Global 10-QSB 1-31-06 body

10QSB 1 global10qsb13106.htm GLOBAL 10-QSB 1-31-06 BODY Global 10-QSB 1-31-06 body

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE

SECURITIES AND EXCHANGE ACT OF 1934

For the period ended January 31, 2006

Commission file number 333-83231

GLOBAL DIVERSIFIED INDUSTRIES, INC

(Exact Name of Registrant as specified in its charter)

NEVADA	95-4741485
(State of Incorporation)	(IRS Employer Identification Number)

1200 Airport Drive, Chowchilla, CA	93610
(Address of Principal Executive Offices)	(Zip Code)

Telephone: 559-665-5800

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]

State the number of shares outstanding of each of the issuer's classes of common equity,:

148,866,114 shares of Common Stock ($.001 par value) as of March 15, 2006.

Transitional small business disclosure format: Yes [] No [X]

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION

ITEM I	FINANCIAL STATEMENTS (UNAUDITED)	2

	CONDENSED CONSOLIDATED BALANCE SHEETS:	2
	JANUARY 31, 2006 AND APRIL 30, 2005

	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS:
	FOR THE THREE MONTHS AND NINE MONHTS ENDED JANUARY 31, 2006 AND 2005	4

	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS:
	FOR THE NINE MONTHS ENDED JANUARY 31, 2006 AND 2005	5

	NOTES TO UNAUDITED CONSOLIDATED FINANCIAL INFORMATION:
	JANUARY 31, 2006	6

ITEM 2	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
	CONDITION AND RESULTS OF OPERATIONS	15

ITEM 3	CONTROLS AND PROCEDURES	21

PART II	OTHER INFORMATION	21

ITEM 1	LEGAL PROCEEDINGS	21

ITEM 2	CHANGES IN SECURITIES	21

ITEM 3	DEFAULTS UPON SENIOR SECURITIES	21

ITEM 4	SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS	22

ITEM 5	OTHER INFORMATION	22

ITEM 6	EXHIBITS	22

ITEM I. FINANCIAL STATEMENTS (UNAUDITED)

GLOBAL DIVERSIFIED INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	(Unaudited)
	January 31, 2006	April 30, 2005
ASSETS:
Current assets:
Cash and cash equivalents	$ 107,642	$ 446,082
Accounts receivable, net of allowance for doubtful accounts of $19,590 at January 31, 2006 and April 30, 2005, respectively	2,521,969	1,632,395
Inventories	3,382,334	2,523,693
Advance to employees	45,384	49,993
Deferred tax asset	8,000	78,000
Prepaid expenses	21,057	55,548
Total current assets	6,086,386	$ 4,785,711

Property, plant and equipment:
Property, plant and equipment, at cost	2,573,939	2,274,882
Less: Accumulated depreciation	(746,655)	(584,716)
Total property, plant and equipment, net	1,827,284	1,690,166

Other assets:
Deposit and others	30,279	35,579
Non Current deferred tax asset	13,000	-
Engineering and architectural plans, net of accumulated amortization of $112,456 and $61,407 at January 31, 2006 and April 30, 2005, respectively (Note F)	944,099	955,757
Total other assets	987,378	991,336

Total Assets	$ 8,901,048	$ 7,467,213

See accompanying notes to the unaudited condensed consolidated financial information

GLOBAL DIVERSIFIED INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)

	(Unaudited)
	January 31, 2006	April 30, 2005

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$ 1,069,610	$ 988,435
Deferred revenue	-	71,228
Notes payable to related parties, current portion (Note B)	140,500	149,000
Notes payable, current portion (Note B)	1,770,927	1,520,369
Total current liabilities	2,981,037	2,729,032

Long-term liabilities:

Deferred tax liability	-	57,000
Notes payable, long term portion, net of debt discount (Note B)	238,356	154,167
Notes payable to related parties, long-term portion (Note B)	588,815	588,815
Total long-term liabilities	827,171	799,982


Commitment and contingencies	-	-

Stockholders' equity:
Series A Preferred stock, par value $.001 per share; 10,000,000 shares authorized; 666,667 shares issued and outstanding at January 31, 2006 and April 30, 2005 (Note C)	667	667
Common stock, par value $ .001 per share; 400,000,000 shares authorized; 148,866,114 and 138,615,314 shares issued and outstanding at January 31, 2006 and April 30, 2005, respectively (Note C)	148,866	138,615
Additional paid-in capital	5,290,531	4,527,475
Preferred stock subscription	733,374	733,374
Common stock subscription	1,566,600	1,679,100
Treasury stock (Note C)	(50)	(50)
Accumulated deficit	(2,647,148)	(3,140,982)
Total stockholders' equity	5,092,840	3,938,199

Total liabilities and stockholders' equity	$ 8,901,048	$ 7,467,213

See accompanying notes to the unaudited condensed consolidated financial information

GLOBAL DIVERSIFIED INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For The Three Months Ended January 31,		For the Nine Months Ended January 31
	2006	2005	2006	2005
		(As restated - Note G)		(As restated - Note G)

Revenues	$ 2,120,772	$ 2,267,076	$ 11,516,163	$ 5,836,234
Cost of goods sold	1,454,672	1,338,495	8,378,729	3,538,490
Gross profit	666,100	928,581	3,137,434	2,297,744

Operating expenses:
Selling, general and administrative expenses	379,870	770,448	2,021,779	1,763,487
Depreciation and amortization	111,968	61,485	212,988	177,315
Total operating expense	491,838	831,933	2,234,767	1,940,802

Income from operations	174,262	96,648	902,667	356,942

Interest expense, net	(79,541)	(39,634)	(408,033)	(189,432)

Income before provision for income taxes	94,721	57,014	494,634	167,510

Provision for income taxes	-	-	(800)	-

Net income	$ 94,721	$ 57,014	$ 493,834	$ 167,510

Earnings per common share:
Basic	$ 0.00	$ 0.00	$ 0.00	$ 0.00
Diluted	$ 0.00	$ 0.00	$ 0.00	$ (0.00)
Weighted average shares outstanding:
Basic	148,858,825	137,032,759	141,044,884	135,205,893
Diluted	158,303,273	145,699,429	150,984,282	144,310,063

See accompanying notes to the unaudited condensed consolidated financial information

GLOBAL DIVERSIFIED INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Nine months ended January 31,
	2006	2005
Cash flows from operating activities:
Net income from operations	$ 493,834	$ 167,510
Adjustment to reconcile net income to net cash:
Depreciation and amortization	212,988	177,315
Common stock issued in exchange for services rendered	27,670	101,400
Amortization and write-off of debt discount	50,856	-
Common stock issued in exchange for employee compensation	16,470	60,176
Change in assets and liabilities:
Increase in accounts receivable	(889,574)	(845,756)
Increase in inventory	(858,641)	(1,024,993)
Increase decrease in prepaid expense and others	39,791	9,666
(Increase)/decrease in employee advances	4,609	(49,441)
Increase in accounts payable and accrued liabilities	81,175	480,295
Increase/(decrease) in deferred revenue	(71,228)	171,184
Net cash used in operating activities:	(892,050)	(752,644)

Cash flows from investing activities:
Capital expenditure	(338,448)	(221,467)
Net cash used in investing activities	(338,448)	(221,467)

Cash flows from financing activities:
Proceeds from sale of common stock and stock subscription, net of costs and fees	50,000	65,745
Proceeds from notes payable, net of repayments	850,558	425,164
Repayments of payable to related parties, net	(8,500)	54,643
Net cash provided by financing activities	892,058	545,552

Net decrease in cash and cash equivalents	(338,440)	(428,559)
Cash and cash equivalents at beginning of period	446,082	693,194
Cash and cash equivalents at end of period	$107,642	$ 264,635

Supplemental Disclosures of Cash Flow Information:

Cash paid during the period for interest	$ 219,024	$ 71,297
Cash paid during the period for taxes	-	-
Common stock issued to consultants for services rendered	27,670	101,400
Common stock issued for employees for compensation	16,470	60,176
Reclassification of notes payable current portion to long-term Portion pursuant to modified note agreement (Note B)	-	29,644
Common stock issued in exchange for conversion of notes payable	400,000	-
Beneficial conversion feature of convertible notes	166,667	-
Common stock issued in exchange for engineering plans	-	22,800

See accompanying notes to the unaudited condensed consolidated financial information

GLOBAL DIVERSIFIED INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION

January 31, 2006

(Unaudited)

NOTE A - SUMMARY OF ACCOUNTING POLICIES

General

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-QSB. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Accordingly, the results from operations for the three and nine-month period ended January 31, 2006, are not necessarily indicative of the results that may be expected for the year ended April 30, 2006. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated April 30, 2005 financial statements and footnotes thereto included in the Company's SEC Form 10-KSB.

Business and Basis of Presentation

Global Diversified Industries, Inc. (the “Company”), is incorporated under the laws of the State of Nevada, and is in the business of designing, manufacturing and marketing re-locatable modular structures such as classrooms and office buildings to end users as well as to third party leasing agents for use primarily within the state of California and other Western States.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Lutrex Enterprises, Inc. (“Lutrex”), Global Modular, Inc. ("Global Modular "), and MBS Construction, Inc. (“MBS”). All significant intercompany balances and transactions have been eliminated in consolidation.

Reclassification

Certain reclassifications have been made to conform to prior periods’ data to the current presentation. These reclassifications had no effect on reported losses.

Revenue Recognition

For revenue from product/contract sales, the Company recognizes revenue in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition (“SAB104”), which superceded Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (“SAB101”). SAB 101 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectibility is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectibility of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. Deferred revenues as of January 31, 2006 and April 30, 2005 are $0 and $71,228, respectively. In the event that the Company’s arrangements with its customers include more than one product or service, the Company determines whether the individual revenue elements can be recognized separately in accordance with Financial Accounting Standards Board (FASB) Emerging Issues Task Force No. 00-21 (EITF 00-21), Revenue Arrangements with Multiple Deliverables. EITF 00-21 addresses the determination of whether an arrangement involving more than one deliverable contains more than one unit of accounting and how the arrangement consideration should be measured and allocated to the separate units of accounting.

The Company recognizes revenue when persuasive evidence of an arrangement exists, the price to the customer is fixed, collectibility is reasonably assured and title and risk of ownership is passed to the customer, which is usually upon shipment. However, in limited circumstances, certain customers traditionally have requested to take title and risk of ownership prior to shipment. Revenue for these transactions is recognized only when:

GLOBAL DIVERSIFIED INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION

January 31, 2006

(Unaudited)

NOTE A - SUMMARY OF ACCOUNTING POLICIES

Revenue Recognition (Continued)

(1) Title and risk of ownership have passed to the customer;

(2) The Company has obtained a written fixed purchase commitment;

(3) The customer has requested in writing the transaction be on a bill and hold basis;

(4) The customer has provided a delivery schedule;

(5) All performance obligations related to the sale have been completed;

(6) The modular unit has been processed to the customer’s specifications, accepted by the customer and made ready for shipment; and

(7)The modular unit is segregated and is not available to fill other orders.

The remittance terms for these “bill and hold” transactions are consistent with all other sales by the Company.

Currently, there are no warranties provided with the purchase of the Company’s products. The cost of replacing defective products and product returns have been immaterial and within management’s expectations. In the future, when the company deems warranty reserves are appropriate that such costs will be accrued to reflect anticipated warranty costs.

Stock Based Compensation

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure-an amendment of SFAS 123." This statement amends SFAS No. 123, "Accounting for Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in APB Opinion No. 25 and related interpretations. Accordingly, compensation expense for stock options is measured as the excess, if any, of the fair market value of the Company's stock at the date of the grant over the exercise price of the related option. The Company has adopted the annual disclosure provisions of SFAS No. 148 in its financial reports for the year ended April 30, 2005 and 2004 and has adopted the interim disclosure provisions for its financial reports for the subsequent periods. The Company has no awards of stock-based employee compensation outstanding at January 31, 2006.

New Accounting Pronouncements

On February 16, 2006 the FASB issued SFAS 155, “Accounting for Certain Hybrid Instruments,” which amends SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” and SFAS 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” SFAS 155 allows financial instruments that have embedded derivatives to be accounted for as a whole (eliminating the need to bifurcate the derivative from its host) if the holder elects to account for the whole instrument on a fair value basis. SFAS 155 also clarifies and amends certain other provisions of SFAS 133 and SFAS 140. This statement is effective for all financial instruments acquired or issued in fiscal years beginning after September 15, 2006. The Company does not expect its adoption of this new standard to have a material impact on its financial position, results of operations or cash flows.

GLOBAL DIVERSIFIED INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION

January 31, 2006

(Unaudited)

NOTE B - NOTES PAYABLE

A summary of notes payable at January 31, 2006 and April 30, 2005 is as follows:

	January 31, 2006	April 30, 2005
Note payable to Company shareholder in monthly installments of interest only at 10.0% per annum; unsecured; maturity date was in November 30, 2003. The Company amended the note with the shareholder in April 2004, extending the maturity date to May 1, 2009; the noteholder has an option to convert the unpaid principal balance of the loan, together with any accrued and unpaid interest to the Company’s preferred stock. (a)	$ 389,465	$ 389,465

Note payable to Company shareholders in monthly installments of interest only at 8.0% per annum; unsecured. The Company amended the note with the shareholder in May 2005, extending the maturity date to May 31, 2006. Noteholder has the option to convert the principal balance of the loan to the Company’s preferred stock.	8,500	8,500

Note payable to Company shareholders in monthly installments of interest only at 6.0% per annum; unsecured; maturity date is on February 2, 2009.	199,350	199,350

Note payable to Company shareholders in monthly installments of interest only at 5.0% per annum; unsecured. The Company amended the note with the shareholder in May 2005, extending the maturity date to May 31, 2006. (a)	1,000	6,000

Note payable in 24 installments beginning February 28, 2005 with interest at 6% per annum, unsecured, maturity date February 1, 2007	7,588	16,104

Note payable in 24 monthly installments beginning January 28, 2005, with interest at 8% per annum; unsecured; maturity date is in December 2006. (b)	33,519	56,961

Note payable to Company shareholder in monthly installments of interest only at 8% per annum, unsecured, maturity date is on January 31, 2006.	131,000	131,000

Note payable revolving agreement secured by receivable and property with interest and administrative fees payable monthly; interest rate is at 2.75% per annum over and above the Prime Rate or Deemed Prime Rate whichever is higher; maturity date is in October 2006. Maximum borrowing capacity of $2,500,000.	1,629,820	1,147,304

Note payable to Company shareholder in monthly installments of interest only at 10% per annum, unsecured, maturity date is October 2005. (a)	-	3,500

Note payable in 3 installments, the first on May 2, 2005 for $100,000, the second on January 25, 2006 for $200,000, principal only, and the third on January 25, 2007, for $200,000 principal plus accrued interest at 5% per annum; unsecured; the lender has an option in lieu of receiving $200,000 in principal to receive five million shares of the company’s unregistered common stock. (c)	-	454,167
Note payable of $500,000; payabel in five annual payments of $100,000 beginning December 31, 2006, with interest payable monthly at 10% per annum. Lender has an option at the end of each twelve months (“anniversary date”) to receive restricted shares of the Company’s common stock in lieu of the annual cash payment of $100,000. The conversion price is equal to 75% of the closing price for the day that is twelve months prior to each anniversary date. The minimum conversion price shall be $0.05 per share. (d)	338,356	-
	2,738,598	2,412,351
Less: current portion	(1,911,427)	(1,669,369)
Total - notes payable - long term	$ 827,171	$ 742,982

GLOBAL DIVERSIFIED INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION

January 31, 2006

(Unaudited)

NOTE B - NOTES PAYABLE (Continued)

(a) The Company granted the noteholder an option to convert a total of $400,000 of principal balance of the notes to the Company’s 2,666,666 shares of preferred stock, and each share of the preferred stock is convertible to ten shares of the Company’s restricted common stock. The noteholder has the option to convert the notes to the Company’s securities anytime within three years from the issuance of the notes. The Company accounted for the notes payable and stock purchase rights in accordance with APB No. 14, "Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants" ("APB 14"). Proceeds from the issuance of notes payable with equity securities are allocated between the debt and the securities based on their relative fair values. The fair value of the company’s restricted common stock at the time the conversion option was granted approximated the value of the debt if converted. Accordingly, no imbedded beneficial conversion feature was accounted in connection with the option to convert notes payable.

(b) Original note agreement was entered into in September 2003, in 24 monthly installments beginning October 15, 2003, with interest at 6% per annum; unsecured; maturity date is October 2005. The Company was in default under the terms of the note agreement. On December 28, 2004, the Company and the noteholder entered into an updated Promissory Note Agreement (“Updated Agreement”). Pursuant to the Updated Agreement, the principal amount together with interest accrued at 8% per annum are payable in 24 monthly installments beginning January 28, 2005. The Company also transferred into an escrow account an aggregate of 3,223,421 shares of its restricted common stock as collateral for this note. If the note is in default after one year or any time thereafter, the noteholder has the option to cash in the restricted stock to pay off the balance of the note plus any unpaid interest and penalties. The 3,223,421 shares of common stock were held in escrow so as not be considered outstanding unless the Company is in default. As of January 31, 2006, the Company was in compliance with the terms of the Update Agreement.

(c) The Company granted the noteholder an option to convert the second installment of $200,000 of principal to five million shares of the company’s unregistered common stock at maturity date. The Company accounted for the notes payable and stock purchase rights in accordance with APB No. 14, "Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants" ("APB 14"). Proceeds from the issuance of notes payable with equity securities are allocated between the debt and the securities based on their relative fair values. The fair value of the company’s restricted common stock at the time the conversion option was granted approximated $250,000. The Company recognized an imbedded beneficial conversion feature present in the convertible note. The Company recognized and measured an aggregate of $50,000 of the proceeds, which is equal to the intrinsic value of the imbedded beneficial conversion feature, to additional paid in capital and a discount against the convertible portion of the note. The debt discount attributed to the beneficial conversion feature is amortized over the maturity period (two years) as interest expense. During the quarter ended October 31, 2005, the Company repaid principal of $100,000 in cash. The Company also issued an aggregate of 2,857,143 shares of common stock in exchange for repayment of $200,000 in principal. Additionally, the noteholder exercised the option in lieu of receiving $200,000 in principal to receive 5 million shares of the company’s unregistered common stock. The five million of shares were issued on November 1, 2006. This note was deemed paid in full as of January 31, 2006. During the period ended January 31, 2005, the Company amortized the debt discount attributed to the beneficial conversion feature and recorded non-cash interest expense of $5,238, and unamortized debt discount of $40,595 in connection with the note was charged to operations upon repayment and conversion of the note.

(d) Collateral for this note is a lien on Aurora Intellectual Property owned by the Company. The Company granted the noteholder an option to receive restricted shares of the Company’s common stock in lieu of the annual cash payment of $100,000 at the end of each twelve months (“anniversary date”). The conversion price is equal to 75% of the closing price for the day that is twelve months prior to each anniversary date. The minimum conversion price shall be $0.05 per share. The Company has sufficient authorized and unissued shares available to settle the debt, and has reserved 10 million shares of common stock to settle the debt in the event that the noteholder converts at the minimum conversion price of $0.05 per share. The Company accounted for the convertible in accordance with Emerging Issues Task Force Issue 98-5, Accounting for Convertible Securities with a Beneficial Conversion Features or Contingently Adjustable Conversion Ratios ("EITF 98-5"), and recognized an imbedded beneficial conversion feature present in the convertible note. The Company recognized and measured an aggregate of $166,667 of the proceeds, which is equal to the intrinsic value of the imbedded beneficial conversion feature, to additional paid in capital and a discount against the convertible note. The debt discount attributed to the beneficial conversion feature is amortized over the maturity period (five years) as interest expense. During the quarter ended January 31, 2006, the Company amortized the debt discount attributed to the beneficial conversion feature and recorded non-cash interest expense of $5,023,

GLOBAL DIVERSIFIED INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION

January 31, 2006

(Unaudited)

NOTE C - CAPITAL STOCK

On November 7, 2001 the Company's Board of Directors approved an increase in the Company's authorized common stock from 50,000,000 to 400,000,000 with a par value of $.001. The Company also created a Series A Preferred class of stock, $.001 par value, and authorized 10,000,000 shares. On February 3, 2003, the Company’s Board of Directors approved to change the conversion right of the Series A Preferred Stock from a ratio of five common for one preferred share to ten common for one preferred share. As of January 31, 2006 and April 30, 2005, the Company has issued and outstanding 666,667 shares of Series A preferred stock. The Company has 148,866,114 and 138,615,314 shares of common stock issued and outstanding at January 31, 2006 and April 30, 2005, respectively. The Company has 50,000 shares of treasury stock at January 31, 2006 and April 30, 2005.

During the nine months period ended January 31, 2006, the Company issued 297,250 shares of common stock to consultants in exchange for $27,670 of services fees. All valuations of common stock issued for services were based upon the value of the services rendered, which did not differ materially from the fair value of the Company's common stock during the period the services are rendered. The Company issued 235,295 shares of common stock, valued at $16,470, to its Regional Sales Manager pursuant to the employment agreement as a signing bonus. Additionally, the Company received $50,000 of cash, net of costs and fees for 611,112 shares of common stock subscribed. The Company also issued 1,250,000 of its commons stock, valued at $112,500, to Langley Park Investments PLC (“Langley”) pursuant to an agreement the Company and Langley entered into in April 2005. These shares were accounted for in the prior year ending April 30, 2005, as common stock subscription payable. The Company also issued an aggregate of 2,857,143 shares of common stock in exchange for repayment of notes payable in the amount of $200,000 (Note B). Additionally, the noteholder exercised the option in lieu of receiving $200,000 in principal to receive five million shares of the company’s unregistered common stock. The five million of shares were issued in November 2006.

NOTE D - STOCK OPTIONS AND WARRANTS

Non-Compensatory Stock Options

The following table summarizes the changes in non-compensatory options outstanding and the related prices for the shares of the Company’s common stock issued to non-employees of the Company.

Options Outstanding				Options Exercisable
Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life (Years)	Weighed Average Exercise Price	Number Exercisable	Weighted Average Exercise Price
$ 5.00	1,500,000	1.25	$ 5.00	1,500,000	$ 5.00
$ 0.05	4,000,000	0.25	$ 0.05	4,000,000	$ 0.05
	5,500,000	0.52	1.40	5,500,000	$ 1.40

Transactions involving options are summarized as follows:

	Number of Shares	Weighted Average Price Per Share
Outstanding at April 30, 2003	1,500,000	$ 5.00
Granted	4,000,000	0.05
Exercised	-	-
Canceled or expired	-	-
Outstanding at April 30, 2004	5,500,000	$ 1.40
Granted	-	-
Exercised	-	-
Canceled or expired	-	-
Outstanding at April 30, 2005	5,500,000	$ 1.40
Granted	-	-
Exercised	-	-
Canceled or expired	-	-
Outstanding at January 31, 2006	5,500,000	$ 1.40

GLOBAL DIVERSIFIED INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION

January 31, 2006

(Unaudited)

NOTE D - STOCK OPTIONS AND WARRANTS (Continued)

Non-Compensatory Stock Options (Continued)

During the period ended January 31, 2006 and 2005, the Company did not grant any compensatory stock options to consultants or shareholders, and all previously granted stock options were fully vested at the time the stock options were granted. Accordingly, no compensation costs were charged to operations during the period ended January 31, 2006 and 2005. The 4,000,000 warrants granted during the year ended April 30, 2004 had an original expiration date on January 25, 2005 and was extended to April 30, 2006.

Non-Compensatory Warrants

The following table summarizes the changes in non-compensatory warrants outstanding and the related prices for the shares of the Company’s common stock issued to non-employees of the Company.

Warrants Outstanding				Warrants Exercisable
Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life (Years)	Weighed Average Exercise Price	Number Exercisable	Weighted Average Exercise Price
$ 0.03	1,500,000	0.50	$ 0.03	1,500,000	$ 0.03

Transactions involving warrants are summarized as follows:

	Number of Shares	Weighted Average Price Per Share
Outstanding at April 30, 2003	1,500,000	$ 0.03
Granted	-	-
Exercised	-	-
Canceled or expired	-	-
Outstanding at April 30, 2004	1,500,000	$ 0.03
Granted	-	-
Exercised	-	-
Canceled or expired	-	-
Outstanding at April 30, 2005	1,500,000	$ 0.03
Granted	-	-
Exercised	-	-
Canceled or expired	-	-
Outstanding at January 31, 2006	1,500,000	$ 0.03

The Company granted 1,500,000 of warrants during the year ended April 30, 2003 in connection with acquisition of MBS Construction, Inc. The warrants granted have an original expiration date on January 31, 2005 and was extended to July 31, 2006.

NOTE E - EMPLOYEE STOCK INCENTIVE PLAN

In Septmeber 2001, the Board of Directors of the Company implemented an Employee Stock Incnetive Plan (“2001 Stock Option Plan”) for officers, employees and certain non-employees (collectively referred to as "Employees") in an amount equal to 15,000,000 shares of common stock. The 2001 Stock Option Plan provides for the issuance of stock options exerciable at fifty percent (50%) of the fair market value of the common stock on the date of exercise. For an employee holding greater than ten percent(10%) of the total voting power of all stock of the Company, the exercise price of an incentive stock option shall be at least one hundred and ten percent (110%) of the fair market value of the common stock on the date of the grant of the option. The maximum life of the options is ten years from the date the stock optiosn are granted.

GLOBAL DIVERSIFIED INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION

January 31, 2006

(Unaudited)

NOTE E - EMPLOYEE STOCK INCENTIVE PLAN (Continued)

In February 2004, the Board of Directors of the Company implemented another Employee Stock Incnetive Plan (“2004 Stock Option Plan”) for officers, employees and certain non-employees (collectively referred to as "Employees") in an amount equal to 2,000,000 shares of common stock. The 2004 Stock Option Plan provides for the issuance of stock options at an exercise price of $0.05 per share (or 110% of the fair market value of the common stock on the date of the grant of the option, for employees holding greater than ten percent (10%) of the total voting power of all stock of the Company). The maximum life of the options is ten years from the date the stock optiosn are granted.

There are no stock options issued and outstanding during the nine month period ended January 31, 2006.

NOTE F- ACQUISITION OF INTANGIBLE ASSETS

The Company has adopted SFAS No. 142, Goodwill and Other Intangible Assets, whereby the Company periodically test its intangible assets for impairment. On an annual basis, and when there is reason to suspect that their values have been diminished or impaired, these assets are tested for impairment, and write-downs will be included in results from operations.

On March 11, 2005, the Company acquired certain intellectual properties from Impact Modular Leasing (“Impact”) through an Asset Purchase Agreement (“Agreement”). Impact had acquired the assets from a bankruptcy auction of Aurora Modular Industries, Inc. As consideration, the Company issued to Impact a secured promissory note (the “Note”) for Five Hundred Thousand Dollars ($500,000) bearing interest at five (5) percent per annum. The total purchase price was allocated to the assets acquired as follows:

Trade name	$ 350,000
Building engineering and architectural plans	150,000
Total	$ 500,000

The trade name acquired is considered to have an undeterminable life, and as such will not be amortized. Instead, the trade name is tested annually for impairment, with any impairment charged against earnings in the Company’s consolidated statement of earnings. The building engineering and architectural plans acquired have estimated useful lives of ten years.

Total identifiable intangible assets acquired and their carrying value at April 30, 2005 are:

	Gross Carrying Amount	Accumulated Amortization	Net	Residual Value	Weighted Average Amortization Period (Years)
Amortized Identifiable Intangible Assets:
Building engineering and architectural plans	$ 667,164	$ (61,407)	$ 605,757	$ -	10.0
Total Amortized Identifiable Intangible Assets	667,164	$ (61,407)	$ 605,757	$ -	10.0
Unamortized Identifiable Intangible Assets:
Trade Name	350,000	-	350,000	350,000
Total Amortized Identifiable Intangible Assets	350,000	-	350,000	350,000

Total	$1,017,164	$ (61,407)	$955,757	$ 350,000

GLOBAL DIVERSIFIED INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION

January 31, 2006

(Unaudited)

NOTE F- ACQUISITION OF INTANGIBLE ASSETS (Continued)

Total identifiable intangible assets acquired and their carrying value at January 31, 2006 are:

	Gross Carrying Amount	Accumulated Amortization	Net	Residual Value	Weighted Average Amortization Period (Years)
Amortized Identifiable Intangible Assets:
Building engineering and architectural plans	$ 706,555	$ (112,456)	$ 594,099	$ -	10.0
Total Amortized Identifiable Intangible Assets	706,555	(112,456)	594,099	$ -	10.0
Unamortized Identifiable Intangible Assets:
Trade Name	350,000	-	350,000	350,000
Total Amortized Identifiable Intangible Assets	350,000	-	350,000	350,000

Total	$1,056,555	$ (112,456)	$ 944,099	$ 350,000

Total amortization expense charged to operations for the nine months period ended January 31, 2006 and 2005 were $51,049 and $30,211, respectively.

Estimated amortization expense as of January 31, 2006 is as follows:

2006	$ 59,410
2007	59,410
2008	59,410
2009	59,410
2010 and after	356,459
Total	$ 594,099

NOTE G - RESTATEMENT OF FINANCIAL STATEMENTS

The Company has restated its condensed consolidated statement of operations for the period ended January 31, 2005 to correct the following errors in the financial statements previously filed.

ཉ The Company erroneously recorded as revenues the value of its work-in-process and finished goods inventories as of January 31, 2005.

The net effect of the correction of this error was to:

ཉ Decrease the Company’s reported revenues for the period ended January 31, 2005 by $519,259 from $6,355,493 to $5,836,234.

ཉ Decrease the Company’s reported cost of sales for the period ended January 31, 2005 by $519,259 from $4,057,749 to $3,538,490.

GLOBAL DIVERSIFIED INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION

January 31, 2006

(Unaudited)

NOTE G - RESTATEMENT OF FINANCIAL STATEMENTS (Continued)

The correction of the error has resulted in no change in the Company’s reported Condensed Consolidated Balance Sheet as of January 31, 2005 and Condensed Consolidated Statement of Cash Flows for the period ended January 31, 2005. However, the restatement did affect the individual components of the Company’s revenues and cost of sales as reported on its Condensed Consolidated Statement of Operations for the period ended January 31, 2005.

Following are reconciliations of the Company’s restatement of the Condensed Consolidated Statement of Operations for the periods ended January 31, 2005.

	Three Months Ended January 31, 2005		Nine Months Ended January 31, 2005
	(As Restated)	(As Reported)	(As Restated)	(As Reported)
Revenues	$ 2,267,076	$2,028,714	$5,836,234	$ 6,355,493
Cost of Goods Sold	1,338,495	1,100,133	3,538,490	4,057,749
Gross Profit	928,581	928,581	2,297,744	2,297,744
Operating Expenses:
Selling, General & Administrative	770,448	770,448	1,763,487	1,763,487
Depreciation and Amortization	61,485	61,485	177,315	177,315
Total Operating expenses	831,933	831,933	1,940,802	1,940,802
Income from Operations	96,648	96,648	356,942	356,942
Interest Expense, net	(39,634)	(39,634)	(189,432)	(189,432)
Income Taxes Provision	-	-	-	-
Net Income	$ 57,014	$ 57,014	$ 167,510	$167,510
Earnings per common share (basic and diluted)	$ 0.00	$ 0.00	$ 0.00	$ 0.00

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2006

This report on Form 10-QSB contains forward-looking statements within the meaning of Rule 175 of the Securities Act of 1933, as amended, and Rule 3b-6 of the Securities Act of 1934, as amended, that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our industry, our beliefs and our assumptions. Words such as “anticipate”, “expects”, “intends”, “plans”, “believes”, “seeks” and “estimates” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Form 10-QSB. Investors should carefully consider all of such risks before making an investment decision with respect to the Company’s stock. The following discussion and analysis should be read in conjunction with our financial statements and summary of selected financial data for Global Diversified Industries, Inc. Such discussion represents only the best present assessment from our Management.

DESCRIPTION OF COMPANY:

The Company is a holding company that currently operates three wholly owned subsidiaries, Lutrex Enterprises, Inc., an entity, which holds equipment and inventory for the registrant, MBS Construction Inc., a modular contractor specializing in modular construction site work and renovation, and Global Modular, Inc., a sales, marketing and manufacturing of modular type structures.

OVERVIEW:

The Company’s subsidiary, Global Modular, Inc. (“Global Modular”) is in the business of designing, manufacturing and marketing pre-fabricated, modular type structures. Global Modular’s 100,000 square foot factory is located on sixteen acres adjacent to the municipal airport at Chowchilla, California. The manufacturing facility has the capacity to produce approximately $50,000,000 of revenue per year. Its principal customer base during the current fiscal year will be educational (public and private schools, universities, etc.), child-care and municipality sectors. Its product lines consist of a variety of relocatable (portable) classroom designs, and designs used specifically for permanent modular construction, i.e., complete schools, wing additions, etc. Global Modular’s capabilities include single-story “slab-on-grade” construction, where a concrete slab is poured on site, which also serves as the floor. The structures are built in our factory and shipped to the site for installation on the concrete slab. The modular division has recently secured rights to state-of-the-art two-story designs recently owned by Aurora Modular Industries, Inc. All of Global Modulars’ portable/modular structures are engineered and constructed in accordance with pre-approved building plans, commonly referred to as “P.C.’s” or “pre-checked” plans that conform to structural and seismic safety specifications administered by the California Department of State Architects (DSA). The DSA regulates all California school construction on public real estate and the DSA’s standards are considered to be more rigorous than the standards that typically regulate other classes of commercial portable structures.

Global Modular also enjoys the benefit of providing educational customers with product contracted under a “piggyback clause”. The State of California allows school districts to canvass proposals from modular classroom vendors under a bidding process where the successful bidder can provide other public school districts and municipalities portable classrooms under a “piggyback contract” issued by the originating school district. This process saves school districts valuable time and resources from the necessity of soliciting bids. A modular vendor who possesses a “piggybackable contract” containing competitive pricing and a variety of design options may have access to future business for up to five years, depending on the term of the piggyback contract. Global Modular has recently received assignment of a second piggyback contract from a Southern California school district. This piggyback contract includes all appropriate pricing parameters pertinent to Global’s “permanent modular construction” designs. Global Modulars’ two piggyback contracts provides them the flexibility to offer California public schools and municipalities an expanded variety of design and pricing alternatives to meet virtually any design request by the school district and/or architect.

At some point during the current or successive fiscal year, Global Modular intends to expand its product line to serve the commercial/business sector. This sector consists of retail, industrial and institutional (including educational institutions that reside on private property). This sector adheres to building designs and specifications administered by the Department of Housing (DOH).

Among Global Modular’s asset base is its integrated, state-of-the-art, automated manufacturing process which includes equipment, raw material and marketing collateral that are specifically designed for the high capacity fabrication of modular structures. Future revenue generation and growth partially depends on the success of marketing efforts to the educational sector for single-story and two-story designs.

The Company’s subsidiary Global Modular, Inc. has secured necessary architectural and engineering approvals from the State of California (Division of the State Architect) for their single story and two-story designs. The two-story design is desirable by school districts since individual two-story buildings can be installed side-by-side to form a cluster of buildings, occupying hundreds of students. The two-story design is fully equipped with easy access to the second story by stairs and balcony along with a hydraulic elevator to accommodate handicap students, teachers and visitors. School districts continue to turn to two-story portable classrooms to satisfy their space dilemma since they have little real estate to surrender. Since the recent acquisition of Aurora Modular Industries intellectual property; the promotion of single-story slab-on-grade and two-story designs will be the main focus of our sales team during the next several years. Global Modular now possesses adequate DSA approved designs that can meet virtually any type configuration and aesthetic alternatives a school district may desire.

During the remainder of 2006, the Global Modular will continue to focus its attention on the sales and marketing of portable classrooms and modular buildings to the California public and private school sectors including California municipalities. Since the state of California has been experiencing an influx in student enrollment over the past several years, and the forecast for the next ten years is for continual increasing enrollments, the portable classroom manufacturing industry has become more successful. In an effort to keep up with demand for additional classroom space, modular manufactures are expecting increased production backlogs throughout the remainder of 2006 and into 2007.

The following Management Discussion and Analysis should be read in conjunction with the financial statements and accompanying notes included in this Form 10-QSB.

COMPARISON OF THE THREE MONTHS ENDED JANUARY 31, 2006 TO THE THREE MONTHS ENDED JANUARY 31, 2005

Results of Operations

Total revenues were $2,120,722 for the quarter ended January 31, 2006 as compared to $2,267,076 in the quarter ended January 31, 2005. The decrease of $146,354 is attributed to three major contracts with a school districts in Southern California. The school districts wanted to use the building design, which was acquired through the Aurora bankruptcy. The intellectual properties acquired from the Aurora bankruptcy, provides Global Modular with a complete line of new products. The decrease of $146,354 in revenue is attributed to Global completing negotiations on a two major contracts with a school district in Southern California and completing four projects in the field. During the period of negotiations, production was slower for the first three weeks of the quarter ended January 31, 2006.

Cost of revenues was $1,454,672 and $1,338,495, respectively for the quarters ended January 31, 2006 and 2005. Gross profit was $666,100 and $928,581, respectively for the quarters ended January 31, 2006 and 2005.. The cost of revenue increased by $116,177 is attributed to Global and MBS Construction finishing the field construction work on four major projects. The field construction normally has a lower profit margin than the manufacturing.

Total operating expenses decreased to $491,838 in the quarter ended January 31, 2006 from $831,933 in the quarter ended January 31, 2005. This is mainly attributable to the reduction in operating expenses of MBS Construction in the quarter ending January 31, 2006.

COMPARISON OF THE NINE MONTHS ENDED JANUARY 31, 2006 TO THE NINE MONTHS ENDED JANUARY 31, 2005

Results of Operations

Total revenues increased to $11,516,163 in the nine months ended January 31, 2006 from $5,836,234 in the nine months ended January 31, 2005. The increase is attributed to four major contracts with a school districts in Southern California. The school districts wanted to use the building design, which was acquired through the Aurora bankruptcy. The intellectual properties acquired from the Aurora bankruptcy, provides Global Modular with a complete line of new products. The increase is attributed to Global Modular substantially increasing sales with its new line products acquired from the Aurora bankruptcy. Global Modular is now recognized by the California School Districts as one of the major manufacturers of classroom buildings.

Cost of revenues was $8,378,729 and $3,538,490, respectively for the nine months ended January 31, 2006 and 2005. Gross profit was $3,137,434 and $2,297,744, respectively for the nine months ended January 31, 2006 and 2005. The cost of revenue increased due to the increased sales generated by the products offered from the purchase of the Aurora intellectual property. The cost of revenues increased due to the increased sales generated by the products offered from the purchase of the Aurora intellectual property.

Total operating expenses increased to $2,234,767 in the nine months ended January 31, 2006 from $1,940,802 in the nine months ended January 31, 2005. This is mainly attributed to the company’s increase in sales of over 100% as compared to the same period last year.

Liquidity and Capital Resources

As of January 31, 2006, the Company had a working capital surplus of $3,105,349. Net income was $493,834 for the nine months ended January 31, 2005. The Company generated a negative cash flow from operations of $892,050 for the nine-month period ended January 31, 2006. The negative cash flow from operating activities for the period is primarily attributable to the Company's net income adjusted for depreciation and amortization of $212,988, common stock issued to consultants and employees in exchange for services of $44,140, amortization and write-off of debt discount of $50,856, an increase in accounts receivable of $889,574 an increase in inventory of $858,641, a decrease in employee advances of $4,609, a decrease in other assets of $39,791, a decrease in deferred revenue of $71,228 and an increase in accounts payable of $81,175,

Cash flows used in investing activities for the nine-month period ended January 31, 2006 consisted of the acquisition of $338,448 of equipment and architectural plans used in operations.

The Company funded operations during the nine months ended January 31, 2006 by increasing debt to lenders by $850,558 and the reduction of debt to related parties by $8,500. The Company raised $ 50,000 of cash by the sale of common stock and stock subscriptions, net of costs and fees.

As a result of limited capital resources and revenues from operations, the Company has relied on the issuance of equity securities to non-employees in exchange for services. The Company's management enters into equity compensation agreements with non-employees if it is in the best interest of the Company under terms and conditions consistent with the requirements of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation." In order conserve its limited operating capital resources, the Company anticipates continuing to compensate non-employees for services during the next twelve months. This policy may have a material effect on the Company's results of operations during the next twelve months.

While the Company has raised capital to meet its working capital and financing needs in the past, additional financing is required in order to meet the Company’s current and projected cash flow needs for operations and development. The Company generated a positive cash flow for the six months ended October 31, 2005. The Company is presently seeking financing in the form of debt or equity in order to provide the necessary working capital. Such financing may be upon terms that are dilutive or potentially dilutive to our stockholders. The Company currently has no commitments for financing. There are no assurances the Company will be successful in raising the funds required

By adjusting its operations and development to the level of capitalization , management belives it has suffucient capital resources to meet projected cash flow needs through the next twelve months. However, if thereafter, we are not successful in generating sufficient liquidity from operations or in raising sufficient capital resources, on terms acceptable to us, this could have a material adverse effect on our business, results of operations , liquidity and financial condition.

The effect of inflation on the Company's revenue and operating results was not significant. The Company's operations are located in North America and there are no seasonal aspects that would have a material effect on the Company's financial condition or results of operations.

Critical Accounting Policies

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. While there are a number of significant accounting policies affecting our consolidated financial statements; we believe the following critical accounting policies involve the most complex, difficult and subjective estimates and judgments:

ཉའའ Revenue Recognition

ཉའའ Inventories

ཉའའ Allowance for doubtful accounts

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, the price to the customer is fixed, collectibility is reasonably assured and title and risk of ownership is passed to the customer, which is usually upon delivery. However, in limited circumstances, certain customers traditionally have requested to take title and risk of ownership prior to shipment. Revenue for these transactions is recognized only when:

(1) Title and risk of ownership have passed to the customer;

(2) The Company has obtained a written fixed purchase commitment;

(3) The customer has requested in writing the transaction be on a bill and hold basis;

(4) The customer has provided a delivery schedule;

(5) All performance obligations related to the sale have been completed;

(6) The modular unit has been processed to the customer’s specifications, accepted by the customer and made ready for shipment; and

(7)The modular unit is segregated and is not available to fill other orders.

The remittance terms for these “bill and hold” transactions are consistent with all other sales by the Company.

In the event that the Company’s arrangements with its customers include more than one product or service, the Company determines whether the individual revenue elements can be recognized separately in accordance with Financial Accounting Standards Board (FASB) Emerging Issues Task Force No. 00-21 (EITF 00-21), Revenue Arrangements with Multiple Deliverables, EITF 00-21 addresses the determination of whether an arrangement involving more than one deliverable contains more than one unit of accounting and how the arrangement consideration should be measured and allocated to the separate units of accounting.

Product Warranty Reserve

Inventories

We value our inventories, which consists of raw materials, work in progress, finished goods, at the lower of cost or market. Cost is determined on the first-in, first-out method (FIFO) and includes the cost of merchandise and freight. A periodic review of inventory quantities on hand is performed in order to determine if inventory is properly positioned at the lower of cost or market. Factors related to current inventories such as future consumer demand and trends in the Company's core business, current aging, current and anticipated wholesale discounts, and class or type of inventory is analyzed to determine estimated net realizable values. A provision is recorded to reduce the cost of inventories to the estimated net realizable values, if required. Any significant unanticipated changes in the factors noted above could have a significant impact on the value of our inventories and our reported operating results.

Allowance for Uncollectible Accounts

We are required to estimate the collectibility of our trade receivables. A considerable amount of judgment is required in assessing the realization of these receivables including the current creditworthiness of each customer and related aging of the past due balances. In order to assess the collectibility of these receivables, we perform ongoing credit evaluations of our customers' financial condition. Through these evaluations we may become aware of a situation where a customer may not be able to meet its financial obligations due to deterioration of its financial viability, credit ratings or bankruptcy. The reserve requirements are based on the best facts available to us and are reevaluated and adjusted as additional information is received. Our reserves are also based on amounts determined by using percentages applied to certain aged receivable categories. These percentages are determined by a variety of factors including, but are not limited to, current economic trends, historical payment and bad debt write-off experience. We are not able to predict changes in the financial condition of our customers and if circumstances related to our customers deteriorate, our estimates of the recoverability of our receivables could be materially affected and we may be required to record additional allowances. Alternatively, if we provided more allowances than are ultimately required, we may reverse a portion of such provisions in future periods based on our actual collection experience. As of January 31, 2006, we determined there was a reserve required against our account receivables of $19,590.

Employees

As of January 31, 2006 the Company had 153 employees. The Company anticipates that the number of employees will satisfy its production backlog during the next six months. The Company does not expect to have any collective bargaining agreements covering any of its employees.

Properties

The Company’s principal executive offices are located at 1200 Airport Drive, Chowchilla California. The property consists of sixteen acres of real estate including a 100,000 square foot structure of usable space. The structure will be utilized by the Company’s executive management team, as well as housing the operating entities of Lutrex, MBS Construction and Global Modular. The Company has entered into a three-year lease (including options for renewals) for the property at a rate of $16,125 per month for the remaining of the current fiscal year with moderate increases for each year thereafter. The Company believes that the current facilities are suitable for its current needs.

Trends, Risks and Uncertainties

We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to our Common Stock.

Cautionary Factors that May Affect Future Results and Market Price of Stock

Our annual report on April 30, 2005 Form 10-KSB includes a detailed list of cautionary factors that may affect future results. Management believes that there have been no material changes to those factors listed, however other factors besides those listed could adversely affect us. That annual report can be accessed on EDGAR.

LIMITED OPERATING HISTORY; ANTICIPATED LOSSES; UNCERTAINTY OF

FUTURE RESULTS.

The Company has only a limited operating history upon which an evaluation of its operations and its prospects can be based. The Company's prospects must be evaluated with a view to the risks encountered by a company in an early stage of development, particularly in light of the uncertainties relating to the new and evolving manufacturing methods with which the Company intends to operate and the acceptance of the Company's business model. The Company will be incurring costs to develop, introduce and enhance its products, to establish marketing relationships, to acquire and develop product lines that will compliment each other and to build an administrative organization. To the extent that such expenses are not subsequently followed by commensurate revenues, the Company's business, results of operations and financial condition will be materially adversely affected. There can be no assurance that the Company will be able to generate sufficient revenues from the sale of their modular buildings and related products. The Company may have negative cash flow from operations to continue for the next four (4) quarters as it continues to develop and market its business. If cash generated by operations is insufficient to satisfy the Company's liquidity requirements, the Company may be required to sell additional equity or debt securities. The sale of additional equity or convertible debt securities would result in additional dilution to the Company's stockholders.

POTENTIAL FLUCTUATIONS IN ANNUAL OPERATING RESULTS.

The Company's annual operating results may fluctuate significantly in the future as a result of a variety of factors, most of which are outside the Company's control, including: the demand for manufactured modular buildings; seasonal trends; introduction of new government regulations and building standards; local, state and federal government procurement delays; general economic conditions, and economic conditions specific to the modular building industry. The Company's annual results may also be significantly impacted by the impact of the accounting treatment of acquisitions, financing transactions or other matters. Particularly at the Company's early stage of development, such accounting treatment can have a material impact on the results for any quarter. Due to the foregoing factors, among others, it is likely that the Company's operating results will fall below the expectations of the Company or investors in some future quarter.

LIMITED PUBLIC MARKET, POSSIBLE VOLATILITY OF SHARE PRICE.

The Company's common stock is currently quoted on the NASD OTC Electronic Bulletin Board under the ticker symbol GDVI. As of March 12, 2006, there were approximately 148,866,114 shares of common stock outstanding, of which approximately 49,630,000 were tradable without restriction under the Securities Act. There can be no assurance that a trading market will be sustained in the future. Factors such as, but not limited to, technological innovations, new products, acquisitions or strategic alliances entered into by the Company or its competitors, failure to meet security analysts' expectations, government regulatory action, patent or proprietary rights developments, and market conditions for manufacturing stocks in general could have a material effect on the volatility of the Company's stock price.

MANAGEMENT OF GROWTH

The Company expects to experience significant growth in the number of employees and the scope of its operations. In particular, the Company intends to hire additional engineering, sales, marketing, and administrative personnel. Additionally, acquisitions could result in an increase in the number of employees and business activity. Such activities could result in increased responsibilities for management. The Company believes that its ability to increase its customer support capability and to attract, train, and retain qualified engineering, sales, marketing, and management personnel, will be a critical factor to its future success. In particular, the availability of qualified sales engineering and management personnel is quite limited, and competition among companies to attract and retain such personnel is intense. During strong business cycles, the Company may experience difficulty in filling its needs for qualified sales, engineering and other personnel.

The Company's future success will be highly dependent upon its ability to successfully manage the expansion of its operations. The Company's ability to manage and support its growth effectively will be substantially dependent on its ability to implement adequate improvements to financial and management controls, reporting and order entry systems, and other procedures and hire sufficient numbers of financial, accounting, administrative, and management personnel. The Company's expansion and the resulting growth in the number of its employees have

resulted in increased responsibility for both existing and new management personnel. The Company is in the process of establishing and upgrading its financial accounting and procedures. There can be no assurance that the Company will be able to identify, attract, and retain experienced accounting and financial personnel. The Company's future operating results will depend on the ability of its management and other key employees to implement and improve its systems for operations, financial control, and information management, and to recruit, train, and manage its employee base. There can be no assurance that the Company will be able to achieve or manage any such growth successfully or to implement and maintain adequate financial and management controls and procedures, and any inability to do so would have a material adverse effect on the Company's business, results of operations, and financial condition.

The Company's future success depends upon its ability to address potential market opportunities while managing its expenses to match its ability to finance its operations. This need to manage its expenses will place a significant strain on the Company's management and operational resources. If the Company is unable to manage its expenses effectively, the Company's business, results of operations, and financial condition will be materially adversely affected.

RISKS ASSOCIATED WITH ACQUISITIONS.

As part of its business strategy, the Company expects to acquire assets and businesses relating to or complementary to its operations. These acquisitions by the Company will involve risks commonly encountered in acquisitions of companies. These risks include, among other things, the following: the Company may be exposed to unknown liabilities of the acquired companies; the Company may incur acquisition costs and expenses higher than it anticipated; fluctuations in the Company's quarterly and annual operating results may occur due to the costs and expenses of acquiring and integrating new businesses or technologies; the Company may experience difficulties and expenses in assimilating the operations and personnel of the acquired businesses; the Company's ongoing business may be disrupted and its management's time and attention diverted; the Company may be unable to integrate successfully.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements

ITEM 3. CONTROLS AND PROCEDURES

The Company’s management including the President, Chief Executive Officer and Chief Financial Officer, have evaluated, as of January 31, 2006, the effectiveness of the design, maintenance and operation of the Company’s disclosure controls and procedures. Management determined that the Company’s disclosure controls and procedures were effective in ensuring that the information required to be disclosed by the Company in the reports that it files under the Exchange Act is accurate and is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and regulations.

Disclosure controls and procedures, no matter how well designed and implemented, can provide only reasonable assurance of achieving an entity’s disclosure objectives. The likelihood of achieving such objectives is affected by limitations inherent in disclosure controls and procedures. These include the fact that human judgment in decision making can be fully faulty and that breakdowns in internal control can occur because of human failures such as errors or mistakes or intentional circumvention of the established process.

There have been no changes in internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation thereof, including any corrective actions with regard to significant deficiencies and material weaknesses.

PART II. OTHER INFORMATION

ITEM 1 LEGAL PROCEEDINGS

None

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

During the quarter ended January 31, 2006, we issued 5,000,000 shares of common stock in exchange for conversion of a note payable. We also issued shares 200,000 shares of common stock, valued at $16,000, to a consultant for services, and 235,295 shares of common stock, valued at $16,470, to an employee as per the terms of his employment agreement. These transactions were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None during this reporting period.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None during this reporting period.

ITEM 5. OTHER INFORMATION

ITEM 6. EXHIBITS

Exhibits

No.	Description
31.1	Certification of Phillip Hamilton Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of E. Adam DeBard to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Phillip Hamilton Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of E. Adam DeBard Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

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

Global Diversified Industries, Inc.

Date: March 15, 2006 By: /s/ Phillip Hamilton

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President and Chief Executive Officer

(Principal Executive Officer)

Date: March 15, 2006 By: /s/ Adam DeBard

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Chief Operating Officer (Principal

Accounting and Financial Officer)