UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549





**FORM
      10-KSB/A**




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




For
      the fiscal year ended December
      31, 2006




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


For
        the transition
        period from _________ to ________  Commission
          file number 000-30653




Secured
                Diversified Investment, Ltd.(Name
                of small business issuer in its
                charter)




Nevada
            80-0068489(State
                or other jurisdiction of incorporation or organization)
            (I.R.S.
                Employer Identification No.)12202
                North Scottsdale Road, Phoenix, AZ
            85054(Address
                of principal executive offices)
            (Zip
                Code)Issuer’s
                telephone number:949
                851-1069





Securities
                registered under Section 12(b) of the Exchange Act:Title
                of each class
            Name
                of each exchange on which registeredNone
            Not
                ApplicableSecurities
                registered under Section 12(g) of the Exchange Act:Common
                Stock, par value $0.001(Title
                of class)





Check
      whether the Issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Securities 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 [
      ]





Check
      if
      disclosure of delinquent filers in response to Item 405 of Regulation S-B is
      not
      contained in this form, and no disclosure will be contained, to the best of
      registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-KSB or any amendment
      to
      this Form 10-KSB [ ]





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
      issuer’s revenue for its most recent fiscal year. $333,690





State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the average bid and asked price of
      such
      common equity, as of a specified date within the past 60 days.
      Unavailable





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date. 2,896,820 Common Shares as of May 15,
      2007





Transitional
      Small Business Disclosure Format (Check One): Yes [ ] No [X]









**Explanatory
      Note**





The
      purpose of this Amendment No. 2 to the Annual Report on Form 10-KSB
      previously filed with the United States Securities and Exchange Commission
      on June 12, 2007,  is to revise the subsection
*Investments* in Note 3 of the Notes to Consolidated Financial
      Statements.




2




**TABLE****OF
      CONTENTS**





PagePART
                IItem
                1.
            Description
                of Business
            3Item
                2.
            Description
                of Property
            7Item
                3.
            Legal
                Proceedings
            12Item
                4.
            Submission
                of Matters to a Vote of Security
                Holders
            13PART
                IIItem
                5.
            Market
                for Common Equity and Related Stockholder Matters
            13Item
                6.
            Management’s
                Discussion and Analysis or Plan of
                Operation
            15Item
                7.
            Financial
                Statements
            22Item
                8.
            Changes
                In and Disagreements With Accountants on Accounting and
                Financial Disclosure
            23Item
                8A.
            Controls
                and Procedures
            23Item
                8B.
            Other
                Information
            24PART
                IIIItem
                9.
            Directors,
                Executive Officers, Promoters and Control Persons;
                Compliance With Section 16(a) of the Exchange Act
            24Item
                10.
            Executive
                Compensation
            28Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management
                and Related Stockholder Matters
            31Item
                12.
            Certain
                Relationships and Related
                Transactions
            31Item
                13.
            Exhibits
            32Item
                14.
            Principal
                Accountant Fees and Services
            32




3


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      of Contents





**** **PART
      I**


**Item****1.
      Description of Business**





**Corporate
      History**





We
      were
      initially formed under the laws of the State of Utah on November 22, 1978 to
      pursue a position in the entertainment industry focusing on transactions
      involving the purchase and sale of literary property rights in connection with
      all types of theatrical pictures, plays, television films, music publications
      and other forms of entertainment. Ultimately, our efforts in the entertainment
      industry were unsuccessful, so we decided to search out other business
      opportunities. On July 23, 2002, our shareholders voted to change the direction
      of our business and pursue ownerships interests in a portfolio of real
      properties. To further our new objective, we moved our domicile to Nevada and
      changed our name from “Book Corporation of America” to “Secured Diversified
      Investment Ltd.”





**Business
      of Issuer**





**Mortgage
      Lending**





During
      the reporting period, we attempted to extend our business model to include
      mortgage banking operations. We established a wholly-owned subsidiary, Secured
      Lending, LLC (“Secured Lending”), and hoped to undertake a mortgage lending
      operation in the State of Arizona.





During
      the reporting period, Ms. Jan Wallace, our officer and director, signed an
      agreement with Americash (the “Branch Agreement”) to set up an Americash branch
      office in Arizona. Ms. Wallace also agreed to assign her compensation rights
      (the “Assignment Agreement”) to our subsidiary, Secured Lending, and obtain the
      necessary approvals for Secured Lending to share information with Americash.





On
      August
      31, 2006, however, the Branch Agreement and the accompanying Assignment
      Agreement were cancelled. The relationship among Americash, Jan Wallace, and
      Secured Lending could not be sustained under Arizona mortgage banking
      regulations. The arrangement therefore mutually discontinued.





On
      August
      2, 2006, Secured Lending entered into an agreement with Dakota First, L.L.C.,
      a
      North Dakota company (“Dakota”), to have Dakota generate and process loans that
      will be funded through Americash. We thereafter mutually terminated our
      agreement with Dakota in light of our discontinued relationship with Americash
      as a result of Arizona’s mortgage banking regulations.





As
      a
      result of these setbacks, and the declining real estate market, we have decided
      to terminate our plans to establish a mortgage lending operation in the State
      of
      Arizona. Therefore, Secured Lending does not have any current business activity.




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      of Contents





**Property
      Investments**





We
      have
      undertaken a business model includes investing in properties that will provide
      immediate appreciation with little debt service strategically located in
      Arizona, Nevada and Utah.





Since
      our
      inception, however, we have been unsuccessful in pursing revenues with our
      investment properties the majority of these properties were acquired in an
      asset
      purchase from Seashore Investment Company, Inc. a related party. Several of
      our
      acquired properties, including the T-Rex Plaza, the Hospitality Inn, and the
      Katella Center, among others, became impaired and or were assets that
      underperformed. These properties were incapable of generating sufficent
      revenues. A major contributing factor to the lack revenues from these properties
      was high-cost ground lease obligations underlying these properties. The assets
      that were cash-producing such as the Decatur Center, Spencer Springs and the
      Cannery, had to be sold to continue our operations, including the high costs
      associated with being a public company, in addition to absorbing the costs
      associated with our impaired and underperforming assets. As a result of the
      problems with our properties, our ability to raise capital was met with failure
      in several instances prior to and during the reporting period. At the date
      of
      this annual report, our company stands in financial jeopardy and may not
      continue as a going concern. We are not likely to raise capital and therefore
      are forced to consider other business opportunities.





***Lincoln
      Drive Property***





In
      the
      first quarter of 2006, we acquired a 25% tenant-in-common interest in three
      buildings located at 5203 - 5205 East Lincoln Drive in Paradise Valley, Arizona
      85253. The property is in very good condition. We once occupied an office at
      the
      5205 East Lincoln Drive location for our corporate headquarters, but relocated
      in the summer of 2006 to the Cactus Road Property, described below. The property
      is 100% leased and situated between two new residential/hospitality
      developments. Although we will not receive any rental income from the leased
      units, we are not responsible for any costs of operating the buildings including
      landscaping, exterior maintenance, property management, and the payment of
      taxes, insurance and loan payments. Our interest in the property is solely
      to
      realize appreciable gain. We believe the property’s adjacent developments and
      scheduled city improvements to the walkways in the front area are positive
      indicators that we will experience appreciable gain in any future sale of the
      property. ****





***Cactus
      Road Property***





Also
      in
      the first quarter of 2006, we acquired a 33 1/3% tenant-in-common interest
      in
      property located at 12202 North Scottsdale Road, Phoenix, Arizona 85054. The
      property consists of 2,180 square feet situated on approximately 38,587 square
      feet of land strategically located on a heavily trafficked corner. We invested
      in the property that was remodelled and retrofitted by Ms. Wallace, which
      included a complete repair and replacement of the roof, electrical retrofitting,
      plumbing repairs, HVAC repairs, renovation and remodelling of the kitchen area.
      In occupying the premises, Secured Lending undertook certain tenant improvements
      on the property in the amount of $38,000. The property has been completely
      repaired and remodeled and was occupied by Secured Lending during the reporting
      period with all tenant improvements completed. Since that time, Secured Lending
      has become an inactive business. We still occupy rental space in our Cactus
      Road
      Property for the property investment side of our business. Because of the
      property’s




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heavily
      trafficked location, we believe that it will appreciate and provide us a profit
      in the event we elect to sell it at some future date.




***The
      Katella Center***





We
      own a
      100% interest in the Katella Center, a strip mall consisting of six retail
      rental units of various sizes totalling approximately 9,500 square feet, located
      at 632-650 E. Katella Avenue in Orange, California. The property was acquired
      in
      March 2003, and is in fair condition.





The
      Katella Center is currently generating monthly net cash flow of approximately
      $3,000. The property is located on approximately 35,800 square feet of leased
      ground owned by a non-affiliated third party. The lease has a 52-year term
      that
      expires in March 2017. The ground lease payment is currently $3,000 per month.
      Commencing June 1, 2007, however, the annual ground lease payment shall revert
      to 7% of the fair market value of the land. The ground lessor has indicated
      that
      the new ground lease payment will increase to $4,760 per month with annual
      CPI
      increases commencing June 1, 2007. As a result of the ground lease adjustment
      the property will generate an estimated monthly cash flow of
      $2,300.





While
      there will be enough cash flow to service the obligations of the property,
      the
      $370,000 loan underlying the first deed of trust matures on June 25th, 2007.
      We
      have requested an extension of the first trust, however, the lender is requiring
      a substantial pay down of approximately $100,000. We do not have the resources
      to comply with this condition. In light of the short term remaining on the
      ground lease and the maturity of the first trust deed on June 25 th ,
      2007,
      we have very limited options. We are attempting to refinance the property but
      have been unsuccessful. There are no assurances that we will be able to
      refinance the property. Management has thoroughly reviewed the issues concerning
      this property and as a result had listed the property for sale with Voit
      Commercial Brokerage for $350,000, on September 30, 2006. We received no offers
      and the property is no longer listed.. We have impaired this property for
      $512,533 as of December 31, 2006. We face a potential liability in the lender
      foreclosing on the property, as well as deficiency claims on any remaining
      amounts under the loan.





***Campus
      Drive Office Building***





We
      are
      the managing member and own a 53.8% membership interest in a limited liability
      company known as Diversified Commercial Brokers, LLC (“Diversified”). The
      primary asset of Diversified is an 8,685 square office building located at
      5030
      Campus Drive in Newport Beach, California 92660. This property was acquired
      in
      February 2003.





Subsequent
      to the reporting period, on April 10, 2007, we entered into a Standard Offer,
      Agreement and Escrow Instructions for Purchase of Real Estate (the “Purchase
      Agreement”) with Campus Drive, LLC, an unrelated third-party (the “Purchaser”),
      for the sale of the Campus Drive Office Building for $1,300,000.





We
      lease
      the land on which the office building sits. Secured Diversified Investment,
      Ltd,
      guaranteed the land lease obligations in 2003 when the property was acquired.
      The lease has a




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55-year
      term that expires in June 30, 2034. The ground lease payment is currently $3,607
      per month. In June 2009, the ground lease payment will adjust to 8% of the
      fair
      market value of the land through June 2019 and in June 2019 the lease will
      again
      adjust to 8% of the fair market value of the land through maturity.





***Competition***





The
      acquisition and leasing of real estate is highly competitive. We compete for
      tenants with owners and developers of similar properties located in our
      respective markets primarily on the basis of location, rent charged, services
      provided, and the design and condition of our buildings. We also experience
      competition when attempting to acquire real estate, including competition from
      domestic and foreign financial institutions, other real estate companies, life
      insurance companies, pension trusts, trust funds, partnerships and individual
      investors. If there is a drop in the rental market, we may be unable to compete
      successfully against existing and future competitors, who have less debt and
      more financial support who could lower rents and could harm our margins and
      our
      business operations.





***Patents,
      Licenses, Trademarks, Franchises, Concessions, Royalty Agreements, or Labor
      Contracts***





We
      do not
      own, either legally or beneficially, any patent or trademark.





***Research
      and Development***





We
      did
      not incur any research and development expenditures in the fiscal years ended
      December 31, 2006 or 2005.





***Compliance
      with Environmental Laws***





We
      are
      subject to various federal, state and local laws and regulations relating to
      environmental matters. Under these laws, we are exposed to liability primarily
      as an owner or operator of real property and, as such, we may be responsible
      for
      the cleanup or other remediation of contaminated property. Contamination for
      which we may be liable could include historic contamination, spills of hazardous
      materials in the course of our tenants’ regular business operations and spills
      or releases of hydraulic or other toxic oils. An owner or operator can be liable
      for contamination or hazardous or toxic substances in some circumstances whether
      or not the owner or operator knew of, or was responsible for, the presence
      of
      such contamination or hazardous or toxic substances. In addition, the presence
      of contamination or hazardous or toxic substances on property, or the failure
      to
      properly clean up or remediate such contamination or hazardous or toxic
      substances when present, may materially and adversely affect our ability to
      sell
      or lease such contaminated property or to borrow using such property as
      collateral.




Asbestos-containing
      material, or ACM, may be present in some of our properties. Environmental laws
      govern the presence, maintenance and removal of asbestos. We believe that we
      manage ACM in accordance with applicable laws. We plan to continue managing
      ACM
      as appropriate and in accordance with applicable laws and believe that the
      cost
      to do so will not be material.




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Compliance
      with existing environmental laws has not had a material adverse effect on our
      financial condition and results of operations, and we do not believe it will
      have such an impact in the future. In addition, we have not incurred, and do
      not
      expect to incur any material costs or liabilities due to environmental
      contamination at properties we currently own or have owned in the past. However,
      we cannot predict the impact of new or changed laws or regulations on our
      current properties or on properties that we may acquire in the future. We have
      no current plans for substantial capital expenditures with respect to compliance
      with environmental laws.





***Employees***





We
      currently have two total employees.





**Item****2.
      Description of Property**





**Our
      Properties at December 31, 2006**





***Katella
      Center, Orange, California***





We
      own a
      100% interest in the Katella Center, a strip mall consisting of six retail
      rental units of various sizes totalling approximately 9,500 square feet, located
      at 632-650 E. Katella Avenue in Orange, California. The property is in fair
      condition. Currently, the building is subject to a first trust deed held by
      Val-Chris Investments with a principal balance of $370,000 and fixed interest
      rate of 11.5%. Our monthly payments on the loan are interest only. The loan
      matured on June 25, 2006, at which time the principal balance was due. The
      loan
      has been extended and the new maturity date is June 25 th ,
      2007.
      The building was subject to a second trust deed held by Prime Time Auctions,
      Inc. with a principal balance of $25,000 and a fixed interest rate of 15%.
      The
      loan matured on January 1, 2006 and has been paid in full off. Prime Time
      Auctions, Inc. is a minority shareholder of our company.





As
      of
      December 31, 2006, the Katella Center generated monthly net cash flow of
      approximately $3,000. The property is located on approximately 35,800 square
      feet of leased ground owned by a non-affiliated third party. The lease has
      a
      52-year term that expires in March 2017. The ground lease payment is currently
      $3,000 per month. Commencing June 1, 2007, the ground lease payment shall
      increase to $4,760 per month with annual CPI adjustments. The ground lease
      adjustment will decrease monthly cash flow to approximately $2,300 per month.
      Additionally, one of the tenants is behind with their rent, and a bad debt
      provision has been established.  The financial difficulties of this 10-KSB
      will impare cash flow. We may be required to find another tenant which may
      be difficult in the current environment.





The
      $370,000 loan underlying the first deed of trust matures on June 25th, 2007.
      We
      have requested an extension of the first trust, however, the lender is requiring
      a substantial pay down of approximately $100,000. We do not have the resources
      to comply with this condition. In light of the short term remaining on the
      ground lease and the maturity of the first trust deed on June 25 th ,
      2007,
      we have very limited options. We are attempting to refinance the property but
      efforts as of this filing have been unsuccessful. There are no assurances that
      we will be able to refinance the property. Management has thoroughly reviewed
      the issues concerning this property and as a result had listed the property
      for
      sale with Voit Commercial Brokerage for $350,000, on




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September
      30, 2006. We received no offers and the property is no longer listed. We have
      impaired this property for $512,533 as of December 31, 2006. We face a potential
      liability in the lender foreclosing on the property, as well as deficiency
      claims on any remaining amounts under the loan.





In
      light
      of the impairment the aggregate undepreciated tax basis of the Katella Center
      for federal income tax purposes was $-0- as of December 31, 2006. Depreciation
      and amortization are computed for federal income tax purposes on the
      straight-line method over lives which range up to 39 years. The current real
      estate tax rate for the Katella Center is $.02247 per $100 of assessed value.
      Property taxes (including penalties) due for the Katella Center for the 2006
      tax
      year are $5,644.  The April 10 th ,
      2007
      property tax installment is delinquent.





The
      property is managed by PSG Enterprises, an unrelated third party. PSG
      Enterprises charges us $750 per month in management fees. The property is
      adequately covered by insurance.





***Campus
      Drive Office Building, Newport Beach, California***





We
      are
      the managing member and own a 53.8% membership interest in a limited liability
      company known as Diversified Commercial Brokers, LLC (“Diversified”). Wayne
      Sutterfield, our former director and current large shareholder, owns the
      remaining 46.2% membership interest in Diversified. The primary asset of
      Diversified is an 8,685 square office building located at 5030 Campus Drive
      in
      Newport Beach, California 92660. The property is in good condition. The building
      is subject to a first trust deed held by Pacific Western Bank with a principal
      balance of $661,174 at December 31, 2006 and a yearly variable rate of interest
      currently at 8% and capped at 10.875%. Monthly payments of principal and
      interest are amortized over a period of 20 years and will mature on at February
      2, 2013. There is no prepayment penalty after March 2, 2006. We have a $70,000
      certificate of deposit with Pacific Western Bank to further secure the loan.





The
      building is also subject to a second deed of trust held by CGC Professional
      Bldg, the entity that sold us the building, with a principal balance of $110,000
      and fixed interest rate of 8%. Our monthly payments on the loan are interest
      only. The loan matures on February 4, 2008, at which time the principal balance
      is due.





In
      addition, the building is subject to a third deed of trust held by Wayne
      Sutterfield, our former director, with a principal balance of $71,630 and fixed
      interest rate of 8%. Mr. Sutterfield receives an 8% preferential treatment
      on
      his investment. Our monthly payments on the loan are interest only. The loan
      matured on December 31, 2006. We are in default and have been so notified by
      Mr.
      Sutterfield. We are in dicusssion with Mr. Sutterfield to resolve a matter,
      if
      we are unable to sell the properties.





We
      also
      encumbered the property with a $67,000 note due to Mr. Sutterfield. This note
      was originally secured by the T-Rex property when it was acquired in 2003.
      The
      note called for interest only payments at 8% per annum. We made no payments
      and
      accrued all interest. The sale of the T-Rex property did not generate cash
      proceeds and we did not have sufficient liquidity to pay this note.




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In
      order
      to complete the T-Rex property sale, Mr. Sutterfield agreed to forebear payment
      at the closing and extended the debt by securing it with the Campus Drive Office
      Building. The loan was originally set to mature August 16, 2006, but has been
      extended to February 16, 2007, at which time the principal balance and all
      accrued interest, approximately $25,003, was due. The loan remains unpaid and
      we
      are in default of this note.





We
      lease
      the land on which the office building sits. The lease has a 55-year term that
      expires in June 30, 2034. The ground lease payment is currently $3,608 per
      month. In June 2009, the ground lease payment will adjust to 8% of the fair
      market value of the land through June 2019 and in June 2019 the lease will
      again
      adjust to 8% of the fair market value of the land through maturity. Fair market
      value is determined as if the leased premises were vacant, unimproved and
      unencumbered and free from zoning restrictions so as to permit all uses
      permitted as of commencement date of lease. The lease contains options for
      two
      additional terms of ten years each. For each term the ground lease payment
      will
      adjust to 8% of the fair market value of the land. The ground lease adjustment
      may adversely affect the property.





The
      aggregate undepreciated tax basis of depreciable real property at the Campus
      Drive Office Building for federal income tax purposes was $1,033,624 as of
      December 31, 2006. Depreciation and amortization are computed for federal income
      tax purposes on the straight-line method over lives which range up to 39 years.
      The current real estate tax rate for the Campus Drive Office Building is $.02033
      per $100 of assessed value. Property taxes due for the Campus Drive Office
      Building for the 2006 tax year are $8,676. There are also supplemental taxes
      due.  The property taxes are delinquent.





The
      property is managed by PSG Enterprises, an unrelated third party. PSG
      Enterprises charges Diversified $750 per month in management fees. The principal
      of PSG Enterprises is also a principal of CGC Professional Building from whom
      the property was acquired. The property is adequately covered by
      insurance.





**Recently
      Acquired Properties - Subsequent to Reported Period**





***Lincoln
      Drive Property***





We
      own a
      25% tenant-in-common interest in three buildings located at 5203 - 5205 East
      Lincoln Drive in Paradise Valley, Maricopa County, Arizona 85253. We acquired
      our 25% interest from Fazoql, Inc. as a joint venture investment with Fazoql,
      Inc. and Willowpoint, LLC. Fazoql, Inc. had previously obtained a 50% interest
      from Willowpoint, LLC, an Arizona limited liability company, which retained
      a
      50% ownership interest in the property. We then obtained our 25% interest
      directly from Fazoql, Inc. Patrick McNevin, a member of our board of directors,
      is President of Fazoql Inc. Currently, the property is subject to a first trust
      deed held by Marshall & Ilsey Bank with a principal balance of $852,146
      bearing an annual interest rate of 6.5% per annum. The loan matures May 1,
      2010.




The
      property is in very good condition. There is no ground lease on the property.
      The property is 100% leased and situated between two new residential/hospitality
      developments.




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We
      will
      not receive any rental income from the leased units. We believe the property’s
      adjacent developments and scheduled city improvements to the walkways in the
      front area are positive indicators that we will experience appreciable gain
      in
      any future sale of the property. Fazoql, Inc. and Willowpoint, LLC are jointly
      responsible for all costs of operating the buildings including landscaping,
      exterior maintenance, property management, and the payment of taxes, insurance
      and loan payments. We are not responsible for these items.





The
      current real estate tax rate for the Lincoln Drive property is unknown at this
      time. Property taxes due for the Lincoln Drive property for the 2006 tax year
      are $6,158. We are not responsible for the payment of taxes.





***Cactus
      Road Property***





On
      February 15, 2006, we acquired a 33 1/3% tenant-in-common interest in property
      located at 12202 North Scottsdale Road, Phoenix, Arizona 85054. We acquired
      our
      interest for $200,000 from Ms. Jan Wallace, our officer and director, who holds
      the remaining 66 2/3% ownership in the property. Currently, the property is
      subject to a first trust deed held by Chase Manhattan Mortgage with a principal
      balance of $303,750 and a second deed of trust held by Ms. Wallace with a
      principal balance of $226,200. There are no ground leases on the property.





The
      property consists of 2,180 square feet situated on approximately 38,587 square
      feet of land strategically located on a heavily trafficked corner. We invested
      in the property and plan to have it remodeled and retrofitted to house our
      headquarters. We also plan to lease a portion of the building to a mortgage
      company in which we plan to develop an interest. Because of the property’s
      heavily trafficked location, we believe that it will appreciate and provide
      us a
      profit in the event we elect to sell it at some future date.





The
      property needs repair. Repairs and renovation costs are estimated at $46,950,
      which include a complete repair and replacement of the roof, electrical
      retrofitting, plumbing repairs, HVAC repairs, renovation and remodeling of
      the
      kitchen area to accommodate new tenants. Ms. Wallace will be responsible for
      these costs. We intend to hire a third party to manage the property. The
      property is adequately covered by insurance.





Depreciation
      and amortization are computed for federal income tax purposes on the
      straight-line method over lives which range up to 39 years, except component
      depreciation as permitted for tenant improvements, repairs and renovation costs.
      The current real estate tax rate for the Cactus Road property is unknown at
      this
      time. The property taxes for 2006 were $2,523.





**Property
      Information**





The
      following table sets forth the average annual occupancy rate and rent per square
      foot for our properties held as of April 17, 2007:




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**Property**
            **Occupancy
                Rate**
            **Average
                Rent/Sq. Ft.**The
                Katella Center*
            100%
            $1.34Campus
                Drive Office Building
            100%
            $1.77Lincoln
                Drive property
            100%
            $3.69Cactus
                Road property
            Vacant
            N/A





The
      following chart sets forth certain information concerning lease expirations
      (assuming no renewals) for our properties held as of April 17, 2007: *As of
      the
      filing a bad debt provision has been established with respect to one
      tenant.





**Property**
            **Year**
            **Number
                of Leases Expiring**
            **Total
                Square Footage of Expiring Leases**
            **Total
                Annual Rental Covered by Expiring Leases**
            **%
                of Gross Annual Rental**The
                Katella Center
            2007
              2008
              2009
              2010
              2011
            4
              3
              -
              -
              -
            3,048
              7,212
              -
              -
              -
            $50,715
              $109,289
              
              -
              -
            27.2%
              72.8%
              -
              -
              -Campus
                Drive Office Building(1)
            2007
              2008
              2009
              2010
              2011
            3
              1
              -
              1
              -
            1,889
              1,306
              -
              3,463
              -
            $56,760
              $31,200
              -
              $77,616
              -
            30.9%
              16.5%
              -
              42.2%
              -Lincoln
                Drive property
            2007
              2008
              2009
              2010
              2011
            1
              -
              2
              -
              -
            1,024
              -
              3,391
              -
              -
            $36,000
              -
              $159,600
              -
              -
            18.4%
              -
              81.6%
              -
              -Cactus
                Road property
            N/A
            N/A
            N/A
            N/A
            N/A





(1)
            We
                have four month-to-month leases on the Campus Drive Office Building.
                These
                leases account for a total of 1,035 square feet, total annual rent
                in the
                amount of $49,500, and 26.9% of the gross annual rental for the property.





The
      following table sets forth those tenants at our properties, as of April 17,
      2007
      that occupied more than 10% of the rentable square footage at the respective
      properties, the square feet occupied, the average rent per square feet for
      such
      tenant.





**Property**
            **Tenants**
            **Business**
            **Sq.
                Ft. Rental (% of Total)**
            **Rent/Sq.
                Ft.**The
                Katella Center
            Strings
                by Judith
              Ted
                Nguyen
              Bloomers
                Cookies
            Clothing
                mfg
              Remodelling
              Retail
                and Baking
            4,445
                / 46.0%
              2,170
                / 22.5%
              1,262
                / 13.1%
            $1.30
              $1.34
              $1.37Campus
                Drive Office Building
            Borders
                & Associates
              Coast
                to Coast
            Architects
              Copying
                Office
            3,463
                / 40.0%
              1,306/
                15.1%
            $1.97
              $2.00Lincoln
                Drive property
            Joel
                D. Designs
              Fazoql
              Hague
                Showcase
            Florists
                & Gift Shop
              Furniture
                Sales
              Furniture
                & Gift Shop
            1,024
                / 23.2%
              1,472
                / 33.3%
              1,919
                / 43.5%
            $2.93
              $4.96
              $3.13Cactus
                Road property
            N/A
            N/A
            N/A
            N/A




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**Item****3.
      Legal Proceedings**





On
      January 13, 2006, Alliance Title Company, Inc. (“Alliance”) filed a complaint in
      the matter of Alliance Title Company, Inc. v. Secured Diversified Investment,
      Ltd. (case no. 06CC02129) in the Superior Court of California, County of Orange.
      The complaint alleges that Alliance, our escrow agent, was entrusted with
      $267,000 pursuant to escrow instructions, and that a mutual written agreement
      among the parties to the escrow was required to properly disperse the funds.
      Alliance further alleges that no instructions were provided to disperse the
      funds, but instead, competing claims for the funds were made by Secured
      Diversified Investment, Ltd., Clifford L. Strand, William S. Biddle, Gernot
      Trolf, Nationwide Commercial Brokers, Inc., and Prime Time Auctions, Inc.





Alliance
      has deposited the funds with the court and has asked for a declaration of rights
      regarding the funds. On April 5, 2007, this matter was settled with all parties
      involved. Each of the parties involved will pay its prorata share of these
      costs.





On
      January 5, 2007, our company and Ms. Jan Wallace entered into a Confidential
      Settlement and General Release Agreement (the “Settlement Agreement”) with Mr.
      Clifford L. Strand to resolve litigation in the matters of *Clifford
      L. Strand v. Secured Diversified Investment, Ltd* .
      (case
      no. 06CC02350) in the Superior Court of California, County of Orange, and *William
      S. Biddle v. Secured Diversified Investment, Ltd* .
      (case
      no. 06CC03959) in the Superior Court of California, County of Orange (the
“Lawsuits”), as well as other claims involving Mr. Strand and our company as set
      forth in the Agreement.




With
      respect to the $267,000 that Alliance Title Company deposited with the Superior
      Court of California in the matter of *Alliance
      Title Company, Inc. v. Secured Diversified Investment, Ltd* .
      (case
      no. 06CC02129), we had previously entered into a settlement agreement with
      Mr.
      William S. Biddle, Mr. Gernot Trolf, and Nationwide Commercial Brokers, Inc.
      that provides an order of disbursement as follows: $45,000 to Mr. Biddle,
      $42,000 to Mr. Trolf, $33,803 to Nationwide, and $33,803 to our company.
      Pursuant to an order dated May 16, 2006, Alliance Title Company, Inc. received
      $22,395 for attorney fees in the interpleader action. This left a balance of
      $89,998 remaining with the Superior Court of California. The Settlement
      Agreement with Mr. Strand provides that a stipulation and order of disbursement
      will be filed on the remaining $89,998 as follows: $80,000 to Mr. Strand and
      $9,998 to our company.





In
      addition to the above disbursement, the Settlement Agreement provides for a
      mutual release of claims, forbearance of prosecution, and dismissal of the
      Lawsuits with prejudice. Mr. Strand expressly waived any and all rights he
      may
      have had in connection with reemployment with our company, and agreed to refrain
      from pursuing complaints against our company and our officers and directors
      in
      any court or government agency.





Further
      under the Settlement Agreement, Mr. Strand granted an irrevocable proxy in
      connection with any shares of stock beneficially owned by him.




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





On
      October 27, 2006, holders of a majority of the outstanding shares of voting
      captial stock executed a written stockholder consent approving an amendment
      of
      our Articles of Incorporation to increase our total authorized capital stock
      from 7,500,000 shares to 102,500,000 shares in connection with an increase
      in
      our authorized common stock from 5,000,000 shares to 100,000,000 shares. The
      amendment did not effect a change to our 2,500,000 shares of authorized
      preferred stock.





**PART
      II**





**Item****5.
      Market for Common Equity and Related Stockholder
      Matters**





**Market
      Information**





Our
      common stock is currently quoted on the OTC Bulletin Board (“OTCBB”), which is
      sponsored by the NASD. The OTCBB is a network of security dealers who buy and
      sell stock. The dealers are connected by a computer network that provides
      information on current "bids" and "asks", as well as volume information. Our
      shares are quoted on the OTCBB under the symbol “SDVFE”





The
      following table sets forth the range of high and low bid quotations for our
      common stock for each of the periods indicated as reported by the OTCBB. These
      quotations reflect inter-dealer prices, without retail mark-up, mark-down or
      commission and may not necessarily represent actual transactions.





Fiscal
                Year Ending December 31, 2006Quarter
                Ended
            
            High
                $
            
            Low
                $March
                31, 2006
            
            0.1495
            
            0.02June
                30, 2006
            
            0.03
            
            0.03September
                30, 2006
            
            0.03
            
            0December
                31, 2006
            
            0.15
            
            0Fiscal
                Year Ended December 31, 2005Quarter
                Ended
            
            High
                $
            
            Low
                $March
                31, 2005
            
            0.45
            
            0.30June
                30, 2005
            
            0.30
            
            0.25September
                30, 2005
            
            0.25
            
            0.25December
                31, 2005
            
            0.25
            
            0.05





**Penny
      Stock**





The
      SEC
      has adopted rules that regulate broker-dealer practices in connection with
      transactions in penny stocks. Penny stocks are generally equity securities
      with
      a market price of less than $5.00, other than securities registered on certain
      national securities exchanges or quoted on the




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NASDAQ
      system, provided that current price and volume information with respect to
      transactions in such securities is provided by the exchange or system. The
      penny
      stock rules require a broker-dealer, prior to a transaction in a penny stock,
      to
      deliver a standardized risk disclosure document prepared by the SEC, that:
      (a)
      contains a description of the nature and level of risk in the market for penny
      stocks in both public offerings and secondary trading; (b) contains a
      description of the broker's or dealer's duties to the customer and of the rights
      and remedies available to the customer with respect to a violation of such
      duties or other requirements of the securities laws; (c) contains a brief,
      clear, narrative description of a dealer market, including bid and ask prices
      for penny stocks and the significance of the spread between the bid and ask
      price; (d) contains a toll-free telephone number for inquiries on disciplinary
      actions; (e) defines significant terms in the disclosure document or in the
      conduct of trading in penny stocks; and (f) contains such other information
      and
      is in such form, including language, type size and format, as the SEC shall
      require by rule or regulation.





The
      broker-dealer also must provide, prior to effecting any transaction in a penny
      stock, the customer with (a) bid and offer quotations for the penny stock;
      (b)
      the compensation of the broker-dealer and its salesperson in the transaction;
      (c) the number of shares to which such bid and ask prices apply, or other
      comparable information relating to the depth and liquidity of the market for
      such stock; and (d) a monthly account statement showing the market value of
      each
      penny stock held in the customer's account.





In
      addition, the penny stock rules require that prior to a transaction in a penny
      stock not otherwise exempt from those rules, the broker-dealer must make a
      special written determination that the penny stock is a suitable investment
      for
      the purchaser and receive the purchaser's written acknowledgment of the receipt
      of a risk disclosure statement, a written agreement as to transactions involving
      penny stocks, and a signed and dated copy of a written suitability
      statement.





These
      disclosure requirements may have the effect of reducing the trading activity
      for
      our common stock. Therefore, stockholders may have difficulty selling our
      securities.





**Holders
      of Our Common Stock**





As
      of
      April 17, 2007, we had approximately 436 holders of record of our common stock
      and several other stockholders hold shares in street name.





**Dividends**





There
      are
      no restrictions in our articles of incorporation or bylaws that restrict us
      from
      declaring dividends. The Nevada Revised Statutes, however, do prohibit us from
      declaring dividends where, after giving effect to the distribution of the
      dividend:





1.
            We
                would not be able to pay our debts as they become due in the usual
                course
                of business; or





2.
            Our
                total assets would be less than the sum of our total liabilities,
                plus the
                amount that would be needed to satisfy the rights of shareholders
                who have
                preferential rights superior to those receiving the
                distribution.




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**Recent
      Sales of Unregistered Securities**





The
      information set forth below relates to our issuances of securities without
      registration under the Securities Act of 1933 during the reporting period which
      were not previously included in a Quarterly Report on Form 10-QSB or Current
      Report on Form 8-K.




**Securities
      Authorized for Issuance Under Equity Compensation Plans**





The
      following table provides information about our compensation plans under which
      shares of common stock may be issued upon the exercise of options as of December
      31, 2006.





**Equity
      Compensation Plans as of December 31, 2006**


A
            B
            C**Plan
                Category**
            **Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights**
            **Weighted-average
                exercise price of outstanding options, warrants and
                rights**
            **Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (A))**Equity
                compensation plans
              approved
                by security
              holders
            0
            0
            1,000,000Equity
                compensation plans
              not
                approved by security
              holders
            400,000
            $0.50-$2.00
            0Total
            400,000
            $0.50-$2.00
            1,000,000





On
      March
      8, 2006, our Board of Directors adopted the 2006 Stock Option Plan of Secured
      Diversified Investment, Ltd (the “2006 Plan”). The 2006 plan authorizes the
      grant of stock options during any 12 month period that does not exceed the
      greater of: (1) $1 million, (2) 15% of our total assets, or (3) 15% of
      our issued and outstanding common stock of the company. No options have been
      issued under the 2006 Plan.


**Item
        6. Management's Discussion and Analysis or Plan of
        Operation**


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**Forward-Looking
      Statements**




Certain
      statements, other than purely historical information, including estimates,
      projections, statements relating to our business plans, objectives, and expected
      operating results, and the assumptions upon which those statements are based,
      are “forward-looking statements” within the meaning of the Private Securities
      Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933
      and Section 21E of the Securities Exchange Act of 1934. These
      forward-looking statements generally are identified by the words “believes,”
“project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,”
“may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and
      similar expressions. We intend such forward-looking statements to be covered
      by
      the safe-harbor provisions for forward-looking statements contained in the
      Private Securities Litigation Reform Act of 1995, and are including this
      statement for purposes of complying with those safe-harbor provisions.
      Forward-looking statements are based on current expectations and assumptions
      that are subject to risks and uncertainties which may cause actual results
      to
      differ materially from the forward-looking statements. Our ability to predict
      results or the actual effect of future plans or strategies is inherently
      uncertain. Factors which could have a material adverse affect on our operations
      and future prospects on a consolidated basis include, but are not limited to:
      changes in economic conditions, legislative/regulatory changes, availability
      of
      capital, interest rates, competition, and generally accepted accounting
      principles. These risks and uncertainties should also be considered in
      evaluating forward-looking statements and undue reliance should not be placed
      on
      such statements. We undertake no obligation to update or revise publicly any
      forward-looking statements, whether as a result of new information, future
      events or otherwise. Further information concerning our business, including
      additional factors that could materially affect our financial results is
      included herein and in our other filings with the SEC.





**Results
      of Operations for the Years Ended December 31, 2006 and
      2005**





**Results
      of Operations**




***Comparison
      of years ended December 31, 2006 and 2005.***




*Income* .
      Income
      consists primarily of rental income from commercial properties pursuant to
      tenant leases. We reported income of $336,945 for the fiscal year ended December
      31, 2006, compared with net income of $549,205 for the same period ended
      December 31, 2005.




Additionally,
      we discontinuted operations of our mortage lending subsidiary. We record a
      loss
      from discontinued operations $153,672 for the fiscal year ended Decebmer 31,
      2006, compared to a gain on discontinued operations of $342,647 for the fiscal
      year ended December 31, 2005.





*General
      and Administrative Expenses* .
      Operating and administrative expenses consist primarily of payroll expenses,
      legal and accounting fees and costs associated with the acquisition and
      ownership of real properties. These expenses decreased by $1,581,303 to $850,600
      for the fiscal year ended December 31, 2006, compared to $2,431,903 for the
      fiscal year ended December 31, 2005. The decrease is attributable to the
      reduction of overhead including payroll, payroll taxes, office rent,
      professional fees, and the sale of poorly performing properties resulting in
      the
      reduction of leasing commissions, land lease payments, property taxes and
      related carrying costs.





*Depreciation* .
      Depreciation for the fiscal year ended December 31, 2006 was $42,583 compared
      to




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$43,950
      in depreciation expense for the fiscal year ended December 31, 2005. The
      depreciation was attributable primarily to the Katella Business Center and
      5030
      Campus Drive.




*Interest
      and Other Income and Expense* .
      Interest expense consists of mortgage interest paid on our properties. Interest
      expense was $137,921 for the fiscal year ended December 31, 2006 compared to
      $193,894 for the fiscal year ended December 31, 2005. The decrease in interest
      expense is attributable to the sale of properties and the corresponding
      reduction in debt. Interest expense was attributable primarily to the Katella
      Business Center and 5030 Campus Drive properties. After recognizing an
      impairment of $214,977 with respect to Katella Center in 2005, we recognized
      an
      additional impairment in the amount of $248,137 at December 31, 2006.




*Net
      Income*  *(Loss)* We
      reported a net loss of $(740,202) or $(0.04) per share for the fiscal year
      ended
      December 31, 2006 compared to a net income of $793,828 or $0.05 per share for
      the fiscal year ended December 31, 2005. Net loss from continuing operations
      was
      $586,530 or $(0.03) per share for the fiscal year ended December 31, 2006
      compared to net income of $451,182 or $0.03 per share for the fiscal year ended
      December 31, 2005. Discontinued operations accounted for a loss of ($153,672)
      or
      ($0.00) for the fiscal year ended December 31, 2006. The net income from
      disposal of discontinued operations was $342,646, or $0.02 per share for the
      fiscal year ended December 31, 2005. The net income in 2005 was attributable
      to
      the sale of properties and subsidiaries.





**Liquidity
      and Capital Resources**




***Capital
      Resources***




As
      stated
      in financial statement Note 1 - Going Concern, we do not have an established
      source of revenues sufficient to continue to cover our operating costs over
      an
      extended period of time allowing us to continue as a going concern. Moreover,
      we
      do not currently possess a financial institution source of financing.





We
      anticipate that we will be dependent, for the short future, on additional
      investment capital to fund operating expenses, and additional property or
      business acquisitions before achieving operating profitability. Since our
      inception, we have covered our capital requirement shortfall through financing
      from our control shareholders, high cost debt from refinancing activities,
      or
      the disposition of assets.





At
      December 31, 2006, we had $12,885 of cash and cash equivalents as compared
      to
      $1,230,404 of cash and cash equivalents at December 31, 2005 to meet our
      immediate short-term liquidity requirements. As noted earlier in this report,
      we
      have been unsuccessful in pursing revenues with our investment properties the
      majority of these properties were acquired in an asset purchase from
      Seashore Investment Company, Inc. a related party. Several of our acquired
      properties, including the T-Rex Plaza, the Hospitality Inn, and the Katella
      Center, among others, became impaired and or were assets that underperformed.
      These properties were incapable of generating sufficent revenues. A major
      contributing factor to the lack revenues from these properties was high-cost
      ground lease obligations underlying these properties. The assets that were
      cash-producing such as the Decatur Center, Spencer Springs and the Cannery,
      had
      to be sold to continue our operations, including the high costs associated
      with
      being a public company, in addition to absorbing the costs associated with
      our
      impaired and underperforming assets. The difference in our cash position from
      December 31, 2006 to December 31, 2005 is a result of cash infused
      from sale of the Cannery in 2005 without an equivelent sale in 2006. As a
      result of the problems with our properties, our ability to raise capital was
      met
      with failure in several instances prior to and during the reporting period.
      At
      the date of this annual report, our company stands in financial jeopardy and
      may
      not continue as a going concern. We are not likely to raise capital and
      therefore are forced to consider other business opportunities.




To
      date,
      we have paid no dividends and do not anticipate paying dividends into the
      foreseeable future.




***Cash
      Flows from Operating Activities***




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Net
      cash
      used by operating activities was $(883,350) for the fiscal year ended December
      31, 2006 comparable to net cash used by operating activities of $(1,568,281)
      for
      the fiscal year ended December 31, 2005.





***Cash
      Flows from Investing Activities***




Net
      cash used in investing activities amounted to $(199,426) for the
      fiscal year ended December 31, 2006 compared to net cash provided by investing
      activities in the amount of $2,984,167 for the fiscal year ended December
      31, 2005.





***Cash
      Flows from Financing Activities***




Cash
      used in financing activities amounted to $(134,743) for the fiscal year
      ended December 31, 2006 compared to $(220,916) for the fiscal year ended
      December 31, 2005.




**Off
      Balance Sheet Arrangements**





As
      of
      December 31, 2006, there were no off balance sheet arrangements.





**Critical
      Accounting Estimates and Policies**





The
      preparation of these financial statements in accordance with accounting
      principles generally accepted in the United States of America requires us to
      make estimates and judgments that affect the reported amounts of assets,
      liabilities, revenues and expenses, and related disclosure of contingent assets
      and liabilities. The Company believes that its critical accounting policies
      are
      those that require significant judgments and estimates such as those related
      to
      revenue recognition and allowance for uncollectible receivables and impairment
      of real estate assets and deferred assets. These estimates are made and
      evaluated on an on-going basis using information that is currently available
      as
      well as various other assumptions believed to be reasonable under the
      circumstances. Actual results could vary from those estimates and those
      estimates could be different under different assumptions or conditions.





**Revenue
      Recognition and Allowance for Uncollectible Receivables**





Base
      rental income is recognized on a straight-line basis over the terms of the
      respective lease agreements. Differences between rental income recognized and
      amounts contractually due under the lease agreements are credited or charged,
      as
      applicable, to rent receivable. The Company maintains, as necessary, an
      allowance for doubtful accounts for estimated losses resulting from the
      inability of tenants to make required payments that will result in a reduction
      to income. Management determines the adequacy of this allowance by continually
      evaluating individual tenant receivables considering the tenant’s financial
      condition, security deposits, letters of credit, lease guarantees and current
      economic conditions.




**Impairment
      of Real Estate Assets**




The
      Company assesses the impairment of a real estate asset when events or changes
      in




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circumstances
      indicate that the net book value may not be recoverable. Indicators management
      considers important that could trigger an impairment review include the
      following:




1.
            a
                significant negative industry or economic trend;2.
            a
                significant underperformance relative to historical or projected
                future
                operation results; and


3.
            a
                significant change in the manner in which the asset is used.




**Going
      Concern**





At
      December 31, 2006, the Company had an accumulated deficit of $8,735,061,
      reported net loss of $740,202, and reported cash of only $12,885. The Company
      does not have adequate cash reserves to pay its existing obligations and does
      will not appear able to raise the necessary capital to meet its obligations
      for
      the next 12 months. Since our inception we have been unsuccessful in pursing
      revenues with our investment properties. Several of our acquired properties,
      including the T-Rex Plaza, the Hospitality Inn, and the Katella Center, among
      others, were or became impaired assets that were underperforming. These
      properties were incapable of generating adequate revenues. The assets that
      sufficiently produced cash to service their obligations, such as Decatur Center,
      Spencer Springs and the Cannery West, did not generate sufficient cash to
      support the Company’s overhead, including the high costs associated with being a
      public company, in addition to absorbing the costs associated with our impaired
      assets. Current management has restructured the Company’s operations by selling
      many of its poorly performing properties and reducing the associated high cost
      debt and ground leases. The Company significantly reduced overhead and rolled
      backed its stock in order to restructure the Company’s capital structure. As a
      result of the problems with our properties, our ability to raise capital was
      met
      with failure in several instances. Management continues with efforts to find
      business partners. Our company stands in financial jeopardy and may not continue
      as a going concern. We are not likely to raise capital and we are forced to
      consider other business opportunities.





**Recently
      Issued Accounting Pronouncements**





In
      September 2006, the FASB issued SFAS 158 (“SFAS 158”), *“Employers’
      Accounting for Defined Benefit Pension and Other Postretirement Plans, an
      amendment of FASB Statements No. 87, 88, 106, and 132(R)”.* This
      statement requires an employer to recognize the over funded or under funded
      status of a defined benefit postretirement plan as an asset or liability in
      its
      statement of financial position and to recognize changes in that funded status
      in the year in which the changes occur through comprehensive income of a
      business entity. This statement also requires an employer to measure the funded
      status of a plan as of the date of its year end statement of financial position,
      with limited exceptions. The Company will be required to initially recognize
      the
      funded status of a defined benefit postretirement plan and to provide the
      required disclosures as of the end of the fiscal year ending after
      December 15, 2006. The requirement to measure plan assets and benefit
      obligations as of the date of the employer’s fiscal year end statement of
      financial position is effective for fiscal years ending after December 15,
      2008, or fiscal 2009 for the Company. Adoption of SFAS 158 is not expected
      to
      have a material impact on the Company’s consolidated financial statements.




In
      February 2007, the FASB issued SFAS No. 159 (“SFAS 159”), *"The
      Fair Value Option for Financial Assets and Financial Liabilities—including an
      amendment of FASB Statement No. 115”.* SFAS
      159




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permits
      entities to choose to measure many financial instruments and certain other
      items
      at fair value. Unrealized gains and losses on items for which the fair value
      option has been elected will be recognized in earnings at each subsequent
      reporting date. SFAS 159 will be effective for the Company on January 1,
      2008. Adoption of SFAS 159 is not expected to have a material impact on the
      Company’s consolidated financial statements.





In
      September 2006, the SEC released Staff Accounting Bulletin No. 108, “Considering
      the Effects of Prior Year Misstatements when Quantifying Misstatements in
      Current Year Financial Statements” (SAB 108). SAB 108 provides interpretive
      guidance on the SEC’s views regarding the process of quantifying materiality of
      financial statement misstatements. SAB 108 is effective for fiscal years ending
      after November 15, 2006. The adoption of this accounting pronouncement is not
      expected to have a material effect on the consolidated financial statements.





In
      September 2006, the FASB issued FAS 157, Fair Value Measurements. This standard
      defines fair value, establishes a framework for measuring fair value in
      generally accepted accounting principles, and expands disclosures about fair
      value measurements. This statement is effective for financial statements issued
      for fiscal years beginning after November 15, 2007. Earlier application is
      encouraged. The adoption of this accounting pronouncement is not expected to
      have a material effect on the consolidated financial statements.




In
      July
      2006, the FASB issued Interpretation No. 48 (FIN No. 48), Accounting for
      Uncertainty in Income Taxes. This interpretation requires recognition and
      measurement of uncertain income tax positions using a “more-likely-than-not”
approach. The provisions of FIN No. 48 are effective for fiscal years beginning
      after December 15, 2006. The adoption of this accounting pronouncement is not
      expected to have a material effect on the consolidated financial statements.





In
      March
      2006, the FASB issued FAS 156 (SFAS No. 156), Accounting for Servicing of
      financial Assets — an amendment of FASB Statement No. 140. This standard
      clarifies when to separately account for servicing rights, requires servicing
      rights to be separately recognized initially at fair value, and provides the
      option of subsequently accounting for servicing rights at either fair value
      or
      under the amortization method. The standard is effective for fiscal years
      beginning after September 15, 2006 but can be adopted early as long as financial
      statements for the fiscal year in which early adoption is elected, including
      interim statements, have not yet been issued. The adoption of this accounting
      pronouncement is not expected to have a material effect on the consolidated
      financial statements.





In
      February 2006, the FASB issued FAS 155 (SFAS No. 155), Accounting for Certain
      Hybrid Financial Instruments — an amendment of FASB Statements No. 133 and 140.
      This statement permits fair value remeasurement for any hybrid financial
      instrument that contains an embedded derivative that would otherwise have to
      be
      accounted for separately. The new statement also requires companies to identify
      interests in securitized financial assets that are freestanding derivatives
      or
      contain embedded derivatives that would have to be accounted for separately,
      clarifies which interest-and principal-only strips are subject to Statement
      No.
      133, and amends Statement No. 140 to revise the conditions of a qualifying
      special purpose entity due to the new requirement to identify whether interests
      in securitized financial assets are freestanding derivatives or contain embedded
      derivates. This statement is effective for all financial




21


Table
      of Contents




instruments
      acquired or issued after the beginning of an entity’s first fiscal year that
      begins after September 15, 2006, but can be adopted early as long as financial
      statements for the fiscal year in which early adoption is elected, including
      interim statements, have not yet been issued. The adoption of this accounting
      pronouncement is not expected to have a material effect on the consolidated
      financial statements.





In
      May
      2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections —
a replacement of Accounting Principles Board Opinion (“APB”) Opinion No. 20 and
      FASB Statement No. 3. This statement applies to all voluntary changes in
      accounting principle and changes required by an accounting pronouncement where
      no specific transition provisions are included. SFAS No. 154 requires
      retrospective application to prior periods’ financial statements of changes in
      accounting principle, unless it is impracticable to determine either the
      period-specific effects or the cumulative effect of the change. Retrospective
      application is limited to the direct effects of the change; the indirect effects
      should be recognized in the period of the change. This statement carries forward
      without change the guidance contained in APB Opinion No. 20 for reporting the
      correction of an error in previously issued financial statements and a change
      in
      accounting estimate. However, SFAS No. 154 redefines restatement as the revising
      of previously issued financial statements to reflect the correction of an error.
      The provisions of SFAS No. 154 are effective for accounting changes and
      corrections of errors made in fiscal periods that begin after December 15,
      2005,
      although early adoption is permitted. The adoption of this accounting
      pronouncement did not have a material effect on the consolidated financial
      statements.





In
      March
      2005, the FASB issued Interpretation No. 47 (FIN No. 47), Accounting for
      Conditional Asset Retirement Obligations, and Interpretation of FASB Statement
      No. 143. This interpretation clarifies the timing for recording certain asset
      retirement obligations required by FASB Statement No. 143, Accounting for Asset
      Retirement Obligations. The provisions of FIN No. 47 are effective for years
      ending after December 15, 2005. The adoption of this accounting pronouncement
      did not have a material effect on the consolidated financial statements.





In
      December 2004, the FASB issued SFAS No. 123R (revised 2004), “Share-Based
      Payment.” SFAS No. 123R addresses the accounting for share-based payment
      transactions in which a company receives employee services in exchange for
      either equity instruments of the company or liabilities that are based on the
      fair value of the company’s equity instruments or that may be


settled
      by the issuance of such equity instruments. SFAS No. 123R eliminates the ability
      to account for share-based compensation transactions using the intrinsic method
      that is currently used and requires that such transactions be accounted for
      using a fair value-based method and recognized as expense in the consolidated
      statement of operations. The effective date of SFAS No. 123R was for annual
      periods beginning after June 15, 2005. After assessing the potential negative
      impact of the provisions of SFAS No. 123R on the consolidated financial
      statements in fiscal year 2006, it was decided to minimize exposure to the
      accounting pronouncement by accelerating the vesting of all outstanding unvested
      options. Effective July 20, 2005, all outstanding unvested options were
      accelerated so as to be fully vested as of such date (see Note 9 to the
      Consolidated Financial Statements).





In
      December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets,
      an amendment of APB Opinion No. 29.” SFAS No. 153 is based on the principle that
      exchanges of nonmonetary assets should be measured based on the fair value
      of
      the assets exchanged. APB Opinion No. 29, “Accounting for Nonmonetary
      Transactions,” provided an exception to its basic measurement principle (fair
      value) for exchanges of similar productive assets. Under APB Opinion No. 29,
      an
      exchange of a productive asset for a similar productive asset was based on
      the
      recorded amount of the asset relinquished. SFAS No. 153 eliminates this
      exception and replaces it with an exception of exchanges of nonmonetary assets
      that do not have commercial substance. The provisions of this Statement are
      effective for nonmonetary asset exchanges occurring in fiscal periods beginning
      after June 15, 2005. The adoption of this accounting pronouncement did not
      have
      a material effect on the consolidated financial statements.





In
      November 2004, the FASB issued SFAS No. 151, “Inventory Costs, an amendment of
      Accounting Research Bulletin No. 43, Chapter 4.” SFAS No. 151 requires that
      abnormal amounts of idle facility expense, freight, handling costs and wasted
      materials (spoilage) be recorded as current period charges and that the
      allocation of fixed production overhead to inventory be based on the normal
      capacity of the production facilities. SFAS No. 151 was effective for the fiscal
      year beginning on October 1, 2005. The adoption of this accounting pronouncement
      did not have a material effect on the consolidated financial statements




22


Table
      of Contents





**Item****7.
      Financial Statements**





Index
      to
      Financial Statements:




**Audited
                Financial Statements:**F-1
            Report
                of Independent Registered Public Accounting
                FirmF-2
            Balance
                Sheet as of December 31, 2006F-3
            Statements
                of Operations - Years Ended December 31, 2006 and
                December 31, 2005F-4
            Statement
                of Stockholders’ Equity (Deficit) for the Years Ended
                December 31, 2006 and December 31, 2005F-5
            Statements
                of Cash Flows for the Years Ended December 31, 2006
                and December 31, 2005F-6
            Notes
                to Financial
                Statements




23


Table
      of Contents





Reportof
      Independent Registered Public Accounting Firm




The
      Board
      of Directors and Stockholders


Secured
      Diversified Investment, Ltd.




We
      have
      audited the accompanying consolidated balance sheet of Secured Diversified
      Investment, Ltd. (the "Company") as of December 31, 2006, and the related
      consolidated statements of operations, stockholders' equity (deficit), and
      cash
      flows for the years ended December 31, 2006 and 2005. These financial statements
      are the responsibility of the Company's management. Our responsibility is to
      express an opinion on these financial statements based on our
      audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards required that we
      plan and perform the audit to obtain reasonable assurance about whether the
      financial statements are free of material misstatement. An audit includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements. An audit also includes assessing the accounting
      principles used and significant estimates made by management, as well as
      evaluating the overall financial statement presentation. We believe that our
      audits provide a reasonable basis for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of the Company as of December 31,
      2006, and the results of its operations and its cash flows for the years ended
      December 31, 2006 and 2005, in conformity with US generally accepted accounting
      principles.





The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. As discussed in Note 1 to the
      consolidated financial statements, the Company has sustained net losses since
      its inception, and the Company's operations do not generate sufficient cash
      to
      cover its operating costs. These conditions raise substantial doubt about the
      Company's ability to continue as a going concern. Management's plans regarding
      these matters are also described in Note 1. The consolidated financial
      statements do not include any adjustments that might result from the outcome
      of
      this uncertainty.








KABANI
      & COMPANY, INC.


Los
      Angeles, California


May
      16,
      2007




F-1


Table
      of Contents


**SECURED****DIVERSIFIED
      INVESTMENT, LTD.**


**Consolidated
      Balance Sheet**


**December
      31, 2006**




**ASSETS**Properties,
                net of accumulated depreciation of $167,298
            $
            1,531,661Cash
                and cash equivalents
            
            12,885Prepaid
                expenses
            
            10,907Restricted
                cash
            
            72,288Net
                assets held for sale
            
            23,544**Total
                Assets**
            $
            1,651,285**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Mortgages
                payable
            $
            1,141,174Mortgages
                payable, related parties
            
            138,630Notes
                payable, related parties
            
            3,275Interest
                payable
            
            39,433Payroll
                liabilities
            
            3,465Accounts
                payable, accrued expenses and other liabilities
            
            145,861**Total
                Liabilities**
            
            1,471,838**Commitments
                & contingencies**
            
            -**Minority
                Interest**
            
            89,870**STOCKHOLDERS'
                EQUITY**Series
                A Preferred Stock, 375,000 shares authorized,
              $0.01
                par value, 355,978 issued & outstanding
            
            3,559Series
                B Preferred Stock, 1,000,000 shares authorized,
              $0.01
                par value, 8,044 issued & outstanding
            
            80Series
                C Preferred Stock, 1,125,000 shares authorized,
              $0.01
                par value, none outstanding
            
            -Common
                Stock, 100,000,000 shares authorized, $0.001
              par
                value, 2,896,820 issued and outstanding
            
            2,897Paid
                In Capital
            
            8,812,272Unissued
                Shares
            
            5,830Accumulated
                Deficit
            
            (8,735,061)**Total
                Stockholders' equity**
            
            89,577**Total
                Liabilities & Stockholders' equity**
            $
            1,651,285




**See
      accompanying notes**


F-2


Table
      of Contents


**SECURED****DIVERSIFIED
      INVESTMENT, LTD**


**Consolidated
      Statements of Operations**


**For
      the years ended December 31, 2006 and 2005**





2006
            
            2005REVENUESRental
                income
            $
            336,945
            
            $
            549,205OPERATING
                EXPENSESLitigation
                expense
            
            -
            
            
            60,000Impairment
                loss
            
            248,137
            
            
            214,977General
                and administrative costs
            
            850,600
            
            
            2,431,903Total
                operating expenses
            
            1,098,737
            
            
            2,706,880Operating
                loss
            
            (761,792)
            
            
            (2,157,675)Other
                Income and LossesInterest
                expense
            
            (137,921)
            
            
            (193,894)Interest
                income
            
            574
            
            
            28,846Gain
                on disposal of equity investment
            
            33,803
            
            
            1,634,238Gain
                on equity investment
            
            -
            
            
            104,838Gain
                on sale of real estate
            
            -
            
            
            339,873Loss
                on sale of note
            
            -
            
            
            (7,500)Minority
                interest
            
            25,254
            
            
            36,070Debt
                forgiveness
            
            268,768
            
            
            -Other
                income
            
            (15,216)
            
            
            666,385Total
                other income (losses)
            
            175,262
            
            
            2,608,856Net
                income (loss) from continuing operations
            
            (586,530)
            
            
            451,181Discontinued
                operations:Loss
                from discontinued operations including gain (loss) on disposal of
                subsidiary
            
            (153,672)
            
            
            342,647Net
                income (loss)
            $
            (740,202)
            
            $
            793,828Net
                income (loss) per share, continuing operations
            $
            (0.35)
            
            $
            0.59Net
                income (loss) per share, discontinued operations
            $
            (0.09)
            
            $
            0.45Basic
                earnings (loss) per common share
            $
            (0.44)
            
            $
            1.04Basic
                weighted average number of shares of common stock
                outstanding
            
            1,697,249
            
            
            765,278Diluted
                earnings (loss) per common shares
            $
            (0.44)
            
            $
            0.68*Diluted
                weighted average number of shares of common stock
                outstanding
            
            1,697,249
            
            
            1,162,280*Basic
                & diluted weighted average number of shares are same for the year
                ended December 31, 2006 due to its anti-dilutive nature




**See
      accompanying notes**


F-3


Table
      of Contents


**SECURED****DIVERSIFIED
      INVESTMENT, LTD**


**Consolidated
      Statements of Stockholder Equity (Deficit)**


**For
      the year ended December 31, 2006**





Preferred
                Stock
              Series
                A
            
            Preferred
                Stock
              Series
                B
            
            Preferred
                Stock
              Series
                C
            
            Common
                Stock
            
            Additional
              Paid
                in
            
            Unissued
            
            Prepaid
            
            Accumulated
            
            Shareholders'
              EquityShares
            
            Par
                Value
            
            Shares
            
            Par
                Value
            
            Shares
            
            Par
                Value
            
            Shares
            
            Par
                Value
            
            Capital
            
            Shares
            
            Consulting
            
            Deficit
            
            (Deficit)**Balance,
                December 31, 2004**
            
            353,918
            
            $
            3,539
            
            
            8,044
            
            $
            80
            
            
            12,500
            
            $
            125
            
            
            750,849
            
            $
            751
            
            $
            8,462,836
            
            
            
            
            $
            (140,000)
            
            $
            (8,788,687)
            
            $
            (461,356)Adjustment
                to share capital
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            8
            
            
            (8)
            
            
            -
            
            
            -
            
            
            -
            
            
            -Prepaid
                consulting
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            140,000
            
            
            -
            
            
            140,000Shares
                issued for debt settlement
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            2,195
            
            
            2
            
            
            10,974
            
            
            -
            
            
            -
            
            
            -
            
            
            10,976Shares
                issued for services
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            28,625
            
            
            29
            
            
            143,096
            
            
            -
            
            
            -
            
            
            -
            
            
            143,125Shares
                to be issued for services
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            125,000
            
            
            -
            
            
            -
            
            
            125,000Shares
                issued for real estate settlement
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            938
            
            
            1
            
            
            18,749
            
            
            -
            
            
            -
            
            
            -
            
            
            18,766Shares
                issued for real estate settlement
            
            1,563
            
            
            16
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            31,233
            
            
            -
            
            
            -
            
            
            -
            
            
            31,233Shares
                cancelled
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (1,250)
            
            
            (1)
            
            
            (36,749)
            
            
            -
            
            
            -
            
            
            -
            
            
            (36,750)Shares
                cancelled
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (12,500)
            
            
            (13)
            
            
            (5,003)
            
            
            -
            
            
            -
            
            
            -
            
            
            (5,000)Options
                issued to directors
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            31,251
            
            
            -
            
            
            -
            
            
            -
            
            
            31,251Warrants
                issued to President
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            15,663
            
            
            -
            
            
            -
            
            
            -
            
            
            15,663Net
                income
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            793,828
            
            
            793,828**Balance,
                December 31, 2005**
            
            355,480
            
            
            3,555
            
            
            8,044
            
            
            80
            
            
            12,500
            
            
            125
            
            
            768,857
            
            
            777
            
            
            8,672,041
            
            
            125,000
            
            
            -
            
            
            (7,994,859)
            
            
            806,735Shares
                issued for services, previously unissued
            
            6,250
            
            
            63
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            124,937
            
            
            (125,000)
            
            
            -
            
            
            -
            
            
            -Shares
                cancelled - Common stock
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (2,037)
            
            
            (2)
            
            
            (11,248)
            
            
            -
            
            
            -
            
            
            -
            
            
            (11,250)Shares
                cancelled - Preferred stock
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (12,500)
            
            
            (125)
            
            
            -
            
            
            -
            
            
            (367,375)
            
            
            -
            
            
            -
            
            
            -
            
            
            (367,500)Shares
                issued for conversion of Series C preferred stock
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            750,000
            
            
            750
            
            
            366,750
            
            
            -
            
            
            -
            
            
            -
            
            
            367,500Shares
                to be issued for fractional shares adjustment
            
            (5,752)
            
            
            (58)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (8)
            
            
            (5,694)
            
            
            5,830
            
            
            -
            
            
            -
            
            
            70Shares
                issued to officers
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            600,000
            
            
            600
            
            
            17,400
            
            
            -
            
            
            -
            
            
            -
            
            
            18,000Shares
                issued for consulting services
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            400,000
            
            
            400
            
            
            11,600
            
            
            -
            
            
            -
            
            
            -
            
            
            12,000Shares
                issued to adjust for anti-dilution
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            380,000
            
            
            380
            
            
            (380)
            
            
            -
            
            
            -
            
            
            -
            
            
            -Stock
                options expense
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            4,240
            
            
            -
            
            
            -
            
            
            -
            
            
            4,240Net
                loss
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (740,202)
            
            
            (740,202)**Balance,
                December 31, 3006**
            
            355,978
            
            $
            3,559
            
            
            8,044
            
            $
            80
            
            
            -
            
            $
            -
            
            
            2,896,820
            
            $
            2,897
            
            $
            8,812,272
            
            $
            5,830
            
            $
            -
            
            $
            (8,735,061)
            
            $
            89,577




**See
      accompanying notes**


F-4


Table
      of Contents


**SECURED****DIVERSIFIED
      INVESTMENT, LTD**


**Consolidated
      Statements of Cash Flows**


**For
      the years ended December 31, 2006 and 2005**





2006
            
            2005**Cash
                flows from operating activities:**Net
                income (loss)
            $
            (740,202)
            
            $
            793,827Adjustment
                to reconcile net income (loss) to net cash used by operating
                activities:Depreciation
                and amortization
            
            42,583
            
            
            43,950Minority
                interest
            
            (25,254)
            
            
            (36,070)Impairment
                of real estate
            
            248,137
            
            
            214,977Gain
                on equity investment
            
            -
            
            
            (104,837)Gain
                on disposal of equity investment
            
            (33,803)
            
            
            (1,634,238)(Gain)
                Loss on disposal of subsidiary
            
            153,672
            
            
            (342,646)Loss
                on sale of note receivable
            
            -
            
            
            7,500Gain
                on sale of real estate
            
            -
            
            
            (339,873)Stocks
                issued for services
            
            12,000
            
            
            143,125Shares
                issued for real estate settlement
            
            -
            
            
            49,999Shares
                issued officers
            
            18,000
            
            
            -Shares
                cancelled
            
            (11,250)
            
            
            (41,750)Options
                granted
            
            4,240
            
            
            31,251Warrants
                granted
            
            -
            
            
            15,663Forgiveness
                of debt
            
            (268,768)
            
            
            (658,950)Prepaid
                consulting
            
            -
            
            
            140,000Unissued
                shares for real estate services
            
            -
            
            
            125,000Increase
                (decrease) in assets and liabilitiesReceivables
            
            -
            
            
            (163,161)Prepaid
                expenses
            
            (1,133)
            
            
            3,708Other
                assets
            
            16,961
            
            
            (216,881)Accrued
                interest added to notes payable
            
            15,042
            
            
            27,513Accounts
                payable and accrued expenses
            
            (316,034)
            
            
            259,109Payroll
                liabilities
            
            2,459
            
            
            114,503Net
                cash used by operating activities
            
            (883,350)
            
            
            (1,568,281)**Cash
                flow from investing activities:**Collection
                of notes receivable
            
            -
            
            
            71,000Proceeds
                from sale of subsidiary, net of cash
            
            -
            
            
            639,357Proceeds
                from (payment of) equipment and tenant improvements
            
            -
            
            
            1,000Investment
                in real estate
            
            (200,000)
            
            
            -Increase
                in restricted cash
            
            574
            
            
            -Decrease
                in restricted cash
            
            -
            
            
            403,767Proceeds
                from sale of real estate
            
            -
            
            
            1,869,044Net
                cash (used in) provided by investing activities
            
            (199,426)
            
            
            2,984,168**Cash
                flows from financing activities:**Proceeds
                from line of credit
            
            -
            
            
            144,940Payment
                of line of credit
            
            -
            
            
            (396,920)Cash
                advanced to discontinued entity
            
            (122,215)Proceeds
                from notes receivable
            
            32,277
            
            
            (9,907.00)Payment
                of mortgage payable
            
            (19,805)
            
            
            (246,310)Payment
                of mortgage payable - related party
            
            (25,000)
            
            
            (60,000)Proceeds
                on notes payable - related party
            
            -
            
            
            358,811Payments
                on notes payable - related party
            
            -
            
            
            (2,526)Proceeds
                from notes payable
            
            -
            
            
            (9,004)Net
                cash used in financing activities
            
            (134,743)
            
            
            (220,916)Net
                increase (decrease) in cash & cash equivalents
            
            (1,217,519)
            
            
            1,194,971Cash
                & cash equivalents, beginning period
            
            1,230,404
            
            
            35,433Cash
                & cash equivalents, end of period
            $
            12,885
            
            $
            1,230,404Supplemental
                disclosures:Cash
                paid for interest
            $
            104,592
            
            $
            144,134Cash
                paid for income tax
            $
            800
            
            $
            800Non-cash
                investing and financing activities:Shares
                issued for debt
            $
            -
            
            $
            10,976




**See
      accompanying notes**


F-5


Table
      of Contents


**SECURED****DIVERSIFIED
      INVESTMENT, LTD.**


Notes
      to
      Consolidated Financial Statements








**NOTE
      1 - Basis of presentation and Going Concern**





*Basis
      of presentation:*





The
      accompanying consolidated financial statements have been prepared in accordance
      with the rules and regulations of the Securities and Exchange Commission for
      the
      presentation of financial information, and include all the information and
      footnotes required by generally accepted accounting principles for complete
      financial statements. In the opinion of management, all adjustments considered
      necessary for a fair presentation have been included.





*Going
      concern:*





The
      accompanying financial statements have been prepared in conformity with
      generally accepted accounting principle, which contemplate continuation of
      the
      Company as a going concern. However, the Company has accumulated deficit of
      $8,735,061 as of December 31, 2006. The Company reported net loss of $740,202
      at
      December 31, 2006. Additionally, the Company reported cash of only $12,885
      at
      December 31, 2006. The Company does not have adequate cash reserves to pay
      its
      existing obligations and does not appear to be able to raise the necessary
      capital to meet its obligations for the next 12 months. Since our inception
      we
      have been unsuccessful in pursing revenues with our investment properties.
      Several of our acquired properties, including the T-Rex Plaza, the Hospitality
      Inn, and the Katella Center, among others, were or became impaired assets that
      were underperforming. These properties were incapable of generating adequate
      revenues. A major contributing factor to the lack of revenues for these
      properties was high-cost of debt and ground lease obligations underlying these
      properties. The assets that sufficiently produced cash to service their
      obligations, but not sufficient cash to support the Company’s overhead, such as
      Decatur Center, Spencer Springs and the Cannery West, had to be sold to continue
      our operations, including the high costs associated with being a public company,
      in addition to absorbing the costs associated with our impaired assets. Current
      management has restructured the Company’s operations by selling many of its
      poorly performing properties and reducing the associated high cost of debt
      and
      ground leases. The Company significantly reduced overhead and rolled backed
      the
      stock in order to restructure the Company’s capital structure. As a result of
      the problems with our properties, our ability to raise capital was met with
      failure in several instances. Management continues with efforts to find business
      partners. Our company stands in financial jeopardy and may not continue as
      a
      going concern. We are not likely to raise capital and we are forced to consider
      other business opportunities.





In
      view
      of the matters described in the preceding paragraph, recoverability of a major
      portion of the recorded asset amounts shown in the accompanying balance sheet
      is
      dependent upon continued operations of the Company, which in turn is dependent
      upon the Company’s ability to raise additional capital to succeed in its future
      operations. The financial statements do not include any adjustments relating
      to
      the recoverability and classification of recorded asset amounts or amounts
      and
      classification of liabilities that might be necessary should the Company be
      unable to continue as a going concern.




**NOTE
      2 - Nature of Operations**




The
      Company was incorporated under the laws of the state of Utah on November 22,
      1978. On July 23, 2002, the shareholders approved a change in domicile from
      Utah
      to Nevada. In accordance with Nevada corporate law, a change of domicile is
      effected by merging the foreign corporation with and into




F-6


Table
      of Contents


**SECURED
      DIVERSIFIED INVESTMENT, LTD.**


Notes
      to
      Consolidated Financial Statements







a
      Nevada
      corporation. On August 9, 2002, a merger between the Company and Book
      Corporation of America was completed. Upon completion of the merger Book
      Corporation of America was dissolved. On September 18, 2002, the OTCBB symbol
      for the Company’s common stock was changed from BCAM to SCDI. The shareholders
      also approved amendments to the Company’s Articles of Incorporation to change
      the par value of the Company’s Common Stock from $.005 to $.001 and to authorize
      50,000,000 shares of Preferred Stock (Series A, B and C), par value $0.01.
      On
      November 15, 2002, the Company changed its fiscal year end from October 31
      to
      December 31.




During
      2002, the Company began pursuing the acquisition of ownership interests in
      real
      estate properties that are geographically and functionally diverse in order
      to
      be more stable and less susceptible to devaluation resulting from regional
      economic downturns and market shifts. Currently, the Company owns a shopping
      center in Orange, California; the Company also owns a single story office
      building in Newport Beach, California through its majority owned subsidiary
      Diversified Commercial Brokers, LLC. During the first quarter of 2006 the
      Company acquired two additional properties in Phoenix, Arizona.




**NOTE
      3 - Significant Accounting Policies**




***Consolidation*** **.** The
      accompanying consolidated financial statements include the accounts of the
      Company and its’ majority owned subsidiary, Diversified Commercial Brokers, LLC
      (53.8%). All material inter-company transactions and balances have been
      eliminated.




***Estimates*** **.** The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect certain reported amounts and disclosures; for example, the estimated
      useful lives of assets and the fair value of real property. Accordingly, actual
      results could differ from those estimates.




***Credit
      and concentration risk*** **.** The
      Company maintains deposit accounts in numerous financial institutions. From
      time
      to time, cash deposits may exceed Federal Deposit Insurance Corporation limits.
      The Company maintains no certificates of deposit in excess of federal deposit
      insurance limits; however, the Company’s general operating account exceeds
      federal deposit insurance limits.




***Revenue
      recognition*** .
      The
      Company’s revenues are derived from rental income. Rental revenues are
      recognized in the period services are provided.




As
      a
      lessor, the Company has retained substantially all of the risks and benefits
      of
      ownership of the Office Properties and account for our leases as operating
      leases. Income on leases, which includes scheduled increases in rental rates
      during the lease term and/or abated rent payments for various periods following
      the tenant’s lease commencement date, is recognized on a straight-line basis.
      Property leases generally provide for the reimbursement of annual increases
      in
      operating expenses above base year operating expenses (excess operating
      expenses), payable to the Company in equal installments throughout the year
      based on estimated increases. Any differences between the estimated increase
      and
      actual amounts incurred are adjusted at year end.




***Cash
      and cash equivalents*** .
      The
      Company considers all short term, highly liquid investments, that are readily
      convertible to known amounts within ninety days as cash equivalents. The Company
      currently has no such investments.




***Restricted
      cash.*** ** The
      Company is required by a lender to maintain a $70,000 deposit in a bank account
      at the lenders financial institution. The deposit and 1 st trust
      deed on real property serve as collateral for the loan. The deposit is
      returnable subject to the borrower meeting certain payment and financial
      reporting conditions.




F-7


Table
      of Contents


**SECURED
      DIVERSIFIED INVESTMENT, LTD.**


Notes
      to
      Consolidated Financial Statements







***Property
      and equipment*** **.** Property
      and equipment are depreciated over the estimated useful lives of the related
      assets. Leasehold improvements are amortized over the lesser of the lease term
      or the estimated life of the asset. Depreciation and amortization is computed
      on
      the straight-line method. Repairs and maintenance are expensed as incurred.




***Investments.*** **The
      equity method of accounting is used for all investments in associated companies
      in which the company's interest is 20% or more but less than 51%. Under the
      equity method, the Company recognizes its share in the net earnings or losses
      of
      these associated companies as they occur rather than as dividends are
      received. Dividends received are accounted for as a reduction of the
      investment rather than as dividend income. Losses from the equity
      investments reduce receivables from the associated companies. As of December
      31,
      2006 the Company does not have investments to be recorded on equity method.




The Company
      reports its investment in real estate
      at historical cost. Those properties were acquired with the intention that
      when the value of properties will appreciate the Company will sell its
      share in those properties.




The
      Company used cost method of accounting based on
      SOP 78-9 paragraph .08 which states that "The division believes that
      the accounting recommendations for use of the equity method of accounting for
      investments in general partnerships are generally appropriate for accounting
      by
      limited partnersfor
      their investments in limited partnerships. A limited partner's interest may
      be
      so minor that the limited partner may have virtually no influence over
      partnership operating and financial policies. Such a limited partner us, in
      substance, in the same position with respect to the investment as an investor
      that owns a minor common stock interest in a corporation, and, accordingly,
      accounting for the investment using the cost method may be
      appropriate."




***Fair
      value*** **.** The
      carrying value for cash, prepaid, and accounts payable and accrued liabilities
      approximate fair value because of the immediate or short-term maturity of these
      financial instruments. Based upon the borrowing rates currently available to
      the
      Company for loans with similar terms and average maturities, the fair value
      of
      long-term debt approximates its carrying value.




***Long-lived
      assets*** *.* Effective
      January 1, 2002, the Company adopted Statement of Financial Accounting Standards
      No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS
      144"), which addresses financial accounting and reporting for the impairment
      or
      disposal of long-lived assets and supersedes SFAS No. 121, "Accounting for
      the
      Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
      and the accounting and reporting provisions of APB Opinion No. 30, "Reporting
      the Results of Operations for a Disposal of a Segment of a Business." The
      Company periodically evaluates the carrying value of long-lived assets to be
      held and used in accordance with SFAS 144. SFAS 144 requires impairment losses
      to be recorded on long-lived assets used in operations when indicators of
      impairment are present and the undiscounted cash flows estimated to be generated
      by those assets are less than the assets' carrying amounts. In that event,
      a
      loss is recognized based on the amount by which the carrying amount exceeds
      the
      fair market value of the long-lived assets. Loss on long-lived assets to be
      disposed of is determined in a similar manner, except that fair market values
      are reduced for the cost of disposal. **




***Issuance
      of shares for service*** *.* The
      Company accounts for the issuance of equity instruments to acquire goods and
      services. The stocks were valued at the average fair market value of the freely
      trading shares of the Company as quoted on OTCBB on the date of
      issuance.





***Income
      (Loss) per share*** .
      Basic
      loss per share is based on the weighted average number of common shares
      outstanding during the period. Diluted loss per share reflects the potential
      dilution that could occur if securities or other contracts to issue common
      stock
      were exercised or converted into common stock. At December 31, 2006 and 2005,
      all potential common shares are excluded from the computation of diluted loss
      per share, as the effect of which was anti-dilutive.





***Stock-based
      compensation*** *.* In
      October 1995, the FASB issued SFAS No. 123, “Accounting for Stock-Based
      Compensation”. SFAS No. 123 prescribes accounting and reporting standards for
      all stock-based compensation plans, including employee stock options, restricted
      stock, employee stock purchase plans and stock appreciation rights. SFAS No.
      123
      requires compensation expense to be recorded (i) using the new fair value method
      or (ii) using the existing accounting rules prescribed by Accounting Principles
      Board Opinion No. 25, “Accounting for stock issued to employees” (APB 25) and
      related interpretations with pro forma disclosure of what net income and
      earnings per share would have been had the Company adopted the new fair value
      method. The company uses the intrinsic value method prescribed by APB25 and
      has
      opted for the disclosure provisions of SFAS No.123.





In
      November of 2003, the Company adopted the 2003 Employee Stock Incentive Plan
      and
      the 2003 Non-Employee Director Stock Incentive Plan, (collectively the “2003
      Plans”). The 2003 Plans authorized the




F-8


Table
      of Contents


**SECURED
      DIVERSIFIED INVESTMENT, LTD.**


Notes
      to
      Consolidated Financial Statements







grant
      of
      stock options, restricted stock awards, stock in lieu of cash compensation
      and
      stock purchase rights covering up to a total of 15,000,000 shares of common
      stock to key employees, consultants, and members our Board of Directors and
      also
      provides for ongoing automatic grants of stock options to non-employee
      directors. Effective April 1, 2005, the 2003 Employee Plan had been eliminated.
      The officers rescinded their employment agreements thereby forgiving and
      rescinding their respective grant of options under the 2003 Employee Plan.
      The
      options were part of the 2003 employment agreements (see Footnote 12 Commitments
      and Contingencies *Officer
      Employment Agreements* ).
      The
      former officers of the Company were collectively granted a total of $2,500,000
      shares of which 1,250,000 were vested at December 31, 2004. The Company recorded
      the expense of the vested options at that date. However, a majority of the
      non-employee directors who received grants have resigned and were required
      to
      exercise such options within six months of resigning from the board or the
      options would expire and automatically cancel. All grants of stock options
      have
      expired and thus cancelled. There are no outstanding stock options as of
      December 31, 2006.





***Gain
      recognition on sale of real estate assets*** .
      In
      accordance with SFAS No. 66, Accounting for Sales of Real Estate, the
      Company performs evaluations of each real estate sale to determine if full
      gain
      recognition is appropriate and of each sale or contribution of a property to
      a
      joint venture to determine if partial gain recognition is appropriate. The
      application of SFAS No. 66 can be complex and requires the Company to make
      assumptions including an assessment of whether the risks and rewards of
      ownership have been transferred, the extent of the purchaser’s investment in the
      property being sold, whether its receivables, if any, related to the sale are
      collectible and are subject to subordination, and the degree of its continuing
      involvement with the real estate asset after the sale. If full gain recognition
      is not appropriate, the Company accounts for the sale under an appropriate
      deferral method.





***Income
      Taxes.*** **** Deferred
      income tax assets and liabilities are computed annually for differences between
      the consolidated financial statements and tax basis of assets and liabilities
      that will result in taxable or deductible amounts in the future based on enacted
      laws and rates applicable to the periods in which the differences are expected
      to affect taxable income (loss). Valuation allowance is established when
      necessary to reduce deferred tax assets to the amount expected to be
      realized.





***Advertising*** .
      The
      Company expenses advertising costs as incurred.





***Segment
      Reporting.*** Statement
      of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosure about
      Segments of an Enterprise and Related Information" requires use of the
      "management approach" model for segment reporting. The management approach
      model
      is based on the way a company's management organizes segments within the company
      for making operating decisions and assessing performance. Reportable segments
      are based on products and services, geography, legal structure, management
      structure, or any other manner in which management disaggregates a company.




During
      2005, the Company sold two improved real properties and our unimproved parcel
      of
      land located Dickinson, North Dakota and Las Vegas, Nevada. By the end of 2005,
      our remaining portfolio consisted of a 100% ownership interest in the Katella
      Business Center in Orange, California, and a 53.8% ownership interest in the
      Campus Drive Office Building in Newport Beach, California.





During
      the first quarter of 2006, the Company acquired investment interest in two
      separate properties in Arizona.




On
      January 6, 2006, the Company acquired a 25 percent Tenant-in-Common interest
      in
      a commercial property located in Paradise Valley, Arizona for $300,000. The
      tenant-in common partners include a director of the Company, 25 percent, and
      an
      unrelated third party, 50 percent and SDI 25%. The unrelated third party will
      be
      responsible for all costs of operation including, but not limited to,
      landscaping, maintenance, taxes, insurance, property management and debt
      payments.




On
      February 15, 2006, the Company acquired a 33.3 percent interest in a property
      located in Phoenix, Arizona for $200,000. The property consists of a 2,180
      square foot structure on approximately 38,587




F-9


Table
      of Contents


**SECURED
      DIVERSIFIED INVESTMENT, LTD.**


Notes
      to
      Consolidated Financial Statements








square
      feet of land. The Company’s interest was purchased from Ms Jan Wallace, an
      officer and director of the Company. The property will be used to house the
      Company’s headquarters. The Company is not responsible for any of the expenses
      and does not share in the revenue stream associated with these properties.





During
      the years ended December 31, 2006 and 2005, all of the Companies properties
      are
      located in California except for the investment properties which are located
      in
      Arizona. Properties in Arizona does not contribute to the income or expense
      stream of the Company.





***Recent
      accounting pronouncements.*** In
      December 2004, the FASB issued FASB Statement No. 123R, "Share-Based Payment,
      an
      Amendment of FASB Statement No. 123" ("FAS No. 123R"). FAS No. 123R requires
      companies to recognize in the statement of operations the grant- date fair
      value
      of stock options and other equity-based compensation issued to employees. FAS
      No. 123R is effective beginning in the Company's first quarter of fiscal 2006.
      The Company believes that the adoption of this standard will have no material
      impact on its consolidated financial statements.




In
      February 2006, FASB issued SFAS No. 155, “Accounting for Certain Hybrid
      Financial Instruments”. SFAS No. 155 amends SFAS No 133, “Accounting for
      Derivative Instruments and Hedging Activities”, and SFAF No. 140, “Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities”. SFAS No. 155, permits fair value remeasurement for any hybrid
      financial instrument that contains an embedded derivative that otherwise would
      require bifurcation, clarifies which interest-only strips and principal-only
      strips are not subject to the requirements of SFAS No. 133, establishes a
      requirement to evaluate interest in securitized financial assets to identify
      interests that are freestanding derivatives or that are hybrid financial
      instruments that contain an embedded derivative requiring bifurcation, clarifies
      that concentrations of credit risk in the form of subordination are not embedded
      derivatives, and amends SFAS No. 140 to eliminate the prohibition on the
      qualifying special-purpose entity from holding a derivative financial instrument
      that pertains to a beneficial interest other than another derivative financial
      instrument. This statement is effective for all financial instruments acquired
      or issued after the beginning of the Company’s first fiscal year that begins
      after September 15, 2006. Management believes that this statement will not
      have
      a significant impact on the consolidated financial statements.




In
      March
      2006 FASB issued SFAS 156 ‘Accounting for Servicing of Financial Assets’ this
      Statement amends FASB Statement No. 140, *Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities,* with
      respect to the accounting for separately recognized servicing assets and
      servicing liabilities. This Statement:




1.
            Requires
                an entity to recognize a servicing asset or servicing liability each
                time
                it undertakes an obligation to service a financial asset by entering
                into
                a servicing contract.





2.
            Requires
                all separately recognized servicing assets and servicing liabilities
                to be
                initially measured at fair value, if practicable.





3.
            Permits
                an entity to choose ‘Amortization method’ or Fair value measurement
                method’ for each class of separately recognized servicing assets and
                servicing liabilities:





4.
            At
                its initial adoption, permits a one-time reclassification of
                available-for-sale securities to trading securities by entities with
                recognized servicing rights, without calling into question the treatment
                of other available-for-sale securities under Statement 115, provided
                that
                the available-for-sale securities are identified in some manner as
                offsetting the entity’s exposure to changes in fair value of servicing
                assets or servicing liabilities that a servicer elects to subsequently
                measure at fair value.




F-10


Table
      of Contents


**SECURED
      DIVERSIFIED INVESTMENT, LTD.**


Notes
      to
      Consolidated Financial Statements







5.
            Requires
                separate presentation of servicing assets and servicing liabilities
                subsequently measured at fair value in the statement of financial
                position
                and additional disclosures for all separately recognized servicing
                assets
                and servicing liabilities.




This
      Statement is effective as of the beginning of the Company’s first fiscal year
      that begins after September 15, 2006. Management believes that this statement
      will not have a significant impact on the consolidated financial
      statements.




In
      September 2006, FASB issued SFAS 157 ‘Fair Value Measurements’. This Statement
      defines fair value, establishes a framework for measuring fair value in
      generally accepted accounting principles (GAAP), and expands disclosures about
      fair value measurements. This Statement applies under other accounting
      pronouncements that require or permit fair value measurements, the Board having
      previously concluded in those accounting pronouncements that fair value is
      the
      relevant measurement attribute. Accordingly, this Statement does not require
      any
      new fair value measurements. However, for some entities, the application of
      this
      Statement will change current practice. This Statement is effective for
      financial statements issued for fiscal years beginning after November 15, 2007,
      and interim periods within those fiscal years. The management is currently
      evaluating the effect of this pronouncement on financial
      statements.




In
      September 2006, the FASB issued SFAS 158 (“SFAS 158”), *“Employers’
      Accounting for Defined Benefit Pension and Other Postretirement Plans, an
      amendment of FASB Statements No. 87, 88, 106, and 132(R)”.* This
      statement requires an employer to recognize the over funded or under funded
      status of a defined benefit postretirement plan as an asset or liability in
      its
      statement of financial position and to recognize changes in that funded status
      in the year in which the changes occur through comprehensive income of a
      business entity. This statement also requires an employer to measure the funded
      status of a plan as of the date of its year end statement of financial position,
      with limited exceptions. The Company will be required to initially recognize
      the
      funded status of a defined benefit postretirement plan and to provide the
      required disclosures as of the end of the fiscal year ending after
      December 15, 2006. The requirement to measure plan assets and benefit
      obligations as of the date of the employer’s fiscal year end statement of
      financial position is effective for fiscal years ending after December 15,
      2008, or fiscal 2009 for the Company. Adoption of SFAS 158 is not expected
      to
      have a material impact on the Company’s consolidated financial statements.




In
      February 2007, the FASB issued SFAS No. 159 (“SFAS 159”), *"The
      Fair Value Option for Financial Assets and Financial Liabilities—Including an
      amendment of FASB Statement No. 115”.* SFAS
      159
      permits entities to choose to measure many financial instruments and certain
      other items at fair value. Unrealized gains and losses on items for which the
      fair value option has been elected will be recognized in earnings at each
      subsequent reporting date. SFAS 159 will be effective for the Company on
      January 1, 2008. Adoption of SFAS 159 is not expected to have a material
      impact on the Company’s consolidated financial statements.





**Reclassification**




**Certain
      items in the accompanied financial statements are reclassified for comparative
      purpose.**




**NOTE
      4 - Property and Equipment**




The
      Company acquires income-producing real estate assets in the normal course of
      business. During 2005, the Company sold a shopping center and vacant lot in
      Dickinson, North Dakota and a shopping center in Las Vegas, Nevada.




F-11


Table
      of Contents


**SECURED
      DIVERSIFIED INVESTMENT, LTD.**


Notes
      to
      Consolidated Financial Statements








Estimated
                LifeBuildings
                and improvements
            $
            1,648,037
            
            
            39
                yearsLess
                accumulated depreciation
            
            (116,376)$
            1,531,661





Depreciation
      expense at December 31, 2006 and 2005 was $42,583 and $43,950, respectively.
      No
      interest was capitalized in either period.





During
      2003, the Company acquired the T-Rex Plaza Mall and recognized an impairment
      loss of $448,000, representing the entire basis of the property, because the
      Company does not anticipate any future cash flows from existing leases. The
      impairment was included in “Other income (loss)” in the financial statements for
      the year ended December 31, 2003. On November 9, 2005, the Company sold the
      T-Rex Plaza Mall, Dickinson North Dakota, to an unrelated third party for total
      consideration of $274,840 which entailed $50,000 in cash and assumption of
      the
      underlying debt in the amount of $224,840. The Company was also released from
      the land lease obligation totaling $14,401 per month and the payment of property
      taxes in the amount of $27,834, including penalties, of which $10,039 was
      delinquent. The Company recorded a gain in the amount of $276,173. A commission
      of $5,000 was paid to Nationwide Commercial Brokers, Inc, a former subsidiary
      of
      the Company. The sale of the property netted no cash.




On
      October 18, 2005, the Company sold its vacant lot in Dickinson, North Dakota
      to
      Morgan Rose Investment, LLC for $110,000. The lot was acquired in connection
      with the sale of the Hotel in October 2004. The Company recognized a gain on
      the
      sale of the lot in the amount of $63,700. The sale of the lot resulted in the
      payoff of a mortgage and accrued interest to Prime Time Auctions in the amount
      of $61,475 and the Company netting $37,683 in cash.




During
      2003, the Company acquired the Katella Business Center. The property is
      encumbered by a first trust deed in the amount of $370,000 bearing an interest
      rate of 11.5% per annum maturing June 25, 2007, and a second trust deed in
      the
      amount of $25,000 bearing an interest rate of 15% per annum. The second trust
      deed was paid off on January 19, 2006. In 2005, the Company recognized an
      impairment loss of $214,977, representing 45% of the property’s basis. The
      impairment was included in “Operating Expenses” in the financial statements for
      the year ended December 31, 2005. During 2006, the Company recognized an
      additional impairment loss of $248,137. In June 2007 the ground lease payment
      will increase to $4,760 per month with annual CPI increases, resulting in
      reduced cash flow of $2,300 per month. As a result of the impairments in 2005
      and 2006 Katella Business Center is 100% impaired as of December 31, 2006.





**NOTE
      5 - Related Party Transactions**




*Seashore
      Diversified Investment Company (SDIC)* .
      Certain
      of the Company’s directors and officers were also directors and officers of SDIC
      and continue to be major shareholders of SDIC. During 2004, 2003 and 2002,
      SDIC
      advanced monies to the Company, of which $55,000 bearing interest at 9% is
      evidence by a note. The advance has matured and is due on demand. At December
      31, 2005, the outstanding advances totaled $162,143 with $38,143 in accrued
      interest. However, while the Company has recorded the liability and accrued
      interest, it is not evidence by a written instrument. Further, SDIC, whose
      president and major shareholders were former officers and directors of the
      Company agreed and




F-12


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      of Contents


**SECURED
      DIVERSIFIED INVESTMENT, LTD.**


Notes
      to
      Consolidated Financial Statements








acknowledge
      the forgiveness of all but $35,000 of the advances and accrued interest. This
      forgiveness was verbally granted in 2004 and again in 2005 and acknowledged
      in a
      letter dated December 13, 2005. However, in the same letter, SDIC retracted
      its
      forgiveness. SDIC has not confirmed the debt or provide the required
      documentation. As of December 31, 2006 the Company recognized debt forgiveness
      of $200,285.




*Robert
      Leonard* .
      In July
      2005, the Company sold its entire interest in Nationwide Commercial Brokers,
      Inc. (“NCB”) to Robert J. Leonard, a large shareholder of the Company for
      $50,000. Prior to the sale, NCB had borrowed $20,000, due on demand, from Mr.
      Leonard during 2005 and 2004. The Company realized a loss of $21,352 from
      discontinued operations and a gain of $75,382 on the disposal of the subsidiary.
      On November 1, 2005, the Company relocated its offices to 5030 Campus Drive,
      Newport Beach, California, which is owned by the Company’s subsidiary, DCB. NCB
      assumed the Company’s former offices at 4940 Campus Drive indemnifying and
      holding the Company harmless from any and all claims, demands, causes of action,
      losses, costs (including without limitation reasonable court costs and
      attorneys’ fees), liabilities or damages of any kind or nature whatsoever that
      the Company may sustain by reason of NCB’s breach or non-fulfillment (whether by
      action or inaction), at any time. NCB breached the subject agreement with the
      Company.




*Sutterfield
      Family Trust and C. Wayne Sutterfield (Sutterfield)* .
      At
      December 31, 2005, the Company owed Sutterfield, a former director and
      shareholder, two notes, $67,000 and $71,630 both secured by trust deeds on
      5030
      Campus Drive. The notes bear interest at 8% and mature on February 17 2007,
      and
      December 31, 2006, respectively. The Company is in default on the $71,630 note
      and subsequently on the other note of $67,000. Sutterfield is a minority owner
      in DCB. In addition to the interest payment on the 3 rd trust
      deed, the Company, pursuant to the terms of the operating agreement, pays
      Sutterfield a preferred return on his investment. Payments to Sutterfield in
      2006 and 2005 totaled $14,034.40 and $22,177, respectively. There is also
      $25,003 in accrued interest payable. The Company retains the right to acquire
      all his interests in DCB. Pursuant to the operating agreement, the Company
      is
      responsible for any all cash flow deficiencies.




In
      December 2004, the Company sold 37% interest, equal to $350,000, in its Spencer
      Springs subsidiary to Biddle and Robert Leonard (large shareholder) for
      $200,000. In March 2005, the Company sold its remaining interest in Spencer
      Springs to Biddle for $577,777, comprised of $300,000 in cash and a promissory
      note for $277,777 accruing interest at 3% per annum, all due and payable on
      October 28, 2007. Biddle repaid the note, including accrued interest, in full
      on
      May 2, 2005. The note was secured by a $950,000 second trust deed on a shopping
      center located in Las Vegas, Nevada, formerly owned by the Company (Spencer
      Springs). The Company realized a income of $3,491 from discontinued operations
      and a gain of $285,125 on the disposal of the subsidiary.




*Prime
      Time Auctions, Inc (Prime Time)* .
      Prime
      Time is a shareholder of the Company. To date there is one outstanding loan
      due
      Prime Time totaling $25,000 which bears interest at 15%, secured by the Katella
      Business Center and maturing January 1, 2006. The note was repaid in full
      including all accrued interest and late fees on January 19, 2006.




On
      October 23, 2006, the Company issued 400,000 bonus shares to its Chief Executive
      Officer and 200,000 bonus shares to its Chief Financial Officer. These shares
      were recorded at the fair market value close to the date of issuance and charged
      to operations.




**NOTE
      6 - Mortgages Payable**




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      of Contents


**SECURED
      DIVERSIFIED INVESTMENT, LTD.**


Notes
      to
      Consolidated Financial Statements








Mortgage
                note, bearing interest at 11.5%, due on June 25, 2007, secured by
                1sttrust deed on Katella Center
            $
            370,000Mortgage
                note, bearing interest at the “1 year constant maturity treasury rate”
                plus 3.5%, adjusting annually, currently 8.0%, principal and interest
                monthly, maturing February 2, 2013, secured by 1sttrust deed on 5030 Campus
            
            661,174Mortgage
                note, bearing interest at 8%, due on Feb. 4, 2008, secured by
                2ndtrust deed on 5030 Campus
            
            110,000Total
                mortgages payable
            $
            1,141,174




Interest
      expense on the Mortgages payable amounted to $104,592 and $138,963 for the
      year
      ended December 31, 2006 and 2005, respectively.




**NOTE
      7 - Mortgages Payable - Related Parties**




Mortgage
                note, bearing interest at 8%, due on Feb. 17, 2007, secured by 5030
                Campus
                Drive
            $
            67,000Mortgage
                note, bearing interest at 8%, due on Dec. 31, 2006, secured by
                3rdtrust deed on 5030 Campus
            
            71,630Total
                mortgages payable- related parties
            $
            138,630




Interest
      expense on the Mortgages payable - related parties amounted to $31,441 and
      $38,521 for the year ended December 31, 2006 and 2005, respectively. The Company
      is in default on both the notes as of December 31, 2006.




**NOTE
      8 - Stockholders’ Equity**




In
      February 2003, the Company created three series of preferred stock, all of
      which
      are convertible at the option of the holder: (1) Series A consisting of
      7,500,000 shares with a par value of $0.01, a liquidation preference of $1.00
      per share, convertible into an equal number of common shares 36 months after
      issuance, with the same voting rights as common stock; (2) Series B consisting
      of 20,000,000 shares with a par value of $0.01, a liquidation preference of
      $0.50 per share, and convertible into an equal number of common shares 24 months
      after issuance; and (3) Series C consisting of 22,500,000 shares with a par
      value of $0.01, a liquidation preference of $3.00 per share, and convertible
      into an equal number of common shares 24 months after issuance. In the event
      the
      price of common stock is less than the purchase price of the preferred stock
      on
      the conversion date, the holder is entitled to convert at a rate equal to the
      purchase price divided by the common stock price.




On
      August
      19, 2004, the Company obtained a written consent from the holders of a majority
      of its outstanding shares of Common Stock and Series B Preferred Stock to amend
      the Certificate of Designation. Such consent amends the terms of the Series
      B
      Preferred Stock to permit the Board of Directors to permit conversion of the
      Series B Preferred Stock into Common Stock prior to the expiration of the
      two-year prohibition on conversion. All 250,000 shares of Series C Preferred
      Stock also consented to the amendment. The amendment to the Certificate of
      Designation became effective October 28, 2004. After approval to amend the
      Certificate of Designation, 5,839,479 shares of Series B Preferred Stock were
      converted to Common Stock.




On
      August
      1, 2006, our Board of Directors resolved to amend the Articles of Incorporation
      pursuant to Nevada Revised Statues 78.207 to decrease the number of authorized
      shares of our common stock, par




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Table
      of Contents


**SECURED
      DIVERSIFIED INVESTMENT, LTD.**


Notes
      to
      Consolidated Financial Statements








value
      $.001, from 100,000,000 to 5,000,000 shares. Correspondingly, our Board of
      Directors affirmed a reverse split of twenty to one in which each shareholder
      will be issued one common share in exchange for each twenty common share of
      their currently issued common stock. At the same time and under the same
      authority, our Board of Directors resolved to amend the Articles of
      Incorporation to decrease the number of authorized shares of our preferred
      stock, par value $0.01, from 50,000,000 to 2,500,000 shares. Correspondingly,
      our Board of Directors affirmed a reverse split of twenty to one in which each
      shareholder will be issued one common share in exchange for each twenty common
      share of their currently issued common stock. A record date of August 14, 2006
      was established in order to provide the NASD ten days notice pursuant to Rule
      10b-17 of the Securities and Exchange Act of 1934 as amended. All shareholders
      of this record date will receive one share of our common stock for each twenty
      shares owned. These share certificates will be issued upon surrender. On August
      1, 2006, we filed a Certificate of Amendment to the Articles of Incorporation
      with the Nevada Secretary of State to reflect the decrease in authorized shares.
      Under Nevada Revised Statutes 78.207, shareholder approval was not
      required.




On
      October 24, 2006, our Board of Directors unanimously approved an amendment
      of
      our Articles of Incorporation to increase our total authorized capital stock
      from 7,500,000 shares to 102,500,000 shares in connection with an increase
      in
      our authorized common stock from 5,000,000 shares to 100,000,000 shares. The
      amendment will not effect a change to our 2,500,000 shares of authorized
      preferred stock. On October 27, 2006, holders of a majority of the outstanding
      shares of voting capital stock executed a written stockholder consent approving
      the amendment.




All
      the
      issued and outstanding shares have been retroactively restated for the effect
      of
      the reverse stock split of 20:1.




During
      the year ended December 31, 2006 and 2005, the Company had the following equity
      transaction:




On
      February 2, 2006, Iomega converted its 250,000 shares of Series C Preferred
      Stock for 15,000,000 shares of the Company’s common stock. The shares were
      converted at a price of $0.05 per share.




On
      October 23, 2006, the Company issued 400,000 bonus shares to its Chief Executive
      Officer and 200,000 bonus shares to its Chief Financial Officer. These shares
      were recorded at the fair market value close to the date of issuance and charged
      to operations.




On
      October 24, 2006, the Company issued 400,000 shares for consulting services.
      These shares were issued at the fair market value close to the date of issuance
      and charged to operations.




On
      May
      17, 2005, the Company issued 938 shares of restricted common stock and 1,563
      shares of Preferred Series A preferred stock for previously transacted real
      estate. The Series A and common shares were issued at a price of $0.05 per
      share.




On
      May
      23, 2005, the Company issued 1250 restricted shares of common stock for public
      relations services. The shares were issued at market price of $0.013 per share.




On
      June
      7, 2005, the Company issued 2,195 restricted shares of common stock for debt
      repayment. The shares were issued at market price of $0.013 per share.




On
      June
      7, 2005, the Company issued 4,625 restricted shares of common stock for various
      real estate services. The shares were issued at market price of $0.013 per
      share.




On
      June
      7, 2005 the Company issued 22,250 shares of restricted stock for consulting
      and
      public relation services. The shares were issued at market price of $0.013
      per
      share.




On
      June
      7, 2005, the Company issued 500 restricted shares of common stock for web design
      and internet services. The shares were issued at market price of $0.013 per
      share.




On
      September 9, 2005, the Chief Financial Officer returned 12,500 shares of common
      stock to the Company for cancellation and return to unissued and authorized
      shares. The shares were cancelled October 11, 2005.




On
      December 22, 2005, the Chief Executive Officer and President returned 1,250
      shares of common stock to the Company for cancellation and return to unissued
      and authorized shares. The shares were cancelled January 14, 2006.




**NOTE
      9 - Stock Incentive Plans**




F-15


Table
      of Contents


**SECURED
      DIVERSIFIED INVESTMENT, LTD.**


Notes
      to
      Consolidated Financial Statements








In
      November 2003, the Board of Directors adopted and the Shareholders approved
      two
      stock incentive plans: the Secured Diversified Investment, Ltd. 2003 Employee
      Stock Incentive Plan (2003 Employee Plan) and the Secured Diversified
      Investment, Ltd. 2003 Non-employee Directors Stock Incentive Plan (2003
      Directors Plan). The Plans authorized the grant of stock options, restricted
      stock awards, stock in lieu of cash compensation and stock purchase rights
      covering up to a total of 15,000,000 shares of common stock to key employees,
      consultants, and members our Board of Directors and also provides for ongoing
      automatic grants of stock options to non-employee directors. Effective April
      1,
      2005, The 2003 Employee Plan had been eliminated. The officers rescinded their
      employment agreements thereby forgiving the entire amount of their accrued
      salaries, shares issued and their grant of options under the 2003 Employee
      Plan.
      The former officers of the Company were collectively granted stock options
      totaling 2,500,000 shares of which 1,250,000 were vested at December 31, 2004.
      The Company recorded the expense of the vested options See Footnote 12
      Commitments and Contingencies *Officer
      Employment Agreements* and
      Footnote 13 Litigation.





The
      2003
      Director Plan has also been eliminated in 2006. However, a majority of the
      non-employee directors who received grants have resigned and were required
      to
      exercise such options within six months of resignation or the options would
      expire and automatically cancel. At December 31, 2006, all grants of stock
      options have expired and been cancelled.





**NOTE
      10 - Warrants**




At
      December 31, 2006, the Company had the following subscriptions for warrants
      outstanding:




Date
            Number
                of Warrants
            Exercise
                Price
            Expiration
                DateApril
                4, 2005
            400,000
            Range
                from $0.50 to $2.00
            April
                4, 2010





Following
      is a summary of the warrant activity:




Warrants
              Outstanding
            
            Aggregate
              Intrinsic
                ValueOutstanding
                at December 31, 2005
            
            400,000
            
            $
            -Granted
            
            -Forfeited
            
            -Exercised
            
            -Outstanding
                at December 31, 2006
            
            400,000
            
            $
            -




Following
      is a summary of the status of warrants outstanding at December 31,
      2006:




Outstanding
                Warrants
            
            Exercisable
                WarrantsExercise
              Price
            Number
            Remaining
              Contractual
              Life
            
            Weighted
              Average
              Exercise
              Price
            Number
            Weighted
              Average
              Exercise
              Price$
                0.50 - $2.00
            400,000
            3.25
                years
            
            $
                1.25
            75,000
            $1.25




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      of Contents


**SECURED
      DIVERSIFIED INVESTMENT, LTD.**


Notes
      to
      Consolidated Financial Statements








At
      December 31, 2005, the Company recorded an expense of $15,663.




The
      fair
      value was calculated using the Black-Scholes option pricing model assuming
      no
      dividends, a risk-free interest rate of 6.5%, an expected life of 5 years and
      expected volatility of 100%.





**NOTE
      11 - Stock Options**




On
      April
      7, 2006, the Company settled its litigation with Luis Leon. The settlement
      included a grant of 7,500 (adjusted for post split effect) stock options. The
      Company adopted 2006 stock option plan in June 2006 and on August 8, 2006 issued
      7,500 (adjusted for post split effect) options at a strike price of $0.01 to
      Luis Leon under the ‘2006 Stock Option Plan of Secured Diversified Investment,
      Ltd.





As
      of
      December 31, 2006, the following is a summary of the stock option
      activity:




Options
              Outstanding
            
            
            Weighted
              Average
              Exercise
              Price
            
            
            Agregate
              Intrinsic
              ValueOutstanding
                at December 31, 2005
            
            -
            
            $
            -
            
            $
            -Granted
            
            7,500
            
            $
            0.01
            
            
            -Forfeited
            
            -
            
            
            -
            
            
            -Exercised
            
            -
            
            
            -
            
            
            -Expired
            
            (7,500)Outstanding
                at December 31, 2006
            
            -
            
            $
            -
            
            $
            -




As
      of
      December 31, 2006 the Company recorded $4,240 in stock options
      expense.




The
      fair
      value was calculated using the Black-Scholes option pricing model assuming
      no
      dividends, a risk-free interest rate of 6.5%, an expected life of 0.6 years
      and
      expected volatility of 100%.




**NOTE
      11 - Loss Per Share**




Following
      is a reconciliation of net income (loss) and weighted average number of shares
      outstanding, in the computation of income (loss) per share for the years ended
      December 31, 2006 and 2005.




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Table
      of Contents


**SECURED
      DIVERSIFIED INVESTMENT, LTD.**


Notes
      to
      Consolidated Financial Statements








2006
            
            2005Net
                income (loss)
            $
            (740,202)
            
            $
            793,828Less
                preferred stock dividends
            
            -
            
            
            -Net
                income (loss) available to common shareholders
            $
            (740,202)
            
            $
            793,828Basic
                weighted average shares outstanding
            
            1,697,249
            
            
            765,278Dilutive
                potential common shares
            
            -
            
            
            397,000Diluted
                weighted average shares outstanding
            
            1,697,249
            
            
            1,162,278Basic
                weighted net income (loss) per share
            $
            (0.44)
            
            $
            1.04Basic
                and diluted net income (loss) per share
            $
            (0.44)
            
            $
            0.68Potential
                common shares excluded from diluted
              weighted
                average shares outstanding because of
              their
                anti-dilutive nature:Convertible
                Series A, B and C preferred stock
              and
                warrants granted, not yet exercised
            
            620,000
            
            
            20,000620,000
            
            
            20,000




**NOTE
      12 - Commitment and Contingencies**




*Lease
      agreements* .
      The
      Company is obligated under various ground leases (Katella Center and 5030
      Campus). Future ground lease payments will be adjusted by a percentage of the
      fair market value of the land.




Future
      annual minimum lease payments and principal payments under existing agreements
      are as follows:





3rd
                Party Lease Obligation
            
            Related
                Party Debt
            
            3rd
                Party Debt
            
            Officer
                Salaries
            
            Total2007
            92,472
            
            67,000
            
            370,000
            
            21,000
            
            550,4722008
            92,472
            
            -
            
            110,000
            
            -
            
            202,4722009
            92,472
            
            -
            
            22,764
            
            -
            
            115,2362010
            92,472
            
            -
            
            22,764
            
            -
            
            115,2362011
            92,472
            
            -
            
            22,764
            
            -
            
            115,236$
            369,888
            
            $
            67,000
            
            $
            525,528
            
            $
            21,000
            
            $
            983,416





The
      lease
      expenses were $79,290 and $222,657 for the year ended December 31, 2006 and
      2005, respectively.





On
      November 1, 2005, the Company relocated its offices to 5030 Campus Drive,
      Newport Beach, California. 5030 Campus is owned by the Company’s subsidiary,
      Diversified Commercial Brokers. Nationwide Commercial Brokers, a former
      subsidiary of the Company owned by Robert Leonard a major shareholder of the
      Company, assumed the Company’s former offices at 4940 Campus Drive and




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      of Contents


**SECURED
      DIVERSIFIED INVESTMENT, LTD.**


Notes
      to
      Consolidated Financial Statements








indemnify
      and hold the Company harmless from any and all claims, demands, causes of
      action, losses, costs (including without limitation reasonable court costs
      and
      attorneys’ fees), liabilities or damages of any kind or nature whatsoever that
      the Company may sustain by reason of Nationwide Commercial Brokers’ breach or
      non-fulfillment (whether by action or inaction), at any time. Nationwide has
      breached the agreement.





*Officer
      employment agreements* .
      During
      2003, the Company executed employment agreements with its officers that extend
      through 2006. On May 11, 2005 and effective April 1, 2005, the officers have
      rescinded their employment agreements and forgiven the entire amount of their
      accrued salaries and their respective grant of options under the Company’s 2003
      Employee Stock Incentive Plan. The Company entered into new employment
      agreements with the officers. Shares and stock options issued under the previous
      agreements will be rescinded. The employment agreements will provide for a
      reduced issuance of common stock and options vesting over the term of the
      agreement. Since then three officers have agreed to resign, and the Company
      has
      decided to set aside $177,000 in contingent liabilities as potential payout
      and
      settlement to these officers. The Company is now in a dispute with these former
      officers (See Note 13 - Litigation).





*Unpaid
      taxes* .
      The
      Company has not paid approximately $19,909 in property taxes and penalties
      on
      5030 Campus Drive. These amounts are currently delinquent. At December 31,
      2006,
      the Company had $3,465 in unpaid payroll tax liabilities. These payroll tax
      liabilities have been paid subsequent to December 31, 2006.





**NOTE
      13 - Litigation**




On
      January 11, 2005, the Company terminated the employment of Luis Leon, formerly
      the Chief Executive Officer of the Company. On April 6, 2005, Luis Leon filed
      a
      complain against the Company in the Superior Court of California, County of
      Orange, alleging causes of action for breach of contract, promissory estoppels,
      intentional misrepresentation, violations of the California Labor Code. The
      Complaint seeks damages in an amount including $116,359 of unpaid salary,
      $16,667 for one month unpaid vacation time, $5,548.27 for unpaid insurance
      benefits through August 15, 2005, reimbursable expenses of $288 plus a statutory
      penalty of $16,666. Mr. Leon also seeks a grant of options to purchase 250,000
      of Company Common Stock. On April 7, 2006, the Company settled its litigation
      with former CEO Luis Leon. The matter was settled for $65,000 and a grant of
      options for 7,500 shares at a strike price of $0.01 per share. Each party will
      be responsible for its respective legal costs. The Company recorded stock
      options expense of $4,240 during the year ended December 31, 2006.




On
      January 13, 2006, Alliance Title Company, Inc. (“Alliance”) filed a complaint in
      the matter of Alliance Title Company, Inc. v. Secured Diversified Investment,
      Ltd. (case no. 06CC02129) in the Superior Court of California, County of Orange.
      The complaint alleges that Alliance, our escrow agent, was entrusted with
      $267,000 pursuant to escrow instructions, and that a mutual written agreement
      among the parties to the escrow was required to properly disperse the funds.
      Alliance further alleges that no instructions were provided to disperse the
      funds, but instead, competing claims for the funds were made by Secured
      Diversified Investment, Ltd., Clifford L. Strand, William S. Biddle, Gernot
      Trolf, Nationwide Commercial Brokers, Inc., and Prime Time Auctions, Inc.
      Alliance has deposited the funds with the court and has asked for a declaration
      of rights regarding the funds. Alliance has requested that its reasonable costs
      and attorney’s fees be paid from the deposited funds.




This
      matter was dismissed by Alliance Title Company in open court in February 2007.




The
      Company received $33,803 as its share out of the funds and recognized as gain
      on
      equity




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      of Contents


**SECURED
      DIVERSIFIED INVESTMENT, LTD.**


Notes
      to
      Consolidated Financial Statements


investment
        as of December 31, 2006.




On
      January 20, 2006, Clifford L. Strand, William S. Biddle, Gernot Trolf, our
      former management, and Nationwide Commercial Brokers, Inc., our former
      subsidiary (collectively, “Plaintiffs”), filed a complaint in the matter of
      Clifford L. Strand v. Secured Diversified Investment, Ltd. (case no. 06CC02350)
      in the Superior Court of California, County of Orange. The complaint contains
      causes of action for fraud and misrepresentation, negligent misrepresentation,
      breach of contract, breach of the covenant of good faith and fair dealing,
      conversion, common counts, money had and received, and declaratory relief.
      These
      allegations arise out of the hold over of funds at issue in Alliance Title
      Company, Inc. v. Secured Diversified Investment, Ltd. (case no. 06CC02129),
      described above. To date, however, the matters have not been consolidated.
      The
      Company has set aside $177,000 in contingent liabilities as potential payout
      and
      settlement to these officers. As of December 31, 2006 the Company paid $45,000
      to William S. Biddle and $42,000 to Gernot Trolf.





This
      matter has been settled as of April 5, 2007 (See note 20 for
      details)





On
      March
      10, 2006, some of our shareholders, including Clifford L. Strand, Robert J.
      Leonard, William S. Biddle, and Gernot Trolf (collectively, “Plaintiffs”) filed
      a complaint in the matter of William S. Biddle v. Secured Diversified
      Investment, Ltd. (case no. 06CC03959) in the Superior Court of California,
      County of Orange. Plaintiff seek declaratory relief as to whether we are a
      foreign corporation under California Corporation Code Section 2115(a) and
      whether Plaintiff’s alleged demand for our shareholder list and for an
      inspection of the accounting books and records and minutes of shareholders
      ,
      board of directors and committees of such board is governed under California
      Corporation Code Sections 1600 and 1601. The Company is contesting this case
      vigorously and is proceeding with discovery. At this time, the Company cannot
      make any evaluation of the outcome of this litigation.




**NOTE
      14 -Equity Investments in Real Estate**




The
      Company entered into a tenant-in-common agreement on May 14, 2004 with Denver
      Fund, I to purchase a shopping center in Las Vegas, Nevada. The Company owned
      a
      51% interest in the property and accounts for this interest under the equity
      method. Both parties to the agreement are jointly and severally liable for
      the
      obligations of the property and share in management decisions. The agreement
      provided the minority tenant with a preferential return on profits while
      operating losses are allocated based upon the pro-rata ownership interest.
      The
      shopping center was sold December 2, 2005 and the Company realized a gain of
      $1,634,238.





For
      the
      year ended December 31, 2005, the property generated total revenues of $748,898
      and a net operating loss of $806,807 attributable to a sales commission of
      $540,000 and a loan prepayment penalty of $300,518 upon sale of the property.
      The sale of the property generated a gain of $3,204,388. The Company’s 51% of
      gain on sale totaled $1,634,238, which is included in other income and losses
      in
      the accompanying consolidated statements of operations. The Company recorded
      a
      gain on equity investment of $104,837 and netted $1,831,361 in
      cash.





**Note
      15 - Sale of a Subsidiary**





Spencer
      Springs - In March 2005, the Company sold its remaining interest in Spencer
      Springs to William S. Biddle, who at the time was an officer and director of
      the
      Company, for $577,777, $300,000 in cash and a promissory note for $277,777
      accruing interest at 3% per annum, all due and payable on October 28, 2007.
      The
      note was secured by a $950,000 second trust deed on Spencer Springs Retail
      Center located in Las Vegas, Nevada, formerly owned by the Company. On May
      2,
      2005, Biddle paid off the outstanding obligation plus all interest. As a result
      of the sale the Company recorded a gain on




F-20


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      of Contents


**SECURED
      DIVERSIFIED INVESTMENT, LTD.**


Notes
      to
      Consolidated Financial Statements








disposal
      of $290,161. Previously, in December 2004, the Company sold a 37%, or $350,000,
      interest in Spencer Springs for $200,000 to Biddle and Robert Leonard, a
      shareholder **.**




Nationwide
      Commercial Brokers Incorporated - In July 2005, the Company sold its entire
      interest in Nationwide Commercial Brokers to Robert J. Leonard, a shareholder
      of
      the Company for $50,000. The Company realized a loss of $21,352 from
      discontinued operations and a gain of $75,382 on the disposal of the
      subsidiary.




Diversified
      Commercial Mortgage Corp. - In July 2005, the Company sold its entire interest
      in Diversified Commercial Mortgage, Inc. to Nationwide Commercial Brokers for
      $1,000. Diversified Commercial Brokers was dormant since inception and had
      no
      operating history, assets or liabilities. The Company realized a gain of $975
      on
      the disposal of the subsidiary.




During
      2006 the Company established a new wholly owned subsidiary, Secured Lending,
      LLC, to engage in mortgage banking activities in the state of Arizona. The
      new
      subsidiary was incorporated on June 15 th ,
      2006
      and it began funding loans in July. However, Secured Lending was not able to
      sustain its mortgage banking activities and these relationships were mutually
      terminated. The Company discontinued its mortgage banking activity at December
      31, 2006. The Company recognized a loss of $153,672 as a result of discontinued
      operations and recorded net assets held for sale of $23,544.




**Note
      16 - Note Receivable**




In
      2005,
      the Company accepted payment of $42,500 on an original note in the amount of
      $50,000 secured by a second trust deed on a commercial property located in
      Alexandria, Minnesota. The Company recorded a loss of $7,500 on the short
      payment.




The
      Company was a holder of a promissory note secured by a first mortgage deed
      on a
      single family residence in the amount of $33,798. The Company sold the note
      to
      an unrelated party in March 2005 for $28,000. The loss of $5,798 was included
      in
      loss on sale of notes in the accompanying financial statements as of December
      31, 2005.




**NOTE
      17 - Notes Payable**




On
      October 18, 2005, the Company sold its vacant lot in Dickinson, North Dakota
      to
      Morgan Rose Investment, LLC for $110,000 and recorded a gain of $63,700. The
      sale of the lot resulted in the payoff of a mortgage to Prime Time Auctions,
      a
      shareholder, in the amount of $60,000, bearing an interest rate of 15 percent
      per annum, plus any remaining accrued interest. The Company netted $37,683
      in
      cash




On
      November 9, 2005, the Company sold the T-Rex Plaza Mall, Dickinson North Dakota,
      to an unrelated third party for total consideration of $274, 840. The Company
      received $50,000 and the remainder was used to pay off an existing loan secured
      by the property. The sale of the property resulted in a reduction of secured
      debt with an outstanding balance of $224,840, bearing an interest rate of 12
      percent per annum, and a release from the land lease obligation totaling $14,401
      per month. Because the property was 100% impaired, the Company recorded a gain
      on sale of $276,173. The Company netted no cash from the sale of the property.





On
      December 2, 2005, the Company sold the Cannery West Shopping Center, Las Vegas,
      Nevada. The sale of the property results in the pay off of a $4,019,672 note
      bearing an interest rate of 7.52 percent per annum secured by a first trust
      deed. The payoff of the note resulted in a prepayment penalty of $300,518.
      The
      sale also resulted in the payoff of a $50,000 note bearing an interest rate
      of
      18 percent per annum to the Sutterfield Family Trust of which the trustee Wayne
      Sutterfield is a shareholder and former director.





**Note
      18 - Forgiveness of Debt**





During
      2003, the Company executed employment agreements with its officers that extend
      through 2006. On May 11, 2005 and effective April 1, 2005, the officers have
      rescinded their employment agreements




F-21


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      of Contents


**SECURED
      DIVERSIFIED INVESTMENT, LTD.**


Notes
      to
      Consolidated Financial Statements








and
      forgiven the entire amount of their accrued salaries. The accrued salaries
      forgiven totaled $658,950:


The
      forgiveness of the accrued salaries also resulted in the reversal of $56,672
      in
      accrued payroll tax expense.





During
      2006 the Company recorded debt forgiveness of $268,768 against reversal of
      various old debts which passed statute of limitations.





**Note
      19 - Income Taxes**





No
      provision was made for Federal income tax for the year ended December 31, 2006
      and 2005, since the Company had significant net operating loss. For the year
      ended December 31, 2006, the Company incurred net loss carry forward for tax
      purposes of $2,990,000. However, for the year ended December 31, 2005 the
      Company incurred net loss carry forward for tax purposes of approximately
      $2,498,000. The net operating losses carry forwards may be used to reduce
      taxable income through the year 2025. The availability of the Company’s net
      operating loss carry forwards are subject to limitation if there is a 50% or
      more positive change in the ownership of the Company’s stock. The provision for
      income taxes consists of the state minimum tax imposed on corporations.





Temporary
      differences that give rise to deferred tax assets and liabilities at December
      31, 2006 and 2005, comprised of depreciation and amortization and net operating
      loss carry forward. The gross deferred tax asset balance as of December 31,
      2006
      is approximately $2,050,258. A 100% valuation allowance has been established
      against the deferred tax assets, as the utilization of the loss carry forwards
      cannot reasonably be assured.





The
      components of the net deferred tax asset are summarized below:




December
                31, 2006
            
            December
                31, 2005Deferred
                tax assetNet
                operating losses
            $
            2,050,258
            
            $
            1,710
                000Less:
                valuation allowance
            
            (2,050,258)
            
            
            (1,710,000)$
            -
            
            $
            -




The
      following is a reconciliation of the provision for income taxes at the U.S.
      federal income tax rate to the income taxes reflected in the Statement of
      Operations:




December
                31, 2006
            
            December
                31, 2005Tax
                expense (credit) at statutory rate-federal
            
            (34)
                %
            
            
            (34)
                %State
                tax expense net of federal tax
            
            (6)
            
            
            (6)Changes
                in valuation allowance
            
            40
            
            
            40Tax
                expense at actual rate
            
            -
            
            
            -




Income
      tax expense consisted of the following:





2006
            
            2005Current
                tax expense:Federal
            $
            -
            
            $
            -State
            
            800
            
            
            800Total
                Current
            $
            800
            
            $
            800




F-22


Table
      of Contents


**SECURED
      DIVERSIFIED INVESTMENT, LTD.**


Notes
      to
      Consolidated Financial Statements








Deferred
                tax credit:Federal
            $
            153,000
            
            $
            313,000State
            
            44,000
            
            
            89,000Total
                deferred
            $
            197,000
            
            $
            402,000Less:
                valuation allowance
            
            (197,000)
            
            
            (402,000)Net
                Deferred tax credit
            
            -
            
            
            -Tax
                expense
            $
            800
            
            $
            800





**Note
      20 - Subsequent Events**




On
      February 17, 2006, the $67,000 note, secured by 5030 Campus Drive, payable
      to
      the Sutterfield Family Trust (Wayne Sutterfield) matured. The note is in
      default.




On
      April
      29, 2007, the Company’s subsidiary Diversified Commercial Brokers, LLC, opened
      escrow to sell the office building located at 5030 Campus Drive, Newport Beach,
      California. The sales price is $1,300,000.




On
      January 5, 2007, the Company entered into a Confidential Settlement and General
      Release Agreement (the “Settlement Agreement”) with Mr. Clifford L. Strand to
      resolve litigation in the matters of *Clifford
      L. Strand v. Secured Diversified Investment, Ltd* .
      (case
      no. 06CC02350) in the Superior Court of California, County of Orange, as well
      as
      other claims involving Mr. Strand and our company as set forth in the Agreement.
      The Settlement Agreement with Mr. Strand provides that a stipulation and order
      of disbursement will be filed on the remaining $89,998 as follows: $80,000
      to
      Mr. Strand and $9,998 to our company. In addition, Mr. Strand expressly waived
      any and all rights he may have had in connection with reemployment with our
      company, and agreed to refrain from pursuing complaints against our company
      and
      our officers and directors in any court or government agency. Further, Mr.
      Strand granted an irrevocable proxy in connection with any shares of stock
      beneficially owned by him.




F-23


Table
      of Contents




**Item****8.
      Changes In and Disagreements with Accountants on Accounting and Financial
      Disclosure**





No
      events
      occurred requiring disclosure under Item 304(b) of Regulation S-B.





**Item****8A.
      Controls and Procedures**





We
      carried out an evaluation of the effectiveness of the design and operation
      of
      our disclosure controls and procedures (as defined in Exchange Act Rules
      13a-15(e) and 15d-15(e)) as of December 31, 2006. This evaluation was carried
      out under the supervision and with the participation of our Chief Executive
      Officer, Ms. Jan Wallace, and our Chief Financial Officer, Mr. Munjit Johal.
      Based upon that evaluation, our Chief Executive Officer and Chief Financial
      Officer concluded that, as of December 31, 2006, our disclosure controls and
      procedures are effective. There have been no significant changes in our internal
      controls over financial reporting during the quarter ended December 31, 2006
      that have materially affected or are reasonably likely to materially affect
      such
      controls.





Disclosure
      controls and procedures are controls and other procedures that are designed
      to
      ensure that information required to be disclosed in our reports filed or
      submitted under the Exchange Act are recorded, processed, summarized and
      reported, within the time periods specified in the SEC's rules and forms.
      Disclosure controls and procedures include, without limitation, controls and
      procedures designed to ensure that information required to be disclosed in
      our
      reports filed under the Exchange Act is accumulated and communicated to
      management, including our Chief Executive Officer and Chief Financial Officer,
      to allow timely decisions regarding required disclosure.





Limitations
      on the Effectiveness of Internal Controls





Our
      management does not expect that our disclosure controls and procedures or our
      internal control over financial reporting will necessarily prevent all fraud
      and
      material error. Our disclosure controls and procedures are designed to provide
      reasonable assurance of achieving our objectives and our Chief Executive Officer
      and Chief Financial Officer concluded that our disclosure controls and
      procedures are effective at that reasonable assurance level. Further, the design
      of a control system must reflect the fact that there are resource constraints,
      and the benefits of controls must be considered relative to their costs. Because
      of the inherent limitations in all control systems, no evaluation of controls
      can provide absolute assurance that all control issues and instances of fraud,
      if any, within our company have been detected. These inherent limitations
      include the realities that judgments in decision-making can be faulty, and
      that
      breakdowns can occur because of simple error or mistake. Additionally, controls
      can be circumvented by the individual acts of some persons, by collusion of
      two
      or more people, or by management override of the internal control. The design
      of
      any system of controls also is based in part upon certain assumptions about
      the
      likelihood of future events, and there can be no assurance that any design
      will
      succeed in achieving its stated goals under all potential future conditions.
      Over time, control may become inadequate because of changes in conditions,
      or
      the degree of compliance with the policies or procedures may deteriorate.




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**Item****8B.
      Other information**





None.





**PART
      III**





**Item****9.
      Directors, Executive Officers, Promoters and Control Persons; Compliance with
      Section 16(a) of the Exchange Act**





The
      following information sets forth the names of our current directors and
      executive officers, their ages and their present positions.





Name
            Age
            Position(s)
                and Office(s) HeldJan
                Wallace
            52
            Chief
                Executive Officer, President, and DirectorMunjit
                Johal
            51
            Chief
                Financial OfficerPeter
                Richman
            40
            DirectorJay
                Kister
            32
            Director





Set
      forth
      below is a brief description of the background and business experience of each
      of our current executive officers and directors.





**Jan
      Wallace.** Ms.
      Wallace is our CEO, President and Director. She is also the President of Wallace
      Black Financial & Investment Services, a private consulting company to
      private and public companies and individuals for business, financial and
      Investment strategies. Ms. Wallace has served as the President and CEO of three
      public companies listed on the Over-The-Counter Bulletin Board: MW Medical
      from
      1998 to 2001; Dynamic and Associates, Inc.; and Claire Technologies, Inc. from
      1994 to 1995. From 1987 to 1996, Ms. Wallace was associated with four Canadian
      companies: Active Systems as Executive Vice President; The Heafey Group, as
      financial consultant; Mailhouse Plus, Ltd., owner and President; and Pitney
      Bowes, first female sales executive. Ms. Wallace has a B.A. in Political Science
      and Economics from Queens University, Kingston, Ontario, Canada.





**Peter
      Richman.** Dr.
      Richman is one of our Directors. Dr. Richman is a Board Certified and Licensed
      Physician in three states. Since 2003, Dr. Richman has been an Assistant
      Professor at the Mayo Clinic of Medicine, Scottsdale, Arizona. From 1997 to
      2001, Dr. Richman served as attending emergency physician and attending
      physician at Morristown Memorial Hospital, Morristown New Jersey. From 2001
      to
      2004, Dr. Richman was Senior Associate Consultant at the Mayo Clinic Hospital,
      Scottsdale, Arizona. Dr. Richman is the author and co-author of numerous medical
      publications and currently involved in a number of medical research projects.
      Dr. Richman was the co-founder and editor-in-chief of Choicemedia.com recently
      acquired by the Polaris, Sequoia, and Allen Group in 2005. Dr. Richman earned
      a
      Bachelor of Arts in Political Science from Brandeis University in 1989. Dr.
      Richman earned his medical degree from S.U.N.Y Health Science Center at Syracuse
      in 1993 and his MBA from Arizona State University in 2005.




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      of Contents




**Jay
      Kister.** Mr.
      Kister is one of our Directors. Since June 2001, Mr. Kister has been employed
      with Blossom Valley Mortgage, Inc. Mr. Kister currently serves as a Loan Broker.
      From April 1999 to June 2001, Mr. Kister was a Personal Banker for San Diego
      National Bank. He was primarily responsible opening and servicing commercial
      accounts and commercial loans. From May 1998 to April 1999, Mr. Kister worked
      for Bank of America performing essentially the same functions as he performed
      for San Diego National Bank. Mr. Kister earned a Bachelor of Arts degree in
      Spanish from Weber State University in Ogden, Utah in August 1997.





**Munjit
      Johal.** Mr.
      Johal
      is our Chief Financial Officer. Mr. Johal has broad experience in accounting,
      finance and management in the public sector. Mr. Johal also serves as the Chief
      Financial Officer for Makeup.Com Limited, and Davi Skin, Inc. Since 1998, Mr.
      Johal has served as the Chief Financial Officer for Dippy Foods, Inc. Mr. Johal
      held the same position with Bengal Recycling from 1996 to 1997. As the Chief
      Financial Officer for these companies, Mr. Johal was primarily responsible
      for
      overseeing the financial affairs of these entities and ensuring that their
      financial statements of these were accurate and complete and complied with
      all
      applicable reporting requirements. From 1990 to 1995, Mr. Johal serves as the
      Executive VP for Pacific Heritage Bank in Torrance, California. Mr. Johal earned
      his MBA degree from the University of San Francisco in 1980. He received his
      BS
      degree in History from the University of California in Los Angeles in
      1978.





**Term
      of Office**





Our
      directors are appointed for a one-year term to hold office until the next annual
      meeting of our shareholders or until removed from office in accordance with
      our
      bylaws.





Our
      executive officers are appointed by our board of directors and hold office
      until
      removed by the board.





**Significant
      Employees**





We
      have
      no significant employees other than our officers and directors.





**Family
      Relationships**





There
      are
      no family relationships between or among the directors, executive officers
      or
      persons nominated or chosen by us to become directors or executive
      officers.





**Involvement
      in Certain Legal Proceedings**





To
      the
      best of our knowledge, during the past five years, none of the following
      occurred with respect to a present director, person nominated to become
      director, executive officer, or control person: (1) any bankruptcy petition
      filed by or against any business of which such person was a general partner
      or
      executive officer either at the time of the bankruptcy or within two years
      prior
      to that time; (2) any conviction in a criminal proceeding or being subject
      to a
      pending criminal proceeding (excluding traffic violations and other minor
      offenses); (3) being subject to any order, judgment or decree, not subsequently
      reversed, suspended or vacated, of any court of




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Table
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competent
      jurisdiction, permanently or temporarily enjoining, barring, suspending or
      otherwise limiting his or her involvement in any type of business, securities
      or
      banking activities; and (4) being found by a court of competent jurisdiction
      (in
      a civil action), the SEC or the Commodities Futures Trading Commission to have
      violated a federal or state securities or commodities law, and the judgment
      has
      not been reversed, suspended or vacated.





**Audit
      Committee**





We
      do not
      have a separately-designated standing audit committee. The entire board of
      directors performs the functions of an audit committee, but no written charter
      governs the actions of the board of directors when performing the functions
      of
      that would generally be performed by an audit committee. The board of directors
      approves the selection of our independent accountants and meets and interacts
      with the independent accountants to discuss issues related to financial
      reporting. In addition, the board of directors reviews the scope and results
      of
      the audit with the independent accountants, reviews with management and the
      independent accountants our annual operating results, considers the adequacy
      of
      our internal accounting procedures and considers other auditing and accounting
      matters including fees to be paid to the independent auditor and the performance
      of the independent auditor.





We
      do not
      have an audit committee financial expert because of the size of our company
      and
      our board of directors at this time. We believe that we do not require an audit
      committee financial expert at this time because we retain outside consultants
      who possess these attributes.





For
      the
      fiscal year ending December 31, 2006, the board of directors:





1.
            Reviewed
                and discussed the audited financial statements with management,
                and





2.
            Reviewed
                and discussed the written disclosures and the letter from our independent
                auditors on the matters relating to the auditor's
                independence.





Based
      upon the board of directors’ review and discussion of the matters above, the
      board of directors authorized inclusion of the audited financial statements
      for
      the year ended December 31, 2006 to be included in this Annual Report on Form
      10-KSB and filed with the Securities and Exchange Commission.





**Section
      16(a) Beneficial Ownership Reporting Compliance**





Section
      16(a) of the Exchange Act requires our directors and executive officers and
      persons who beneficially own more than ten percent of a registered class of
      the
      Company’s equity securities to file with the SEC initial reports of ownership
      and reports of changes in ownership of common stock and other equity securities
      of the Company. Officers, directors and greater than ten percent beneficial
      shareholders are required by SEC regulations to furnish us with copies of all
      Section 16(a) forms they file. To the best of our knowledge based solely on
      a
      review of Forms 3, 4, and 5 (and any amendments thereof) received by us during
      or with respect to the year ended December 31, 2006, the following persons
      have
      failed to file, on a timely basis, the identified reports required by Section
      16(a) of the Exchange Act during fiscal year ended December 31, 2006:




27


Table
      of Contents





Name
                and principal position
            Number
                of
              late
                reports
            Transactions
                not
              timely
                reported
            Known
                failures to
              file
                a required formJan
                Wallace
              Chief
                Executive Officer, President, Director
            0
            1
            0Munjit
                Johal
              Chief
                Financial Officer
            0
            1
            0Peter
                Richman
              Director
            0
            0
            1Patrick
                McNiven
              Former
                Director
            1
            0
            1Jay
                Kister
              Director
            1
            0
            0


**Code
      of Ethics Disclosure**





As
      of
      December 31, 2006, we have not adopted a Code of Ethics for Financial
      Executives, which include our principal executive officer, principal financial
      officer, principal accounting officer or controller, or persons performing
      similar functions.





We
      have
      begun the process of drafting a code of ethics which will be filed with the
      Security and Exchange Commission upon its adoption by the board of directors.




28


Table
      of Contents





**Item****10.
      Executive Compensation**





**Summary
      Compensation Table**




The
      table
      below summarizes all compensation awarded to, earned by, or paid to our former
      or current executive officers for the fiscal years ended 2006 and
      2005.





SUMMARY
                COMPENSATION TABLEName
              and
              principal
              position
            Year
            Salary($)
            Bonus
              ($)
            Stock
              Awards
              ($)
            Option
              Awards
              ($)
            Non-Equity
              Incentive
                Plan
              Compensation
              ($)
            Nonqualified
              Deferred
              Compensation
              Earnings
                ($)
            All
                Other
              Compensation
              ($)
            Total
              ($)Jan
                Wallace(1)
              President
                & CEO
            2006
              2005
            180,000
              8,641
            -
              -
            600,000
              -
            -
              -
            -
              -
            -
              -
            -
              -
            60000
              8,641Munjit
                Johal
              CFO
            2006
              2005
            84,000
              79,000
            -
              -
            200,000
            -
              -
            -
              -
            -
              -
            -
              -
            30000
              79,000




**Narrative
      Disclosure to the Summary Compensation Table**




In
      April
      2005, we entered into a Consulting Agreement with Wallace Black Financial &
Investment Services (“WB”) to provide consulting services to us. Jan Wallace,
      our Chief Executive Officer, is a principal of WB. The Consulting Agreement
      provides for payment of $10,000 per month, the issuances of 400,000 shares
      of
      144 restricted shares of common stock and 400,000 warrants exercisable at a
      price range from $0.50 to $2.00 for five (5) years from the date the contract
      is
      executed. Of the common shares issued to Wallace Black, only 200,000 shares
      were
      placed in Ms. Wallace’s name and the remaining 200,000 shares were issued to Ms.
      Black. The warrants to purchase 400,000 shares remain held in WB, in which
      Ms.
      Wallace holds indirect beneficial ownership. Additionally, Ms. Wallace was
      to be
      granted shares having a fair market value of $22,500 for each full month of
      service. In December 2005, we renegotiated the agreement with Ms. Wallace,
      who
      agreed accept the unpaid portion in cash through August 31, 2005, amounting
      to
      $112,500 and reduce her compensation to $8,500 per month through December 31,
      2005. Ms Wallace also agreed to cancel shares issued for each month of service.
      Ms Wallace had received 45,000 shares that she returned to our corporate
      treasury.





In
      April
      2005, we entered into an employment agreement with our Chief Financial Officer,
      Munjit Johal. As provided in the employment agreement, Mr. Johal is paid a
      base
      salary of $84,000. Mr. Johal received $79,000 in salary for the fiscal year
      ended December 31, 2005 and $84,000 in salary for the fiscal year ended December
      31, 2006. Mr. Johal’s employment agreement expired April 2007. Salary paid is
      recorded in the summary compensation table above in the column titled “Salary.”





As
      performance based bonuses in connection with their service to our company,
      the
      board of directors in 2006 issued to Ms. Wallace 400,000 shares of our common
      stock and 200,000 shares




29


Table
      of Contents




of
      our
      common stock to Mr. Johal as a stock award. The aggregate value of these shares
      was computed in accordance with FAS 123R and is reported in the summary
      compensation table above in the column titled “Stock Awards.”





At
      no
      time during the last fiscal year was any outstanding option repriced or
      otherwise modified. There was no tandem feature, reload feature, or
      tax-reimbursement feature associated with any of the stock options we granted
      to
      our executive officers or otherwise.





**Outstanding
      Equity Awards at Fiscal Year-End**





The
      table
      below summarizes all unexercised options, stock that has not vested, and equity
      incentive plan awards for each named executive officer as of December 31,
      2006.





**OUTSTANDING
                EQUITY AWARDS AT FISCAL YEAR-END**OPTION
                AWARDS
            STOCK
                AWARDSName
            Number
                of
              Securities
              Underlying
              Unexercised
              Options
              (#)
              Exercisable
            Number
                of
              Securities
              Underlying
              Unexercised
              Options
              (#)
              Unexercisable
            Equity
              Incentive
              Plan
              Awards:
              Number
                of
              Securities
              Underlying
              Unexercised
              Unearned
              Options
              (#)
            Option
              Exercise
              Price
              ($)
            Option
              Expiration
              Date
            Number
              of
              Shares
              or
                Units
              of
              Stock
                That
              Have
              Not
              Vested
              (#)
            Market
              Value
              of
              Shares
              or
              Units
              of
              Stock
              That
              Have
              Not
              Vested
              ($)
            Equity
              Incentive
              Plan
              Awards:
              Number
              of
              Unearned
              Shares,
              Units
                or
              Other
              Rights
              That
                Have
              Not
              Vested
              (#)
            Equity
              Incentive
              Plan
              Awards:
              Market
                or
              Payout
              Value
                of
              Unearned
              Shares,
              Units
                or
              Other
              Rights
              That
              Have
                Not
              Vested
              (#)Jan
                Wallace
            400,000
            -
            -
            $0.50-$2,00
            3/10/2010
            -
            -
            -
            -Munjit
                Johal(1)
            -
            -
            -
            -
            -
            -
            -
            -
            -





(1)
            Effective
                April 1, 2005, Mr. Johal agreed to rescind his 250,000 shares of
                common
                stock and options to purchase 500,000 shares of common stock provided
                under his December 31, 2003 employment agreement and return his share
                certificates to our corporate treasury. Mr. Johal returned his share
                certificate to our corporate
                treasury.




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Table
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**Compensation
      of Directors**





The
      table
      below summarizes all compensation of our directors as of December 31,
      2006.





**DIRECTOR
                COMPENSATION**Name
            Fees
                Earned or
              Paid
                in
              Cash
              ($)
            Stock
                Awards
              ($)
            Option
                Awards
              ($)
            Non-Equity
              Incentive
              Plan
              Compensation
              ($)
            Non-Qualified
              Deferred
              Compensation
              Earnings
              ($)
            All
              Other
              Compensation
              ($)
            Total
              ($)Jan
                Wallace
            -
            -
            -
            -
            -
            -
            -Peter
                Richman
            -
            -
            -
            -
            -
            -
            -Patrick
                McNiven(1)
            -
            -
            -
            -
            -
            -
            -Jay
                Kister
            -
            -
            -
            -
            -
            -
            -





(1)
            Mr.
                McNevin resigned as a member of our board of directors on April 30,
                2006.





**Narrative
      Disclosure to the Director Compensation Table**





Non-employee
      directors were not paid for their services in fiscal year ended December 31,
      2006.





The
      consideration earned or paid to Jan Wallace and Munjit Johal were earned in
      connection with their service as executive officers. Jan Wallace and Munjit
      Johal received no compensation for their service as members of our board of
      directors.




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Table
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**Item****11.
      Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters**




The
      following table sets forth, as of June 11, 2007, the beneficial ownership of
      our
      voting capital stock by each executive officer and director, by each person
      known by us to beneficially own more than 5% of the our voting capital stock
      and
      by the executive officers and directors as a group.  Except as otherwise
      indicated, all shares are owned directly and the percentage shown is based
      on
      3,252,798 shares of voting capital stock issued and outstanding on June 11,
      2007, comprised of 2,896,820 shares of common stock and 355,978 shares of Series
      A Preferred Stock. Except as otherwise indicated, the address of each person
      named in this table is c/o Secured Diversified Investment, Ltd., 12202 North
      Scottsdale Road, Phoenix, AZ 85054.





**Title
                of class**
            **Name
                and address of beneficial owner****(1)**
            **Amount
                of beneficial ownership**
            **Percent
                of class*****Executive
                Officers & Directors:**Common
            Jan
                Wallace**(2)**
            1,000,000
                shares
            27.3%Common
            Peter
                Richman
            0
                shares
            0%Common
            Jay
                Kister**(3)**
            5,998
                shares
            Less
                than 1%Common
            Munjit
                Johal
            200,000
                shares
            6.1%**Total
                of All Directors and Executive Officers:**
            1,205,998
                shares
            33%**More
                Than 5% Beneficial Owners:**Common
            Kelly
                Black
              7349
                N. Scottsdale Road, #515
              Scottsdale,
                Arizona 85283
            201,250
                shares
            6.1%Common
            Donald
                Schwall
              8326
                Geary Boulevard
              San
                Francisco, California 94121
            400,000
                shares
            10.9%




(1)
            As
                used in this table, "beneficial ownership" means the sole or shared
                power
                to vote, or to direct the voting of, a security, or the sole or shared
                investment power with respect to a security (i.e., the power to dispose
                of, or to direct the disposition of, a security). In addition, for
                purposes of this table, a person is deemed, as of any date, to have
                "beneficial ownership" of any security that such person has the right
                to
                acquire within 60 days after such date.





(2)
            Includes
                600,000 shares of Common Stock held in her name and warrants to purchase
                400,000 shares of Common Stock held in Wallace Black Financial &
                Investment Services.





(3)
            Includes
                5,000 shares of Common Stock held in his name and 998 shares held
                in joint
                tenancy with his wife Alicia
                Kister.




**Item****12.
      Certain Relationships and Related Transactions**





Other
      than as disclosed below, none of our directors or executive officers, nor any
      proposed nominee for election as a director, nor any person who beneficially
      owns, directly or indirectly, shares carrying more than 5% of the voting rights
      attached to all of our outstanding shares, nor any members of the immediate
      family (including spouse, parents, children, siblings, and in-laws) of any
      of
      the foregoing persons has any material interest, direct or indirect, in any
      transaction since our incorporation or in any presently proposed transaction
      which, in either case, has or will materially affect us.





On
      February 15, 2006, we acquired a 33 1/3% tenant-in-common interest in property
      located at 12202 North Scottsdale Road, Phoenix, Arizona 85054. We acquired
      our
      interest for $200,000 from Ms. Jan Wallace, our officer and director, who holds
      the remaining 66 2/3% ownership in the property.





In
      April
      2005, we entered into a Consulting Agreement with Wallace Black Financial &
Investment Services (“WB”) to provide consulting services to us. Jan Wallace,
      our Chief Executive Officer, is a principal of WB. The Consulting Agreement
      provides for payment of $10,000 per month, the issuances of 400,000 shares
      of
      144 restricted shares of common stock and 400,000 warrants exercisable at a
      price range from $0.50 to $2.00 for five (5) years from the date the contract
      is
      executed. Of the common shares issued to Wallace Black, only 200,000 shares
      were
      placed in Ms. Wallace’s name and the remaining 200,000 shares were issued to Ms.
      Black. The warrants to purchase 400,000 shares remain held in WB, in which
      Ms.
      Wallace holds indirect beneficial ownership. Additionally, Ms. Wallace was
      to be
      granted shares having a fair market value of $22,500 for each full month of
      service. In December 2005, we renegotiated the agreement with Ms. Wallace,
      who
      agreed accept the unpaid portion in cash through August 31, 2005, amounting
      to
      $112,500 and reduce her compensation to $8,500 per month through December 31,
      2005. Ms Wallace also agreed to cancel shares issued for each month of service.
      Ms Wallace had received 45,000 shares that she returned to our corporate
      treasury.




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Table
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**Item****13.
      Exhibits**





Exhibit
                Number
            Description10.1
            Confidential
                Settlement and General Release Agreement dated January 5, 2007(1)10.2
            Confidential
                Settlement and General Release Agreement dated September 20, 2006(2)10.3
            Secured
                Lending, LLC Lease Agreement dated July 1, 2006(2)31.1
            Certification
                of Chief Executive Officer pursuant to
                Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant
                to
                Section 302 of the Sarbanes-Oxley Act of 200231.2
            Certification
                of Chief Financial Officer pursuant to
                Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant
                to
                Section 302 of the Sarbanes-Oxley Act of 200232.1
            Certification
                of Chief Executive Officer and Chief
                Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
                pursuant
                to Section 906 of the Sarbanes-Oxley Act of
                2002





(1)
            Previously
                filed as an exhibit to the Current Report on Form 8-K filed on January
                11,
                2007.(2)
            Previously
                filed as an exhibit to the Quarterly Report on Form 10-QSB for the
                period
                ended September 30, 2006 filed on November 14,
                2006.





**Item****14.
      Principal Accountant Fees and Services**





**Audit
      Fees**





The
      aggregate fees billed by our auditors for professional services rendered in
      connection with a review of the financial statements included in our quarterly
      reports on Form 10-QSB and the audit of our annual consolidated financial
      statements for the fiscal years ended December 31, 2006 and December 31, 2005
      were approximately $60,500 and $135,000 respectively.





**Audit-Related
      Fees**





Our
      auditors did not bill any additional fees for assurance and related services
      that are reasonably related to the performance of the audit or review of our
      financial statements.





**Tax
      Fees**





The
      aggregate fees billed by our auditors for professional services for tax
      compliance, tax advice, and tax planning were $16,065 and $11,540 for the fiscal
      years ended December 31, 2006 and 2005.





**All
      Other Fees**





The
      aggregate fees billed by our auditors for all other non-audit services, such
      as
      attending meetings and other miscellaneous financial consulting, for the fiscal
      years ended December 31, 2006 and 2005 were $2,000 and $0
      respectively.




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Table
      of Contents





**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.





**Secured
                Diversified Investment, Ltd.**By:
            /s/Jan
                Wallace
            By:
            /s/
                Munjit JohalJan
                Wallace
              Chief
                Executive Officer and Director
              December
                28, 2007
            
            Munjit
                Johal
              Chief
                Financial Officer
              December
                28, 2007




In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated:




By:
            /s/Jan
                WallaceJan
                Wallace
              Director
              December
                28, 2007