885,000
Available for sale investments                          --        337,000             --             --            --       337,000
Accounts receivable                                     --      2,836,000      1,463,000             --         7,000     4,306,000
Inventory, net                                          --      1,745,000        111,000             --            --     1,856,000
Other current assets                                    --        543,000         58,000             --        62,000       663,000
Notes receivable                                        --             --             --             --            --            --
Property, plant & equipment, net                        --      2,350,000        326,000             --        27,000     2,703,000
Loan origination fees, net                              --         50,000             --             --            --        50,000
Goodwill                                                --      5,957,000         82,000             --            --     6,039,000
Other intangible assets, net                            --      1,180,000             --             --            --     1,180,000
Other long-term assets                                  --         14,000             --             --            --        14,000
                                              ------------   ------------   ------------   ------------  ------------  ------------

Total Segment Assets                          $         --   $ 15,804,000   $  2,099,000   $      1,000  $    129,000  $ 18,033,000
                                              ============   ============   ============   ============  ============  ============
</TABLE>

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

     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
Nor-Cote International, Inc.; Kingston Sales Corporation; PDH, Inc.; Cornerstone
Wireless Services, Inc.; Cornerstone Wireless Construction Services, Inc.;
Telecom Technology Corp.; StarQuest Wireless Services, Inc.; Women of Wrestling,
Inc.; and Murphy Development, Ltd. In addition, on October 1, 2003 the Company
acquired Professional Staff Management, Inc., Professional Staff Management,
Inc. II and Pro Staff, Inc.

     The Company's current operating focus is achieved through its Manufacturing
and Distribution Segment (Nor-Cote International, Inc. and Kingston Sales
Corporation); its Wireless Infrastructure Segment (PDH, Inc., Cornerstone
Wireless Services, Inc., Cornerstone Wireless Construction Services, Inc.,
Telecom Technology Corp, and StarQuest Wireless Services, Inc.) and its
Professional Business Solutions Segment (Professional Staff Management, Inc.,
Professional Staff Management, Inc. II and Pro Staff, Inc.).

                                       20
<PAGE>

Manufacturing and Distribution Segment
--------------------------------------

     The Company's Manufacturing and Distribution segment is conducted through
its Nor-Cote International, Inc. ("Nor-Cote") and Kingston Sales Corporation
("Kingston") subsidiaries. Nor-Cote is a leading technology company which
manufactures UV curable screen printing inks. Nor-Cote's inks are used on many
types of plastic, metals, and other substrates that are compatible with the UV
curing process. Typical applications consist of plastic sheets, cell phones,
bottles & containers, CD and DVD disks, rotary-screen printed labels, and
membrane switch overlays. Nor-Cote has operating facilities in the United
States, United Kingdom, Singapore, and Malaysia, with worldwide distributors
located in Canada, China, Australia, Hong Kong, Taiwan, Italy, South Africa, and
Thailand. Nor-Cote has the following wholly-owned United Kingdom, Singapore, and
Malaysian subsidiaries: U.V. Ink Trading Co. (inactive), Nor-Cote International,
Ltd. (formerly Nor-Cote (UK) Ltd.), Nor-Cote International PTE, Ltd., and
Nor-Cote (Malaysia) SDN, BHD., respectively. Nor-Cote expects to increase sales
in the current fiscal year. Nor-Cote believes that the silver conductive ink
market will expand rapidly in the next few years. Nor-Cote has received
substantial interest in its products at trade shows and is adding new customers
in Europe and the U.K.

     Kingston 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); Audiovox Specialized Applications (mobile electronics). Sales by
Kingston's mobile electronic product division are increasing. Sales to the
hotel/motel, hospital and restaurant industries are still somewhat slow due to
the weak economy. One of the difficulties encountered by Kingston during the
prior year was the lack of product availability. The lack of product
availability affected Kingston's sales. In order to help alleviate this
difficulty, Kingston anticipates importing more products directly from China and
brand-naming such products. Kingston believes the direct imports will give it
additional product and a competitive advantage in the market. In addition,
Kingston expects significant changes to its current distribution channels. These
changes could result in the increased availability of product.

Wireless Infrastructure Segment
-------------------------------

     The Company's Wireless Infrastructure segment is conducted through its PDH,
Inc. ("PDH"), Cornerstone Wireless Services, Inc. ("Cornerstone Wireless"),
Cornerstone Wireless Construction Services, Inc. ("Cornerstone Construction")
Telecom Technology Corp. ("TTC") and StarQuest Wireless Services, Inc.
("StarQuest") subsidiaries. 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.

                                       21
<PAGE>

     Cornerstone Wireless 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 Construction offers a full range of construction services to
the telecommunications industry, primarily developing wireless networks for
wireless carriers. These services include civil construction, electrical,
foundations and tower installations, as well as, antennae and line
installations. Cornerstone Construction can provide a complete turnkey solution
to the development of telecommunications infrastructure.

     TTC specializes in the design, engineering and installation of structured
cabling systems for the commercial marketplace and sells telephone and voice
mail systems. TTC provides the data cabinets, racks, cable trays, HUBS, patch
panels, computer furniture, cable management and any peripheral equipment
necessary for a complete voice and data-cabling infrastructure. TTC has provided
services to companies throughout the midwest and for some of the largest
companies in the State of Indiana.

     StarQuest is a 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.

Professional Business Solutions Segment
---------------------------------------

     The Company's Professional Business Solutions segment is conducted through
Professional Staff Management, Inc., Professional Staff Management, Inc. II and
Pro Staff, Inc. (collectively "PSM"). PSM is one of the midwest's largest
Professional Employer Organizations (PEO) providing cost-effective employee
administrative solutions to companies in more than 25 states nationwide. The
three companies are engaged in providing services in employment-related matters,
such as payroll and tax processing, worker's compensation and risk management,
benefits administration, unemployment administration, legal and regulatory
employer compliance, 401k and retirement plan administration and employee
assessments. PSM has been recognized as one of the 100 Fastest Growing Companies
in Indiana by the Kelly School of Business at Indiana University for 2000, 2001
and 2002. The PEO industry is expanding rapidly. The Company believes there is a
rising demand for PEO services and an excellent opportunity for consolidation
and expansion. PSM has a great reputation and is a very well-managed company.
The Company believes that PSM will continue its rapid expansion.

Other Information
-----------------

The Company reviews, as opportunities arise, the potential acquisition and/or
operation of other businesses. Any such action will be based upon the Company'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 stockholders. The Company intends to continue to aggressively pursue
acquisitions and other business opportunities.

The completion of any additional acquisitions or other business opportunities,
as well as the expected rapid growth of the Company's existing businesses, could
result in the need for substantial additional funding. Additional funding could
be needed for increased office/warehouse space and increased working capital
requirements.

The Company expects to fund current operations and other cash expenditures
through the use of available cash, cash from operations, funds available under
its credit facilities and possible new debt or equity sources. The Company
believes that there will be sufficient funds from current cash, operations and
available financing to fund operations and cash expenditures for the foreseeable
future.

                                       22
<PAGE>

Over the next quarter, the Company plans to hire additional employees in all of
its segments especially in the Wireless Infrastructure Segment; however, the
hiring of these employees will be approximately correlated with an increase in
operating revenue.


RESULTS OF OPERATIONS:  COMPARISON OF THE THREE MONTH PERIODS ENDED
NOVEMBER 30, 2003 AND NOVEMBER 30, 2002
---------------------------------------

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

Net revenues for the three months ended November 30, 2003 were $10,206,000,
compared to $3,571,000 for the three months ended November 30, 2002. This
increase was primarily due to the acquisitions of PSM, on October 1, 2003, and
Nor-Cote and Cornerstone Construction in fiscal year 2003. PSM, which represents
all of the Company's Professional Business Solutions Segment reported revenues
of $2,826,000 for two months ended November 30, 2003. Nor-Cote, which was added
to the Company's Manufacturing and Distribution Segment on July 1, 2003,
reported revenues of $2,768,000. Cornerstone Construction, which was added to
the Company's Wireless Infrastructure Segment on August 15, 2003, reported
revenues of $1,065,000. During the quarter ended November 30, 2003 the Company
recorded net earnings in the amount of $234,000.

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

Cost of revenues were $7,451,000 for the three months ended November 30, 2003
compared to $2,431,000 for the three months ended November 30, 2002. This
increase was primarily due to the acquisitions of PSM, on October 1, 2003, and
Nor-Cote and Cornerstone Construction in fiscal year 2003. PSM, which represents
all of the Company's Professional Business Solutions Segment reported cost of
revenues for the two months ended November 30, 2003 of $2,269,000. Nor-Cote,
which was added to the Company's Manufacturing and Distribution Segment on July
1, 2003, reported cost of revenues of $1,473,000. Cornerstone Construction,
which was added to the Company's Wireless Infrastructure Segment on August 15,
2003, reported cost of revenues of $917,000.

Selling, general and administrative expenses were $2,417,000 for the three
months ended November 30, 2003, compared to $794,000 for the three months ended
November 30, 2002. The increase in expenses was primarily due to the
acquisitions of PSM, on October 1, 2003, and Nor-Cote and Cornerstone
Construction in fiscal year 2003. PSM, which represents all of the Company's
Professional Business Solutions Segment on reported expenses for two months
ended November 30, 2003 of $344,000. Nor-Cote, which was added to the Company's
Manufacturing and Distribution Segment on July 1, 2003, reported expenses of
$1,035,000. Cornerstone Construction, which was added to the Company's Wireless
Infrastructure Segment on August 15, 2003, reported expenses of $170,000.

In the Holding Company, there was an increase of $66,000 in selling, general and
administrative expenses for the three months ended November 30, 2003 compared to
the same period in the previous fiscal year. This increase was primarily related
to the Holding Company's hiring of additional employees and an increase in
professional fees due to Company growth.

Interest expense for the three months ended November 30, 2003 was approximately
$95,000, compared to $38,000 for the three months ended November 30, 2002. The
increase was due to the financing of the Nor-Cote acquisition along with
acquired debt from the Nor-Cote acquisition in July 2003. The Company obtained a
$3,600,000 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
$3,000,000 long-term line of credit facility with a related party and a $150,000
line of credit facility with a bank.

Gains on investments in marketable securities, net for the three months ended
November 30, 2003 was $29,000 as compared to $0 for the three months ended
November 30, 2002.

                                       23
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

As of November 30, 2003 the Company had working capital of approximately
$2,720,000 composed primarily of cash and equivalents, net accounts receivable
and net inventory. The Company's principal sources of liquidity include
$4,818,000 in cash and cash equivalents, a $1,500,000 line of credit available
through July 31, 2004 of which $104,000 was available as of November 30, 2003, a
$500,000 line of credit available through June 30, 2004 of which $45,000 was
available as of November 30, 2003, and a $3,000,000, unsecured line of credit
with a stockholder of which $1,000,000 was available as of November 30, 2003.

For the three months ended November 30, 2003, cash flows used by operating
activities were $233,000, as compared to cash flows provided by operating
activities of $488,000 for the three months ended November 30, 2002. The change
is primarily related to the Company's increase in accounts receivable of
$258,000 due to increased sales, increase in inventory of $222,000 due to stock
replenishment, and a decrease in accrued expenses of $261,000.

For the three months ended November 30, 2003, cash flows provided by investing
activities were $3,382,000, as compared to cash flows used by investing
activities of $112,000 for the three months ended November 30, 2002. The
increase in cash flows used for investing activities for the three months ended
November 30, 2003 is primarily due to net cash received as part of the PSM
acquisition of $3,302,000. Capital expenditures increased from $42,000 for the
three months ended November 30, 2002 to $264,000 for the three months ended
November 30, 2003. Proceeds from the sale of available securities were $344,000
for the three months ended November 30, 2003 compared to $0 for the three months
ended November 30, 2002.

For the three months ended November 30, 2003, cash flows provided by financing
activities were $648,000 as compared to cash flows used by financing activities
of $49,000 for the three months ended November 30, 2002. The increase was
primarily related to increased borrowings on existing debt in order to finance
the acquisition on PSM on October 1, 2003.

OFF BALANCE SHEET ARRANGEMENTS

The Company does not have any material off balance sheet arrangements that have
or is reasonably likely to have a current or future effect on the Company's
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
is material to investors. A stockholder of the Company individually owns a
related party company, in which the principal asset is the building used by
Kingston. Kingston has provided indirect guarantees on behalf of the debt
included in this related party. The Company believes that these guarantees are
excluded from the scope of Interpretation No. 45. The Company will continue to
evaluate what effect, if any, the recognition and measurement provisions will
have on its financial statements and related disclosures in future periods.

FORWARD-LOOKING STATEMENTS

This report 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 report and include
statements regarding the intent, belief or current expectations of 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 report are cautioned that any such forward-looking statements
are not guarantees of future performance and involve risks and uncertainties
that could cause actual results to differ materially. Factors that might cause
or contribute to such differences, include, but are not limited to, the risks
and uncertainties that are discussed under the heading "Management's Discussion
and Analysis or Plan of Operations". 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 the
risk factors referred to above and the other documents filed by the Company with
the Securities and Exchange Commission.

                                       24
<PAGE>

Item 3.  Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the reports we file pursuant
to the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported with the time periods specified in the SEC's rules and forms. Such
information is accumulated and communicated to the Company's management,
including its Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. The
Company's management recognizes that, because the design of any system of
controls is based in part upon certain assumptions about the likelihood of
future events and also is subject to other inherent limitations, any controls
and procedures, no matter how well designed and operated, can provide only
reasonable, and not absolute, assurance of achieving the desired objectives. The
Company's management believes, however, that the Company's disclosure controls
and procedures provide reasonable assurance that the disclosure controls and
procedures are effective.

The Company has carried out as of November 30, 2003, an evaluation, under the
supervision and with the participation of the Company's management, including
the Company's Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. Based on this evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures were effective. There have been no significant changes in the
Company's internal controls or in other factors that could significantly affect
internal controls subsequent to the November 30, 2003 evaluation.


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.
------  ---------------------

         None

Item 3. Defaults Upon Senior Securities.
------  -------------------------------

         None

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

         None

Item 5. Other Information.
------  -----------------

         None

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

(a) Exhibits

        31.1          Rule 15d-14(a) Certification of CEO
        31.2          Rule 15d-14(a) Certification of CFO
        32.1          Section 1350 Certification of CEO
        32.2          Section 1350 Certification of CFO

                                       25
<PAGE>

(b) Reports on Form 8-K.

         The following reports were filed by the Company during the first
quarter of fiscal year 2003-2004:

         Current report on Form 8-K dated October 10, 2003 furnishing items 1
and 2 for announcing the acquisition of PSM by the Company.

         Current report 8-K/A dated December 15, 2003 furnishing item 7,
financial information related to the acquisition of PSM by the Company.














                                       26
<PAGE>

                                   SIGNATURES

         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                    Fortune Diversified Industries, Inc.
                                             (Registrant)

Date:  November 29, 2004            By: /s/ Carter M. Fortune
                                        ---------------------------------
                                        Carter M. Fortune,
                                        Chief Executive Officer



Date:  November 29, 2004            By: /s/ Amy Gallo
                                        ---------------------------------
                                        Amy Gallo,
                                        Chief Financial Officer














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