UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549





**FORM
      10-KSB**





[X]
            ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934For
                the fiscal year endedDecember
                31, 2006[
                 ]
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACTFor
                the transition period from _________ to ________Commission
                file number000-30653





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]




Table
          of Contents




**TABLEOF
      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


2
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          of Contents


**** **PART
      I**


**Item1.
      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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**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.





**Item2.
      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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**Item3.
      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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**Item4.
      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**





**Item5.
      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.





**Item6.
      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




20
 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


21
 Table
          of Contents


**Item7.
      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


22
 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
 **SECUREDDIVERSIFIED
        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


**SECUREDDIVERSIFIED
        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
 **SECUREDDIVERSIFIED
          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
 **SECUREDDIVERSIFIED
                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
 **SECUREDDIVERSIFIED
                    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. A s
                    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. O ur
                    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
                  consolidated method of accounting is used for investments in associated
                  companies in which the company’s interest is 50% or more. Under the consolidated
                  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.
  ***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
 Table
                        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**
 F-13
 Table
                      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
 F-14
 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
 F-16
 Table
                      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.
 F-17
 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
 F-18
 Table
                        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
 
 F-19
 Table
                      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
 Table
                      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
 Table
                      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


**Item8.
      Changes In and Disagreements with Accountants on Accounting
      and Financial** **Disclosure**





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





**Item8A.
      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.





23
 Table
          of Contents




**Item8B.
      Other information**





None.





**PART
      III**





**Item9.
      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.





24
 Table
          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




25
 Table
          of Contents




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:




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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
            0
            0Munjit
                Johal
              Chief
                Financial Officer
            0
            0
            0Peter
                Richman
              Director
            0
            0
            0Patrick
                McNiven
              Former
                Director
            0
            0
            0Jay
                Kister
              Director
            0
            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.


27
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**Item10.
      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




28
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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.


29
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            of Contents
  **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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**Item11.
      Security Ownership of Certain Beneficial Owners and
      Management and Related** **Stockholder
      Matters**





The
      following table sets forth, as of April 17, 2007, the beneficial ownership
      of
      our common stock by each executive officer and director, by each person known
      by
      us to beneficially own more than 5% of the our common 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 2,896,820 shares of common
      stock issued and outstanding on April 17, 2007. Except as otherwise indicated,
      the address of each person named in this table is c/o Secured Diversified
      Investment, Ltd., 5205 East Lincoln Drive, Paradise Valley, Arizona
      85253.





**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
            30.3%Common
            Peter
                Richman
            0
                shares
            0%Common
            Jay
                Kister**(3)**
            5,998
                shares
            Less
                than 1%Common
            Munjit
                Johal
            200,000
                shares
            6.9%**Total
                of All Directors and Executive Officers:**
            1,205,998
                shares
            36.5%**More
                Than 5% Beneficial Owners:**Common
            Kelly
                Black
              7349
                N. Scottsdale Road, #515
              Scottsdale,
                Arizona 85283
            200,000
                shares
            6.9%Common
            Donald
                Schwall
              8326
                Geary Boulevard
              San
                Francisco, California 94121
            400,000
                shares
            13.8%





(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.





**Item12.
      Certain Relationships and Related
      Transactions**





Except
      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
      the
      beginning of our last fiscal year on January 1, 2006 or
      in any
      presently proposed transaction which, in either case, has or will materially
      affect us.





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**Item13.
      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.





**Item14.
      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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**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
                May 18, 2007
              
              Munjit Johal
                Chief Financial Officer
                May 18,
                  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
              Wallace
            By:
            /s/ Peter RichmanJan Wallace
              Director
              May 18, 2007
            
            Peter Richman
              Director
              May 18,
                2007