UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, DC 20549





__________________________





Form 10-K


__________________________








(MARK ONE)x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended April 30, 2009ORo
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from  ______________ to ______________





Commission file number:333-83231





GLOBAL DIVERSIFIED INDUSTRIES, INC.


(Exact name of Company as specified in its charter)





Nevada
95-4741485(State or other jurisdiction of  incorporation or organization)
(IRS Employer Identification No.)





1200 Airport Drive, Chowchilla, California 93610


(Address of principal executive offices) (Zip Code)





Company's telephone number: (559) 665-5800





Securities registered pursuant to Section 12(b) of the Act: None





Securities registered pursuant to Section 12(g) of the Act:  Common Stock, $0.001 Par Value





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  o YES     x NO





Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  o YES     x NO





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.  x YES     o NO





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding twelve months (or for such shorter period that the registrant was required to submit and
post such files)   o YES    o NO





Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.  o





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act





Large accelerated filer  o

Accelerated filer  o

Non-accelerated filer  o

Smaller reporting company  x





Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  o YES     x NO





At August 9, 2009, there were 15,369,885 shares of common stock outstanding.





Table of Contents





Table of Contents





PAGEPART I.Item 1.
Description of Business
3Item 1 A.
Risk Factors
4Item 1 B.
Unresolved Staff Comments
9Item 2.
Properties
9Item 3.
Legal Proceedings
9Item 4.
Submission of Matters to a Vote of Security Holders
9PART II.Item 5.
Market for Company’s Common Equity, Related Stockholders Mattersand Issuer Purchases of Equity Securities
10Item 6.
Selected Financial Data
11Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
12Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
15Item 8.
Financial Statements and Supplementary Data
16Item 9.
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
18Item 9A (T)
Controls and Procedures
18Item 9B.
Other Information
19PART III.Item 10.
Directors and Executive Officers and Corporate Governance,
19Item 11.
Executive Compensation
20Item 12.
Security Ownership of Certain Beneficial Owners and Managementand Related Stockholders
Matters
21Item 13.
Certain Relationships and Related Transactions
21Item 14.
Principal Accountant’s Fees and Services
22PART IVItem 15.
Exhibits, Financial Statement Schedules
23Signatures
24EX-31.1 (Certifications required under Section 302 of the Sarbanes-Oxley Act of 2002)EX-31.2 (Certifications required under Section 302 of the Sarbanes-Oxley Act of 2002)EX-32.1 (Certifications required under Section 906 of the Sarbanes-Oxley Act of 2002)EX-32.2 (Certifications required under Section 906 of the Sarbanes-Oxley Act of 2002)





Table of Contents





PART I.





SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS





Forward-looking statements in this report are made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. The Company wishes to advise readers that actual results may differ substantially from such forward-looking statements. Forward-looking statements include statements concerning underlying assumptions
and other statements that are other than statements of historical facts. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the statements, including, but not limited to, the following: the ability of the Company to provide for its obligations, to provide working capital needs from operating revenues, to obtain additional financing needed for any future acquisitions, to meet competitive challenges and technological
changes, and other risks detailed in the Company's periodic report filings with the Securities and Exchange Commission.





ITEM1. BUSINESS





Introduction





The Company is a Nevada company with a limited operating history.  In October 2006, the Company sold a subsidiary, MBS Construction, Inc. ("MBS") to Paragon Modular, Inc ("PMI") through a Stock Purchase Agreement ("Purchase Agreement"). As a result of the sale of the MBS business segment, the Company accounted for the segment
as a discontinued operation.





The Company currently operates two wholly owned subsidiaries, Lutrex Enterprises, Inc., an entity, which holds equipment and inventory for the registrant and Global Modular, Inc., a sales, marketing and manufacturer of modular type structures.





The Company is engaged in the business of designing, manufacturing and marketing re-locatable modular structures such as classrooms and office buildings and was under contract to build multiple classrooms for several school districts in southern California.





Overview





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





Global Modular was awarded a contract with Victor Valley School District with a “piggyback clause”.  California allows school districts to canvass proposals from modular classroom vendors under a bidding process where the successful bidder can provide other public school districts and municipalities portable classrooms
under a “piggyback contract” issued by the originating school district.  This process saves school districts valuable time and resources from the necessity of soliciting bids.  A modular vendor who possesses a “piggybackable contract” containing competitive pricing and a variety of design options may have access to future business for up to five years, depending on the term of the piggyback contract.





The Company was issued a Manufacturer’s License by the California Department of Housing (DOH) on July 13, 2006.  This opens up a new market comprising of retail, industrial and institutional (including educational institutions that reside on private property).  This sector adheres to building designs and specifications
administered by the Department of Housing (DOH).  However, there have not been any DOH buildings produced as of April 30, 2009 and there are none currently scheduled.





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





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





During the remainder of 2009, Global Modular will focus its attention on the sales and marketing of portable classrooms and modular buildings to the California public and private school sectors including California municipalities.  Since the state of California has been experiencing an influx in student enrollment over the past
several years, and the forecast for the next ten years is for continual increasing enrollments, the portable classroom manufacturing industry has become more successful.  In an effort to keep up with demand for additional classroom space, modular manufacturers are expecting increased production backlogs throughout the remainder of 2009 and into 2010.





Employees





As of April 30, 2009 the Company had 35 employees. The Company anticipates that the number of employees will increase over the next twelve months. The Company does not expect to have any collective bargaining agreements covering any of its employees.





ITEM 1A. RISKS FACTORS





AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. IN ADDITION TO THE OTHER INFORMATION IN THIS REPORT, THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND ITS BUSINESS. THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. ALL FORWARD-LOOKING STATEMENTS ARE INHERENTLY UNCERTAIN AS THEY ARE BASED ON CURRENT EXPECTATIONS AND ASSUMPTIONS CONCERNING FUTURE EVENTS OR FUTURE PERFORMANCE OF THE COMPANY. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH ARE ONLY PREDICTIONS AND SPEAK ONLY AS OF THE DATE HEREOF. FORWARD-LOOKING STATEMENTS USUALLY CONTAIN THE WORDS "ESTIMATE," "ANTICIPATE," "BELIEVE," "PLAN,"
"EXPECT," OR SIMILAR EXPRESSIONS, AND ARE SUBJECT TO NUMEROUS KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES. IN EVALUATING SUCH STATEMENTS, PROSPECTIVE INVESTORS SHOULD REVIEW CAREFULLY VARIOUS RISKS AND UNCERTAINTIES IDENTIFIED IN THIS REPORT, INCLUDING THE MATTERS SET BELOW AND IN THE COMPANY'S OTHER SEC FILINGS. THESE RISKS AND UNCERTAINTIES COULD CAUSE THE COMPANY'S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED IN THE FORWARD-LOOKING STATEMENTS. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE OR PUBLICLY
ANNOUNCE REVISIONS TO ANY FORWARD-LOOKING STATEMENTS TO REFLECT FUTURE EVENTS OR DEVELOPMENTS.





We Will Need Additional Financing To Fully Implement Our Business Plan, And We Cannot Assure You That We Will Be Successful In Obtaining Such Financing Or In Continuing Our Operations.





We have focused our efforts on developing our business in the construction and sale of modular building structures. We will need to raise additional capital to continue to implement fully our business plan and continue to establish adequate manufacturing, marketing, and sales operations. There can be no assurance that additional public
or private financing, including debt or equity financing, will be available as needed, or, if available, on terms favorable to us. Any additional equity financing may be dilutive to our stockholders and such additional equity securities may have rights, preferences or privileges that are senior to those of our existing common or preferred stock. Furthermore, debt financing, if available, will require payment of interest and may involve restrictive covenants that could impose limitations on our operating flexibility.
Our failure to successfully obtain additional future funding may jeopardize our ability to continue our business and operations.





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If We Are Unable To Manage Future Growth, Our Business May Be Negatively Affected




We are continuing to pursue a strategy of rapid growth, and plan to expand significantly our manufacturing capability and devote substantial resources to our marketing, sales, administrative, operational, financial and other systems and resources. Such expansion will place significant demands on our marketing, sales, administrative, operational,
financial and management information systems, controls and procedures. Accordingly, our performance and profitability will depend on the ability of our officers and key employees to:





·
manage our business and our subsidiaries as a cohesive enterprise;·
manage expansion through the timely implementation and maintenance of appropriate administrative, operational, financial and management information systems, controls and procedures;





·
add internal capacity, facilities and third-party sourcing arrangements as and when needed;·
maintain service quality controls; and





·
attract, train, retain, motivate and manage effectively our employees.





There can be no assurance that we will integrate and manage successfully new systems, controls and procedures for our business, or that our systems, controls, procedures, facilities and personnel, even if successfully integrated, will be adequate to support our projected future operations. Any failure to implement and maintain such systems,
controls and procedures, add internal capacity, facilities and third-party sourcing arrangements or attract, train, retain, motivate and manage effectively our employees could have a material adverse effect on our business, financial condition and results of operations.





We May Face Strong Competition From Larger, Established Companies





We likely will face intense competition from other builders of modular structures , virtually all of which can be expected to have longer operating histories, greater name recognition, larger installed customer bases and significantly more financial resources, facilities and manufacturing and marketing experience than the Company.





In addition, we expect to face additional competition from new entrants into our targeted industry segments. As the demand for modular products grows and new markets are exploited, we expect that competition will become more intense, as current and future competitors begin to offer an increasing number of diversified products and services.





Increased competition could result in price reductions, fewer product orders, and reduced operating margins, any of which could materially and adversely affect our business, financial condition and results of operations.





Our Success Depends In Large Part On Our Ability To Attract And Retain Key Employees And Management





Our success and execution of our business strategy will depend significantly upon the continuing contributions of, and on our ability to attract, train and retain qualified management, marketing, sales, operational, production, administrative and technical personnel. In this regard, we are particularly dependent upon the services of Phil
Hamilton, our President and Chief Executive. The loss of the services of Mr. Hamilton and the failure to attract, train and retain additional qualified personnel in a timely manner could have a material adverse effect on our business, financial condition and results of operations.





5
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Our Results Of Operations May Highly Fluctuate From Quarter To Quarter As We Continue To Grow, Therefore You Cannot Use These Results To Predict How We May Perform In The Future





As a result of our limited operating history, we do not have historical financial data for a significant number of periods in which to base our planned operating expenses. In addition our revenues have not met our expectations.  Our expense levels are based in part on our projections as to future revenues that are expected to
increase. It is anticipated that as we mature, our sales and operating results may fluctuate from quarter to quarter and from year to year due to a combination of factors, including, among others:





·
the volume, timing of, and ability to fulfill customer orders;·
the demand for our products;





·
the number, timing and significance of product enhancements and new product introductions by us and our competitors;·
changes in pricing policies by us or our competitors;





·
changes in the level of operating expenses;·
expenses incurred in connection with our plans to fund greater levels of sales and marketing activities and operations, and broaden our customer  support capabilities ;





·
personnel changes;·
product defects and other product or service quality problems; and





·
general domestic and international legal, economic and political conditions.





Any unfavorable changes in these or other factors could have a material adverse effect on our business, financial condition and results of operations.





We May Not Be Able To Obtain Sufficient Contract Bonding





The sale of our products to certain government and/or private customers may require contract performance bonding.  The availability of contract bonding in the remediation market has been curtailed since the September 11, 2001 World Trade Center disaster. Insurance bonding requirements often require collateral of 100% of the contract
amount. The collateral and bonding requirements could limit the number and size of projects requiring bonds undertaken by the Company.  In the event contract bonding cannot be obtained at an economical price or collateral requirements are beyond the Company's financial capability the failure to obtain contract bonding could have a material adverse effect on the Company's business, financial condition and results of operations.





Limited Operating History; Anticipated Losses; Uncertainty Of Future Results





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





Potential Fluctuations In Annual Operating Results





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





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Limited Public Market, Possible Volatility Of Share Price





The Company's common stock is currently quoted on the  OTC  Bulletin Board under the ticker symbol GDIV. As of August 9, 2009, there were 15,369,885 shares of common stock outstanding.  There can be no assurance that a trading market will be sustained in the future. Factors such as, but not limited
to, technological innovations, new products, acquisitions or strategic alliances entered into by the Company or its competitors, failure to meet security analysts' expectations, government regulatory action, patent or proprietary rights developments, and market conditions for manufacturing stocks in general could have a material effect on the volatility of the Company's stock price.





Management Of Growth





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





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





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





Risks Associated With Acquisitions





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





Risk Of Penny Stock





Our common stock is deemed to be a "penny stock" as that term is defined in Rule 3a51-1 of the Exchange Act of 1934. Penny stocks are stocks (i) with a price of less than five dollars per share; (ii) that are not traded on a "recognized" national exchange; (iii) whose prices are
not quoted on the NASDAQ automated quotation system (NASDAQ-listed stocks must still meet requirement (i) above); or (iv) of an issuer with net tangible assets less than US$2,000,000 (if the issuer has been in continuous operation for at least three years) or US$5,000,000 (if in continuous operation for less than three years), or with average annual revenues of less than US$6,000,000 for the last three years.





A principal exclusion from the definition of a penny stock is an equity security that has a price of $5.00 or more, excluding any broker or dealer commissions, markups or markdowns.





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Since the Company's common stock was deemed a penny stock, section 15(g) and Rule 3a51-1 of the Exchange Act of 1934 would require broker-dealers dealing in the Company's common stock to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document
before effecting any transaction in a penny stock for the investor's account. Potential investors in the Company's common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be "penny stock."





Moreover, Rule 15g-9 of the Exchange Act of 1934 Commission requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial
situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement
from the investor, confirming that it accurately reflects the investor's financial situation, investment experience and investment objectives.  Compliance with these requirements may make it more difficult for investors in the Company's common stock to resell their shares to third parties or to otherwise dispose of them.





The Trading Price Of Our Common Stock May Decrease Due To Factors Beyond Our Control.





The trading price of the common stock is subject to significant fluctuations in response to numerous factors, including:





·
Variations in anticipated or actual results of operations;·
Announcements of new products or technological innovations by us or our competitors;





·
Changes in earnings estimates of operational results by analysts;·
Results of product demonstrations.





·
Inability of market makers to combat short positions on the stock;·
Inability of the market to absorb large blocks of stock sold into the market;





·
Developments or disputes concerning our licensed patents, trademarks or proprietary rights; and·
Comments about us or our markets posted on the Internet.





Moreover, the stock market from time to time has experienced extreme price and volume fluctuations, which have particularly affected the market prices for emerging growth companies and which often have been unrelated to the operating performance of the companies. These broad market fluctuations may adversely affect the market price of our
Common Stock. If our shareholders sell substantial amounts of their common stock in the public market, the price of our common stock could fall. These sales also might make it more difficult for us to sell equity or equity related securities in the future at a price we deem appropriate.





The Conversion of Outstanding Preferred Stock and Exercise of Warrants will Cause Dilution of the Holders of Common Stock





The Holders of the Preferred Stock have the right to convert their Preferred Stock into 176,317,644  shares of Common Stock and the Holders of Warrants have the right to purchase a total of  286,070,860  shares of  Common Stock.  In the event that the Holders of the Preferred Stock and/or
the Holders of the Warrants convert their Preferred Stock or exercise their Warrants, the Holders of Common Stock will experience immediate dilution in the net tangible value of their shares.





The Liquidity Of Our Stock Could Become Impaired





Our common stock currently is traded on the OTC Bulletin Board, which is generally considered to be a less efficient market than national exchanges such as NASDAQ. Consequently, the liquidity of our securities could be impaired, not only in the number of securities which could be bought and sold, but also through delays in the timing of
transactions, difficulties in obtaining price quotations, reduction in security analysts' and the media's coverage of ours, if any, and lower prices for our securities than might otherwise be attained. This circumstance could have an adverse effect on the ability of an investor to sell any shares of our Common Stock as well as on the selling price for such shares.  In addition, the market price of our Common Stock may be significantly affected by various additional factors, including, but not limited
to, our business performance, industry dynamics or changes in general economic conditions.





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ITEM 1B.  UNRESOLVED STAFF COMMENTS





Not applicable.




ITEM 2.  PROPERTIES





The Company's principal executive offices are located at 1200 Airport Drive, Chowchilla, California. The property consists of sixteen acres of real estate including a 100,000 square foot structure of usable space. The structure will be utilized by the Company's executive management team, as well as housing the operating entities of
Lutrex and Global Modular. The Company has entered into a three-year lease (including options for renewals) for the property.  The Company renewed the lease in February 2007 at a rate of $24,021 per month. The Company believes that the current facilities are suitable for its current needs.





ITEM 3.  LEGAL PROCEEDINGS





The Company is subject to legal proceedings and claims that arise in the ordinary course of its business.  Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters will not have material adverse effect on its financial position, results of operations or liquidity.





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





There were not any matters that were submitted during the fourth quarter of the 2008-2009 fiscal year end to a vote of the security holders.





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PART II.





ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS





Market Information





(a) The Company's Common Stock has been and is currently traded on the over-the-counter market and quotations are published on the OTC Bulletin Board under the symbol "GDIV". The Company began trading under this symbol on May 8, 2008. The Company previously traded under the symbol “GDVI" since January 3, 2002 and under the symbol  "GDIO"
which commenced on October 2000.





The following table sets forth the range of high and low bid prices of the Common Stock for each fiscal quarterly period. Prices reported represent prices between dealers, do not include retail markups, markdowns or commissions and do not represent actual transactions.





Per Share Common Stock Bid Prices by Quarter


For the Fiscal Year Ended on April 30, 2009





HIGH


LOWQuarter Ended April 30, 2009


.03



.03Quarter Ended January 31, 2009


.01



.01Quarter Ended October 31, 2008


.03



.02Quarter Ended July 31, 2008


.09



.09





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Per Share Common Stock Bid Prices by Quarter


For the Fiscal Year Ended on April 30, 2008





HIGH


LOWQuarter Ended April 30, 2008


.12



.12Quarter Ended January 31, 2008


.16



.11Quarter Ended October 31, 2007


.20



.16Quarter Ended July 31, 2007


.30



.26





The ability of individual stockholders to trade their shares in a particular state may be subject to various rules and regulations of that state. A number of states require that an issuer's securities be registered in their state or appropriately exempted from registration before the securities are permitted to trade in that state.
Presently, the Company has no plans to register its securities in any particular state. Further, most likely the Company's shares will be subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.





The Commission generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be a penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria
set by the Commission; authorized for quotation on the NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the issuer's net tangible assets (at least $2 million); or exempted from the definition by the Commission. The Company's shares are deemed to be a penny stock, trading in the shares will be subject to additional sales practice requirements of broker-dealers who sell penny stocks to persons other than established
customers and accredited investors, generally persons with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse.





For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of such securities and must have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery,
prior to the first transaction, of a risk disclosure document relating to the penny stock market. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information for the penny stocks held in the account and information on the limited market in penny stocks. Consequently, these rules may restrict the ability of broker-dealers to trade and/or
maintain a market in the Company's Common Stock and may affect the ability of stockholders to sell their shares.





Dividend Information





The Company has not declared or paid cash dividends on its Common Stock or made distributions in the past, and the Company does not anticipate that it will pay cash dividends or make cash distributions in the foreseeable future, other than non cash dividends described below. The Company currently intends to retain and invest future
earnings, if any, to finance its operations.





Transfer Agent





The transfer agent and registrar for our common stock is Fidelity Transfer Company, 1800 South West Temple, Suite 301, Salt Lake City, Utah 84115.





ITEM 6.  SELECTED FINANCIAL DATA





Not applicable





11
 Table of Contents





ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS





The following discussion contains forward-looking statements that are subject to significant risks and uncertainties about us, our current and planned products, our current and proposed marketing and sales, and our projected results of operations. There are several important factors that could cause actual results to differ materially
from historical results and percentages and results anticipated by the forward-looking statements. The Company has sought to identify the most significant risks to its business, but cannot predict whether or to what extent any of such risks may be realized nor can there be any assurance that the Company has identified all possible risks that might arise.





Investors should carefully consider all of such risks before making an investment decision with respect to the Company's stock. In particular, investors should refer to the section entitled, Risk Factors that May Affect Future Results and Market Price of Stock.





The following discussion and analysis should be read in conjunction with our financial statements and summary of selected financial data for the Company. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be
indicative of actual operating results in the future.  Such discussion represents only the best present assessment from our Management.





General Overview





The Company generates revenue from the sale of pre-fabricated, modular type structures to educational institutions, such as public and private schools, universities, etc., child-care providers and municipalities. Our product lines consist of a variety of re-locatable (portable) classroom designs, including both single-story and two-story
floor plans.





Effect of Related Prospective Accounting Pronouncement





EITF 07-5, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock” will become effective for the Company on May 1, 2009.  The Company’s warrants related to its Series B and C Preferred Stock both have reset provisions to the exercise price if the Company issues equity at
a price less than the exercise prices.  Upon the effective date, the provisions of this EITF will require a reclassification to liability based on the reset feature of the warrant agreements if the Company sells equity at a price below the exercise price of the warrants. The potential impact on the balance sheet would be an increase in derivative liability of approximately $2,482,000.





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





·
revenue recognition·
Inventories





·
allowance for doubtful accounts·
stock-based compensation





·
Intangible valuation





Revenue Recognition





The Company recognizes revenue when persuasive evidence of an arrangement exists, the price to the customer is fixed, collectability is reasonably assured and title and risk of ownership is passed to the customer, which is usually upon delivery.





In fiscal 2008 and 2009, the Company entered into several fixed-price arrangements whereby the Company is to construct and install several modular units for customers. Revenue from these construction-type fixed-price contracts is recognized in accordance with SOP No. 81-1, "Accounting for Performance of Construction-Type and Certain
Production-Type Contracts", on the basis of the estimated percentage of completion.





12
 Table of Contents





Under the percentage-of-completion method, progress toward completion is measured by the ratio of costs incurred to total estimated costs. Revenue and gross profit may be adjusted prospectively for revisions in estimated total contract costs. If the current estimates of total contract revenue and contract cost indicate a loss, a provision
for the entire loss on the contract is recorded in the period in which it becomes evident. The total estimated loss includes all costs allocable to the specific contract. Each construction contract is reviewed individually to determine the appropriate basis of recognizing revenue. Revisions to the estimates at completion are reflected in results of operations as a change in accounting estimate in the period in which the facts that give rise to the revision become known by management.





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





Inventories





We value our inventories, which consist of raw materials, work in progress and finished goods, at the lower of cost or market.  Cost is determined on the first-in, first-out method (FIFO) and includes the cost of merchandise and freight.  The Company regularly reviews the period over which its inventories will be
converted to sales.  Any inventories expected to convert to sales beyond 12 months from the balance sheet date are classified as non-current.  The Company periodically reviews the carrying value of inventories and non-cancelable purchase commitments by reviewing revenue forecasts, material usage requirements, and the engineering design changes. These forecasts of changes in design, future sales, and pricing are estimates. The Company may record charges to write down inventories based on these reviews
and forecasts. If there is change in demand, additional write downs of inventories may be required which will negatively impact gross margins. Inventory impairment charges are considered to permanently establish a new cost basis for inventory and are not subsequently reversed to income even if circumstances later suggest that increased carrying amounts are recoverable, except when the associated inventory is disposed of or sold.





Allowance for Uncollectible Accounts





We are required to estimate the collectability of our trade receivables. A considerable amount of judgment is required in assessing the realization of these receivables including the current creditworthiness of each customer and related aging of the past due balances. In order to assess the collectability of these receivables, we perform
ongoing credit evaluations of our customers' financial condition. Through these evaluations we may become aware of a situation where a customer may not be able to meet its financial obligations due to deterioration of its financial viability, credit ratings or bankruptcy. The reserve requirements are based on the best facts available to us and are reevaluated and adjusted as additional information is received. Our reserves are also based on amounts determined by using percentages applied to certain aged receivable
categories. These percentages are determined by a variety of factors including, but are not limited to, current economic trends, historical payment and bad debt write-off experience. We are not able to predict changes in the financial condition of our customers and if circumstances related to our customers deteriorate, our estimates of the recoverability of our receivables could be materially affected and we may be required to record additional allowances. Alternatively, if we provided more allowances than are
ultimately required, we may reverse a portion of such provisions in future periods based on our actual collection experience. As of April 30, 2009 we determined a reserve of $154,945 was required against our account receivables.





Stock-Based Compensation





Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS 123R, using the modified-prospective transition method. Under this transition method, stock-based compensation expense is recognized in the consolidated financial statements for granted, modified, or settled stock options. Compensation expense
recognized included the estimated expense for stock options granted on and subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123R, and the estimated expense for the portion vesting in the period for options granted prior to, but not vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123. Results for prior periods have not been restated, as provided for under the modified-prospective
method.





Comparison of Years Ended April 30, 2009 and 2008 Revenues





The Company's total revenues were $5,230,458 for the year ended April 30, 2009 compared to $5,701,556 for the same time period in 2008, a decrease of $471,098 or approximately 9%.   The Company secured funding of $1,750,000 in July 2008 and an additional $6,000,000 in December 2008 from Vicis Capital Master Fund.  Subsequent
to the April 30, 2009, the Company also secured funding of $2,150,000 in July 2009.  The funds were utilized for working capital and to purchase the assets and raw materials from a major competitor that declared bankruptcy.  During the quarter ending April 30, 2009, management focused on disassembling and moving the equipment and raw material from two locations owned by the competitor to the Chowchilla facility.  The newly acquired equipment will enable the Company to fabricate some
of its steel components which will reduce the manufacturing cost.





The Company’s market has been affected due to the poor economic conditions in California.  Many of the school districts have put their future projects on hold or reducing the size of their current projects.  The schools are starting to lease refurbished modular units for their needs instead of purchasing new
buildings.  Global Modular currently has refurbished building in inventory and is actively pursuing the used building market.  The Company is actively pursuing other markets that are opening up in the state and federal government agencies.  Also, the Company has received the necessary licenses from for the Department of Housing (DOH) to manufacture and sale DOH buildings to the commercial market.





13
 Table of Contents





Gross Profit





For the year ended April 30, 2009, the Company's gross profit margin was $1,677,562, approximately 32% as compared to $36,279, approximately 1% for the year ended April 30, 2008.  The Company’s gross profit margin except for the year ended April 30, 2008 averages approximately 30%.  For the year ended April 30,
2009, we took over five projects for a manufacturing firm that was in bankruptcy and we received the raw materials for the projects at no cost as part of the agreement to take over the production of these modular buildings.  Not having to pay for the raw material related to these projects increased our gross profit margin substantially.  Also contributing to the low gross profit margin in 2008 were costs over runs for site work on two major projects.





Operating and Other Expenses





The Company's general and administrative expenses for the year ended April 30, 2009 was $ 2,227,629 compared to $1,228,362 for the same period in 2008, a increase of $999,267. This increase is mainly attributable to the general and administrative costs in connection with the fees charged to secure the two funding totaling $7,750,000.





The Company's interest expenses, net, for the year ended April 30, 2009 was $487,473 compared to $353,892 for the same period in 2008, an increase of $133,581. The increase is due to the Company’s executing a promissory note for $6,000,000 in December 2008.  This funding has allowed the Company to purchase valuable equipment
from a competitor substantially below market prices.





Liquidity and Capital Resources





The Company incurred a loss from operations of $1,466,182 for the year ended April 30, 2009. We generated a negative cash flow of $4,595,862 from operating activities. Cash flows used in investing activities was $1,874,113 during this period. Cash flow was generated from the sale of Series C Preferred Stock for $1,750,000
and a $6,000,000 Promissory Note from Vicis Capital.


The Company secured additional funding of $2,150,000 from Vicis Capital in July 2009,





While the Company has raised capital to meet its current  working capital and financing needs, additional financing could be required in the future to order to meet the Company's projected cash  flow deficits from operations and development.





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





In prior periods, the Company has borrowed funds from significant shareholders of the Company to satisfy certain obligations. There are no assurances that the Company will be able to borrow funds from significant shareholders of the Company in the future.





As the Company continues to expand, the Company will incur additional costs for personnel. In order for the Company to attract and retain quality personnel, management anticipates it will have to offer competitive salaries, issue common stock to consultants and employees, and grant Company stock options to current and future employees.





The company's operations are in the Western United States and there are no seasonal aspects that would have a material adverse effect on the Company's financial condition or results of operations.





Inflation





The effect of inflation on the Company's revenue and operating results was not significant.





Off-Balance Sheet Arrangements





The Company does not maintain off-balance sheet arrangements nor does it participate in non-exchange traded contracts requiring fair value accounting treatment.





14
 Table of Contents





Business Concentration





During the year ended April 30, 2009, the Company recognized approximately $3,399,798 or 65% of its revenues from sales of its products to four (4) customers and $1,085,058  (63%) of the total  accounts  receivable  at April  30,  2009  were  due  from
three (3)  major customers.  While the Company's management considers its relationships with the customers to be satisfactory, given the concentration of its sales to a few key customers, its continued relationships may be subject to the policies and practices of the customers. The Company management continues to concentrate its efforts on expanding its customer base in order to reduce its reliance on its current customers.





New Accounting Pronouncements





In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R), “Business Combinations” (“Statement 141(R)”) and Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“Statement 160”). Statements 141(R) and 160 require
most identifiable assets, liabilities, noncontrolling interests and goodwill acquired in a business combination to be recorded at “full fair value” and require noncontrolling interests (previously referred to as minority interests) to be reported as a component of equity.  Both statements are effective for fiscal years beginning after December 15, 2008.  Statement 141(R) will be applied to business combinations occurring after the effective date.  Statement 160 will be
applied prospectively to all noncontrolling interests, including any that arose before the effective date.  The Company does not expect the adoption of Statements 141(R) and 160 will have a material impact, if any, on the Company’s financial position or results of operations.





In February 2008, the FASB issued a FASB Staff Position (FSP) on Accounting for Transfers of Financial Assets and Repurchase Financing Transactions (FSP FAS 140-3). This FSP addresses the issue of whether the transfer of financial assets and the repurchase financing transactions
should be viewed as two separate transactions or as one linked transaction. The FSP includes a rebuttable presumption that the two transactions are linked unless the presumption can be overcome by meeting certain criteria. The FSP will be effective for fiscal years beginning after November 15, 2008 and will apply only to original transfers made after that date; early adoption will not be allowed. The Company does not expect the adoption of FSP FAS 140-3 to have a material impact, if any, on its consolidated
financial statements.





In March 2008, the Financial Accounting Standards Board (FASB) issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133 (SFAS 161).  The SFAS 161 requires companies to provide enhanced
disclosures regarding derivative instruments and hedging activities and requires companies to better convey the purpose of derivative use in terms of the risks they intend to manage. Disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect a company’s financial position, financial
performance, and cash flows are required. This Statement retains the same scope as SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and is effective for fiscal years and interim periods beginning after November 15, 2008. The Company does not expect the adoption of SFAS No. 161 to have a material impact, if any, on its consolidated financial statements.





In April 2008, the FASB issued FSP No. 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP 142-3”). FSP 142-3 amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under FASB Statement No.
142, “Goodwill and Other Intangible Assets”. This new guidance applies prospectively to intangible assets that are acquired individually or with a group of other assets in business combinations and asset acquisitions. FSP 142-3 is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. Early adoption is prohibited. The Company is currently evaluating the impact, if any, that FSP 142-3 will have on its consolidated financial statements.





In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented
in conformity with generally accepted accounting principles (the GAAP hierarchy). SFAS 162 will become effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” The Company does not currently expect the adoption of SFAS 162 to have a material effect on its consolidated results of operations and financial condition.





In May 2008, the FASB issued FSP Accounting Principles Board (“APB”) 14-1 “Accounting for Convertible Debt instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”). FSP APB 14-1 requires the issuer of certain convertible debt instruments that may
be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s non-convertible debt borrowing rate. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008 on a retroactive basis. The Company currently believes the adoption of FSP APB 14-1 will not have a material effect on its consolidated results of operations and financial condition.





EITF 07-5, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock” will become effective for the Company on May 1, 2009.  The Company’s warrants related to its Series B and C Preferred Stock both have reset provisions to the exercise price if the Company issues equity
at a price less than the exercise prices.  Upon the effective date, the provisions of this EITF will require a reclassification to liability based on the reset feature of the warrant agreements if the Company sells equity at a price below the exercise price of the warrants. The potential impact on the balance sheet would be an increase in derivative liability of approximately $2,482,000.





ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Not applicable





15
 Table of Contents





ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA














CONSOLIDATED FINANCIAL STATEMENTS


APRIL 30, 2009 AND 2008








FORMING A PART OF ANNUAL REPORT


PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934





GLOBAL DIVERSIFIED INDUSTRIES, INC.








16
 Table of Contents








GLOBAL DIVERSIFIED INDUSTRIES, INC.


Index to Financial Statements





PageReports of Independent Registered Public Accounting Firms
F-1,  F-2Consolidated Balance Sheets at April 30, 2009 and 2008
F-3Consolidated Statements of Losses for the years ended April 30, 2009 and 2008
F-4Consolidated Statements of Stockholders’ Equity for the two years ended April 30, 2009
F-5Consolidated Statements of Cash Flows for the years ended April 30, 2009 and 2008
F-6Notes to Consolidated Financial Statements
F-7 to F-24








17
 Table of Contents





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








To the Board of Directors


Global Diversified Industries, Inc.


Chowchilla, California





We have audited the accompanying consolidated balance sheet of Global Diversified Industries, Inc. (the “Company”) as of April 30, 2009 and the related statements of losses, stockholders' equity and cash flows for the twelve month period then ended.  The financial statements for the year ended
April 30, 2008 were audited by other auditors whose report expressed an unqualified opinion on those statements.  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 audit.


We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. 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 audit provides a reasonable basis for our opinion.





In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Global Diversified Industries, Inc. as of April 30, 2009 and the results of its operations and cash flows for the period described above in conformity with accounting principles generally accepted in
the United States of America.














M&K CPAS, PLLC





www.mkacpas.com


Houston, Texas


August 12, 2009











F-1
 Table of Contents








REPORTOF REGISTERED INDEPENDENT CERTIFIED PUBLIC ACCOUNTING FIRM








To the Board of Directors and Stockholders of


Global Diversified Industries, Inc.


Chowchilla, California








We have audited the accompanying consolidated balance sheet of Global Diversified Industries, Inc., and its subsidiaries (the “Company”) as of April 30, 2008 and the related consolidated statements of losses, stockholders’ equity, and cash flows for the
year then ended.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these consolidated financial statements based upon our audits.




We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements.  The Company is not required
to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly we express no such opinion. 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 our audits provide a reasonable basis for our opinion.





In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of April 30, 2008, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United
States of America.





As discussed in Note S, the Company has restated the consolidated balance sheet as of April 30, 2008 and the related consolidated statements of losses, stockholders’ equity, and cash flows for the year then ended.








/S/ RBSM LLP


RBSM LLP





New York, New York


August 13, 2008 , except for Note A, Note I, and Note T as to which date is October 23, 2008.





F-2
 Table of Contents





GLOBAL DIVERSIFIED INDUSTRIES, INC.


CONSOLIDATED BALANCE SHEETS


AS OF APRIL 30, 2009 AND 2008


2009


2008RestatedASSETS:Current assets:Cash and cash equivalents

$
335,799


$
53,193Accounts receivable, net of allowance for doubtful accounts of $154,945 at April 30, 2009 and $0 at April 30, 2008, respectively


1,563,830



386,040Inventories (Note C)


4,583,275



2,357,378Advance to employees


15,815



16,737Prepaid expenses


40,554



246,196Other current asset


91,667



-Total current assets


6,630,940



3,059,544Property, plant and equipment (Note D):Property, plant and equipment, at cost


4,845,445



3,081,437Less: accumulated depreciation


(1,587,861
)


(1,291,771
)Total property, plant and equipment, net


3,257,584



1,789,666Other assets:Inventories-long term (Note C)


661,738



895,929Deferred Financing charges, net of accumulated amortization of $213,589 (Note N )


994,522



-Deposit


37,375



113,614Intangible assets, net of accumulated amortization of $375,280 at April 30, 2008 and $284,170 at April 30, 2008, respectively (Note B)


920,662



901,670Total other assets


2,614,297



1,911,213Total Assets

$
12,502,821


$
6,760,423


LIABILITIES AND STOCKHOLDERS’ EQUITYCurrent liabilities:Accounts payable and accrued liabilities (Note E)

$
787,913


$
493,156Notes payable to related parties, current portion (Note G)


-



5,500Notes payable, current portion (Note G)


100,000



22,384Dividend payable


57,444



69,686Total current liabilities


945,357



590,726Long-term liabilities:Notes payable, long term portion, net of debt discount (Note G)


5,499,476



246,710Total long-term liabilities


5,499,476



246,710Commitment and contingencies (Note Q)Convertible Redeemable Preferred Stock, Series C, par value $.001 per share; 2,750,000 shares authorized,
1,750,000 and 0 shares issued and outstanding at April 30, 2009 and April 30, 2008 respectively (Note J)


1,750,000



-Discount on Preferred Stock Series C


(1,744,140
)


-Net Preferred Stock Series C


5,860



-Convertible Redeemable Preferred Stock, Series B, par value $.001 per share; 3,500,000 share authorized;
3,484,294 shares issued and outstanding at April 30, 2009 and April 30,2008, respectively (Note I)


3,484,294



3,484,294Discount on Preferred Stock Series B


(3,439,670
)


( 3,483,900
)Net Preferred Stock Series B


44,624



394Stockholders' Equity:Convertible Redeemable Preferred Stock, Series A,  par value $.001 per share; 10,000,000 share authorized;
no shares issued and outstanding at April 30, 2008Common stock, par value $.001 per share; 2,750,000,000 shares authorized;
15,369,885 shares issued and outstanding at April 30, 2009 and April 30, 2008, respectively  (Note I)


15,370



15,370Additional paid-in capital


13,334,258



11,783,165Treasury stock


(50
)


(50
)Accumulated deficit


(7,342,074
)


( 5,875,892
)Total stockholders' equity


6,007,504



5,922,593Total liabilities and stockholders' equity

$
12,502,821


$
6,760,423





See accompanying notes to consolidated financial statements




F-3
 Table of Contents





GLOBAL DIVERSIFIED INDUSTRIES, INC.


CONSOLIDATED STATEMENTS OF LOSSES


FOR THE YEARS ENDED APRIL 30, 2009 AND 2008





2009


2008RestatedRevenue

$
5,230,458


$
5,701,556Impairment of Inventories (Note  C )


234,191



-Cost of goods sold


3,318,705



5,665,277Gross profit


1,677,562



36,279Operating expenses:Selling, general and administrative expenses


2,227,629



1,228,362Depreciation and amortization (Notes B and D)


387,202



345,840Total operating expense


2,614,831



1,574,202Loss from operations


(937,269
)


(1,537,923
)Other income (expense):Interest (expense), net


(487,473
)


(353,892
)Guaranty expense (Note O)


(41,440
)


-Loss from operations before income taxes


(1,466,182
)


(1,891,815
)Income taxes benefit (expense)


-



(96,000
)Net loss


(1,466,182
)


(1,987,815
)Preferred Dividends, paid or accrued


595,339



69,686Accretion of discount on preferred stock


50,090



394Total preferred stock dividends


645,429



70,080Net loss attributable to common shareholders


(2,111,611
)


(2,057,895
)(Losses) per common share (Note Q):Basic and diluted earnings per share


(0.14
)

$
(0.21
)Weighted average shares outstanding for computation:Basic and diluted


15,369,885



9,774,281





See accompanying notes to consolidated financial statements




F-4
 Table of Contents





GLOBAL DIVERSIFIED  INDUSTRIES, INC.


CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS’ EQUITY


FOR THE TWO YEARS ENDED APRIL 30, 2009





Balance  May 1, 2007

413,092


413


733,374


8,360,461


8,361


6,572,285


916,600


(50
)

(3,888,077
)

4,342,906Common stock issued in exchange for services rendered

-


-


-


100,000


100


17,900


-


-


-


18,000Common stock issued in exchange for accrued expenses

-


-


-


290,960


291


86,997


-


-


-


87,288Sale of common stock

-


-


-


791,665


792


249,208


-


-


-


250,000Common stock issued in exchange for stock subscribed

-


-


-


3,536,919


3,536


896,464


(900,000
)

-


-


-Series A preferred stock issued in exchange for stock subscribed

8,333,332


8,333


(733,374
)

-


-


725,041


-


-


-


-Conversion of Series A to common stock

(8,746,424
)

(8,746
)




2,289,880


2,290


6,456


-








-Cancellation of common stock subscription

-


-


-


-


-


16,600


(16,600
)

-


-


-Beneficial conversion feature relating to the issuance of Series B Redeemable Preferred Stock

-


-


-








1,009,984


-


-


-


1,006,984Relative fair value of investor warrants issued in connection with Series B Redeemable Preferred Stock
















1,590,177











1,590,177Fair value of broker-dealer warrants issued in connection with Series B Redeemable Preferred Stock
















682,133











682,133-


-


-


-








-


-


-Series B preferred stock dividend

-


-


-


-


-


(70,080
)

-


-





(70,080
)Net loss

-


-


-


-


-


-


-


-


(1,987,815
)

(1,987,815
)Balance, April 30, 2008 (Restated)

-

$
-

$
-


15,369,885

$
15,370

$
11,783,165

$
-

$
(50
)
$
(5,875,892
)
$
5,922,593Guaranty Warrant Expense

-


-


-








41,152





-


-


41,152Fair value of broker warrants issued in connection with Series C Redeemable Preferred Stock
















173,226











173,226Beneficial conversion feature relating to issuance of Series C Redeemable Preferred Stock
















563,939


-








563,939Fair value of investor warrants issued in connection with Series C Redeemable Preferred Stock

-


-


-


-


-


1,012,835





-


-


1,012,835Fees related to closing Series C Preferred Stock Sale
















(250,000
)










(250,000
)Accretion on Series B Preferred Stock

-


-


-








(44,624
)

-


-


-


(44,624
)Accretion on Series C Preferred Stock
















(5,860
)










(5,860
)Series B preferred stock dividends
















(418,169
)










(418,169
)Series C preferred stock dividends
















(177,008
)










(177,008
)Debt discount on DOF note

-


-


-


-





596,064


-


-


-


596,064Amortization of financing costs on DOF note

-


-


-


-


-


59,538


-


-





59,538Net loss

-


-


-


-


-


-


-


-


(1,466,182
)

(1,466,182
)Balance, April 30, 2009

-

$
-

$
-


15,369,885

$
15,370

$
13,334,258

$
-

$
(50
)
$
(7,342,074
)
$
6,007,504





See accompanying notes to consolidated financial statements





F-5
 Table of Contents





GLOBAL DIVERSIFIED INDUSTRIES, INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS


FOR THE YEARS ENDED APRIL 30, 2009 AND 2008







2009


2008RestatedCash flows from operating activities:Income (loss) from continuing operations


( 1,466,182
)


(1,987,815
)Adjustment to reconcile net income (loss) to net cash used in operating activities:Bad debt expense


154,945



-Deferred taxes


-



96,000Depreciation and amortization


387,202



345,840Common stock issued in exchange for services rendered






18,000Amortization of Guaranty Expense


41,152



-Inventory impairment


234,191



-Common stock issued in exchange for rent






87,282Amortization of debt discount


60,263



19,380Change in assets and liabilities:(Increase)/decrease in accounts receivable


(1,332,735
)


296,322(Increase) in inventory


(2,225,897
)


(279,767
)(Increase) in prepaid expense and others


(744,480
)


(82,310
)(Increase)/decrease in employee advances


922



(14,992
)(Decrease) in accounts payable and accrued expenses


294,757



(705,240
)Net cash provided by (used in) operating activities:


(4,595,862
)


(2,207,300
)Cash flows from investing activities:Intangible assets


(110,103
)Capital expenditure, net


(1,764,010
)


(28,950
)Net cash (used in) investing activities


(1,874,113
)


(28,950
)Cash flows from financing activities:Proceeds from sale of common stock and stock subscription


-



250,000Proceeds from sale of Series B preferred stock


-



2,000,000Preferred dividends paid


(607,419
)


-Proceeds from sale of preferred stock, net of cost


1,500,000



-Proceeds from (repayments of) notes payable, net


5,865,500



(702,626
)Proceeds from note payable to related parties, net of repayments


(5,500
)


435,500Net cash provided by (used in) financing activities


6,752,581



1,932,874Net increase (decrease) in cash and cash equivalents


282,606



(303,376
)Cash and cash equivalents at beginning of year


53,193



356,569Cash and cash equivalents at end of year

$
335,799


$
53,193Supplemental Disclosures of Cash Flow Information:Cash paid during the period for interest

$
172,603


$
236,399
 Cash paid during the period for income taxes


-



3,200Deferred financing costs on Vicis Master Fund Note


59,538Initial discount recorded on Vicis Master Fund Note


595,381



-Common stock issued for services


-



18,000Common stock subscribed in exchange for conversion of note payable


-



700,000Common stock issued in exchange for factory rent


-



87,288Series B Preferred Stock issued in exchange for notes payable


-



1,484,294Accretion of preferred stock discounts charged to paid-in-capital


50,090



-Amortization of beneficial conversion feature of convertible notes & debt discount


60,263



19,380Amortization of deferred financing cost


4,140



-





See accompanying notes to consolidated financial statements





F-6
 Table of Contents





GLOBAL DIVERSIFIED INDUSTRIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


APRIL 30, 2009 AND 2008





NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





A summary of the significant accounting policies applied in the preparation of the accompanying consolidated financial statements follows.





Business and Basis of Presentation





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





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





Cash Equivalents





For purposes of the Statements of Cash Flows, the Company considers all highly liquid investments purchased with a maturity date of three months or less to be cash equivalents. There were no cash equivalents at April 30, 2009 or April 30, 2008, respectively





Inventories





Inventories are stated at the lower of cost or market determined by the first-in, first-out method. Inventories consist primarily of modular buildings and raw materials for modular structures (Note C).





Property and Equipment





Property and equipment are recorded on the basis of cost.  For financial statement purposes, property and equipment are depreciated using the straight-line method over their estimated useful lives (Note D).





Impairment of Long Lived Assets





The Company has adopted Statement of Financial Accounting Standards No. 144 (“SFAS 144”). The Statement requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period.  The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should an impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting
from the use and ultimate disposition of the asset.  SFAS 144 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell.  In the fiscal year ended April 30, 2009, the Company had an impairment loss of $234,191 which is discussed in Note C.






F-7
 Table of Contents





GLOBAL DIVERSIFIED INDUSTRIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


APRIL 30, 2009AND 2008





NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





Revenue Recognition





For revenue from product/contract sales, the Company recognizes revenue in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition (“SAB104”), which superceded Staff Accounting Bulletin No. 101, Revenue
Recognition in Financial Statements (“SAB101”).  SAB 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectibility is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectibility
of those amounts.  Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.  There were no deferred revenues at April 30, 2009.  SAB
104 incorporates Emerging Issues Task Force 00-21 (“EITF 00-21”), Multiple-Deliverable Revenue Arrangements.EITF 00-21 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing EITF 00-21 on the Company's consolidated financial position and results of operations was not significant.





The Company recognizes revenue when persuasive evidence of an arrangement exists, the price to the customer is fixed, collectability is reasonably assured and title and risk of ownership is passed to the customer, which is usually upon shipment





In fiscal 2009 and 2008, the Company entered into several fixed-price arrangements whereby the Company is to construct and install several modular units for customers. Revenue from these construction-type fixed-price contracts is recognized in accordance with SOP No. 81-1, "Accounting for Performance of Construction-Type and Certain Production-Type
Contracts", on the basis of the estimated percentage of completion.





Under the percentage-of-completion method, progress toward completion is measured by the ratio of costs incurred to total estimated costs. Revenue and gross profit may be adjusted prospectively for revisions in estimated total contract costs. If the current estimates of total contract revenue and contract cost indicate a loss, a provision
for the entire loss on the contract is recorded in the period in which it becomes evident. The total estimated loss includes all costs allocable to the specific contract. Each construction contract is reviewed individually to determine the appropriate basis of recognizing revenue. Revisions to the estimates at completion are reflected in results of operations as a change in accounting estimate in the period in which the facts that give rise to the revision become known by management.  As of April 30,
2009 there were no projects utilizing the  percentage- of- completion method, therefore, there was no cost in excess or billing in excess recorded.





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





Advertising





The Company follows the policy of charging the costs of advertising to expenses as incurred.  Advertising costs were $2,800 and  $4,614 for the years ended April 30, 2009 and April 30, 2008, respectively.





F-8
 Table of Contents





GLOBAL DIVERSIFIED INDUSTRIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


APRIL 30, 2009 AND 2008





NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





Research and Development





The Company accounts for research and development costs in accordance with the Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 2 (“SFAS 2”), “Accounting for Research and Development Costs.”  Under SFAS 2, all research and development costs must be charged to
expense as incurred.  Accordingly, internal research and development costs are expensed as incurred.  Third-party research and developments costs are expensed when the contracted work has been performed or as milestone results have been achieved.  Company-sponsored research and development costs related to both present and future products are expensed in the period incurred.  The Company incurred no expenditures on research and product development for the years ended April
30, 2009 and 2008.





Income Taxes





Income taxes are provided based on the liability method for financial reporting purposes in accordance with the provisions of Statements of Financial Standards No. 109, “Accounting for Income Taxes”.  Under this method deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be removed or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of operations in the period that includes the enactment date.





Stock Based Compensation





The Company is required to recognize expense of options or similar equity instruments issued to employees using the fai-value-based method of accounting for stock-based payments in compliance with SFAS No. 123(R).  “Share-Based Payment” SFAS No. 123(R) covers a wide range of share-based compensation arrangements including
share options, restricted share plans, performance –based awards, share appreciation rights, and employee share purchase plans.  Application of this pronouncement requires significant judgment regarding the assumptions used in the selected option pricing model, including stock price volatility and employee exercise behavior.  Most of these inputs are either highly dependent on the current economic environment at the date of grant or forward-looking over the expected term of the award.  On
January 1, 2006, the Company authorized its Stock Option Plan.  As of April 30, 2009, the Company has no awards of stock-based employee compensation issued or outstanding.





Segment Information





Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“SFAS 131”) establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in
interim financial reports issued to stockholders.  SFAS 131 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources and assess performance.  The information disclosed herein materially represents
all of the financial information related to the Company’s principal operating segment.





Use of Estimates





The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.
The Company evaluates, on an on-going basis, its estimates and judgments, including those related to revenue recognition, bad debts, excess inventory, impairment of intangible assets, income taxes, contingencies and litigation. Its estimates are based on historical experience and assumptions that the Company believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or conditions.






F-9
 Table of Contents





GLOBAL DIVERSIFIED INDUSTRIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


APRIL 30, 2009 AND 2008





NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





Concentration of Credit Risk





Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and trade receivables.  The Company places its cash and temporary cash investments with credit quality institutions.  At times, such investments may be in excess
of the FDIC insurance limit. The Company periodically reviews its trade receivables in determining its allowance for doubtful accounts. The allowance for doubtful accounts was $154,945 at April 30, 2009.





Comprehensive Income (Loss)





The Company adopted Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive Income” (SFAS 130 “) establishes standards for the reporting and displaying of comprehensive income and its components. Comprehensive income is defined as the change in equity of a business during a period from transactions
and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. SFAS 130 requires other comprehensive income (loss) to include foreign currency translation adjustments and unrealized gains and losses on available-for-sale securities.





Net Earnings (Losses) Per Common Share





The Company computes earnings per share under Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (“SFAS 128”). Net earnings (losses) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during
the year. Dilutive common stock equivalents consist of shares issuable upon conversion of convertible preferred shares and the exercise of the Company's stock options and warrants (calculated using the treasury stock method).  Basic and dilutive weighted average shares are the same due to the anti-dilutive nature of possible common stock equivalents.





Reverse Stock Split





On May 21, 2008, the Company affected a one-to-twenty reverse stock split of our common stock.  We did not reduce the number of shares we are authorized to issue or change the par value of the common stock.  All references to share value in these consolidated financial statements have been restated to reflect this split.





Reclassifications





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





Fair Value of Financial Instruments





Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments" ("SFAS 107"), defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. The Company includes fair value information in the notes to
consolidated financial statements when the fair value of its financial instruments is materially different from the book value. The carrying value of the Company’s cash and cash equivalents, short-term debt securities held to maturity, time deposits, receivables, other current assets, accounts payable, and accrued liabilities, included in the accompanying balance sheets, approximate the estimated fair value of those instruments because of their short-term nature. The fair value of the notes payable to banks
based on the interest rates currently available for borrowings with similar terms and maturities approximates the carrying amount of those borrowings.





Use of Lattice Model





Lattice Valuation Model





Beginning in the quarter ended October 31, 2008, the Company is now using a lattice valuation model to determine the fair value of warrants, with the assistance of a valuation consultant. The lattice model values the warrants based on a probability weighted discounted cash flow model. This model is based on future projections that the warrant
holder exercises it right to convert the warrants for settlement of the features included within the instrument. The Company uses the model to analyze (a) the underlying economic factors that influence which of these events  will occur, (b when  they  are  likely  to  occur,  and  (c)  the common stock price and specific terms of the warrants
such as interest rate and exercise price that will be in effect when they occur. Based on the analysis of these factors, the Company uses the model to develop a set of potential scenarios. Probabilities of each scenario occurring during the remaining term of the warrants are determined based on management's projections. These probabilities are used to create a cash flow projection over the term of the warrants and determine the probability that the projected cash flow will be achieved





F-10
 Table of Contents


GLOBAL DIVERSIFIED INDUSTRIES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 APRIL 30, 2009 AND 2008




NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





New Accounting Pronouncements





In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R), “Business Combinations” (“Statement 141(R)”) and Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“Statement 160”). Statements 141(R) and 160 require
most identifiable assets, liabilities, noncontrolling interests and goodwill acquired in a business combination to be recorded at “full fair value” and require noncontrolling interests (previously referred to as minority interests) to be reported as a component of equity.  Both statements are effective for fiscal years beginning after December 15, 2008.  Statement 141(R) will be applied to business combinations occurring after the effective date.  Statement 160 will be
applied prospectively to all noncontrolling interests, including any that arose before the effective date.  The Company does not expect the adoption of Statements 141(R) and 160 will have a material impact, if any, on the Company’s financial position or results of operations.





In February 2008, the FASB issued a FASB Staff Position (FSP) on Accounting for Transfers of Financial Assets and Repurchase Financing Transactions (FSP FAS 140-3). This FSP addresses the issue of whether the transfer of financial assets and the repurchase financing transactions should be viewed as two separate transactions or
as one linked transaction. The FSP includes a rebuttable presumption that the two transactions are linked unless the presumption can be overcome by meeting certain criteria. The FSP will be effective for fiscal years beginning after November 15, 2008 and will apply only to original transfers made after that date; early adoption will not be allowed. The Company does not expect the adoption of FSP FAS 140-3 to have a material impact, if any, on its consolidated financial statements.





In March 2008, the Financial Accounting Standards Board (FASB) issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133 (SFAS 161).  The SFAS 161 requires companies to provide enhanced
disclosures regarding derivative instruments and hedging activities and requires companies to better convey the purpose of derivative use in terms of the risks they intend to manage. Disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect a company’s financial position, financial
performance, and cash flows are required. This Statement retains the same scope as SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and is effective for fiscal years and interim periods beginning after November 15, 2008. The Company does not expect the adoption of SFAS No. 161 to have a material impact, if any, on its consolidated financial statements.





In April 2008, the FASB issued FSP No. 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP 142-3”). FSP 142-3 amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under FASB Statement No.
142, “Goodwill and Other Intangible Assets”. This new guidance applies prospectively to intangible assets that are acquired individually or with a group of other assets in business combinations and asset acquisitions. FSP 142-3 is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. Early adoption is prohibited. The Company is currently evaluating the impact, if any, that FSP 142-3 will have on its consolidated financial statements.





In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented
in conformity with generally accepted accounting principles (the GAAP hierarchy). SFAS 162 will become effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” The Company does not currently expect the adoption of SFAS 162 to have a material effect on its consolidated results of operations and financial condition.





In May 2008, the FASB issued FSP Accounting Principles Board (“APB”) 14-1 “Accounting for Convertible Debt instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”). FSP APB 14-1 requires the issuer of certain convertible debt instruments that may
be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s non-convertible debt borrowing rate. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008 on a retroactive basis. The Company currently believes the adoption of FSP APB 14-1 will not have a material effect on its consolidated results of operations and financial condition.





EITF 07-5, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock” will become effective for the Company on May 1, 2009.  The Company’s warrants related to its Series B and C Preferred Stock both have reset provisions to the exercise price if the Company issues equity
at a price less than the exercise prices.  Upon the effective date, the provisions of this EITF will require a reclassification to liability based on the reset feature of the warrant agreements if the Company sells equity at a price below the exercise price of the warrants.  The potential impact on the balance sheet would be an increase in derivative liability of approximately $2,482,000





F-11
 Table of Contents


GLOBAL DIVERSIFIED INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2009 AND 2008





NOTE B- ACQUISITION OF INTANGIBLE ASSETS





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





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





Trade name

$
350,000Building engineering and architectural plans


150,000Total

$
500,000





The trade name acquired is considered to have an undeterminable life, and as such will not be amortized. Instead, the trade name is tested annually for impairment, with any impairment charged against earnings in the Company’s consolidated statement of earnings. An independent appraiser assessed the value of the trade name acquired
and determined that the fair value of the trade name exceeded its recorded book value at April 30, 2005. The building engineering and architectural plans acquired have estimated useful lives of ten years.





The Company has adopted  SFAS No. 142,  Goodwill  and Other  Intangible  Assets, whereby the Company  periodically test its intangible assets for impairment.  On an annual basis, and when there is reason to suspect that their values have been diminished or impaired, these
assets are tested for impairment,  and write-downs will be included in results from operations.  There was no impairment of acquired intangibles as of April 30, 2009.





Total identifiable intangible assets acquired and their carrying value at April 30, 2009 are:





Gross Carrying Amount


Accumulated Amortization


Net


Residual Value

Weighted Average
Amortization
Period (Years)Amortized Identifiable Intangible Assets:Building engineering and architectural plans

$
945,942


$
(375,280
)

$
570,662


$
-

10.0Total Amortized Identifiable Intangible Assets


945,942



(375,280
)


570,662



-

10.0Unamortized Identifiable Intangible Assets:Trade Name


350,000



-



350,000



350,000

-Total Amortized Identifiable Intangible Assets


350,000



-



350,000



350,000

-Total

$
1,295,942


$
(375,280
)

$
920,662,


$
350,000

10.0





Total amortization expense charged to operations for the year ended April 30, 2009 and 2008 were $91,111 and $87,870, respectively.   Estimated amortization expense as of April 30, 2009 is as follows:





2010

$
91,1112011


91,1112012


91,1112013


91,1112014 and after


206,218Total

$
570,662





F-12
 Table of Contents





GLOBAL DIVERSIFIED INDUSTRIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


APRIL 30, 2009 AND 2008





NOTE C - INVENTORIES





Inventories are stated at the lower of cost or market determined by the first-in, first-out (FIFO) method.   The Company regularly reviews the period over which its inventories will be converted to sales. Any inventories expected to convert to sales beyond 12 months from the balance sheet date are classified as non-current. Components
of inventories as of April 30, 2009 and 2008 are as follows:





Current Inventories


2009



2008
 Finished Goods

$
98,651


$
108,856Refurbished Bldgs


250,000



-Work in Progress


285,627



493,994Raw Materials


3,948,997



1,754,528Total current inventories

$
4,583,275


$
2,357,378







Long Term Inventories




2009



2008


Refurbished Bldgs

$
193,000


$
193,000Raw Materials


468,738



702,929Total long term inventories

$
661,738


$
895,929
 
  The Company periodically reviews the carrying value of inventories and non-cancelable purchase commitments by reviewing revenue forecasts, material usage requirements, and the engineering design changes. These forecasts of changes in design, future sales, and pricing are estimates. The Company may record charges to write down inventories based on these reviews and forecasts. If there is change
in demand, additional write downs of inventories may be required which will negatively impact gross margins. Inventory impairment charges are considered to permanently establish a new cost basis for inventory and are not subsequently reversed to income even if circumstances later suggest that increased carrying amounts are recoverable, except when the associated inventory is disposed of or sold.  The Company wrote down the long term raw material inventory by $234,191 due to impairment during the year
ended April 30, 2009.  The long term raw material inventory items consist of three electrical control panels for elevators that are used in the Company’s two story modular school building.





NOTE D - PROPERTY, PLANT AND EQUIPMENT





The Company’s property and equipment at April 30, 2009 and April 30, 2008 consists of the following:





2009


2008Useful LifePlant Equipment
10 years

$
3,881,302


$
2,106,816Furniture and Fixtures
10 years


2,933



2,933Building and Leasehold Improvement
20 years


961,210



971,688Total



4,845,445



3,081,437Accumulated Depreciation



(1,587,861
)


(1,291,771
)$
3,257,584


$
1,789,666





Depreciation expense included as a charge to income amounted to $296,091 and $257,970 for the years ended April 30, 2009 and 2008, respectively.






F-13
 Table of Contents





GLOBAL DIVERSIFIED INDUSTRIES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 APRIL 30, 2009 AND 2008




NOTE E – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES





Accounts payable and accrued liabilities at April 30, 2009 and April 30, 2008 are as follows:




2009


2008Account payable

$
242,895


$
104,608Accrued state income tax payable


4,993



15,727Accrued expenses related to Hidden Valley Lawsuit


29,100



207,715Accrued property taxes


44,152



49,384Accrued legal expenses for equity raises


55,350



-Accrued legal expenses for S-1 report


28,400



-Accrued legal expenses for general counsel services


25,500



-Accrued interest on promissory note


235,069



-Accrued Payroll


36,915



21,545Accrued sales tax


9,300



-Other accrued expenses


76,239



94,177Total

$
787,913


$
493,156








NOTE F - ECONOMIC DEPENDENCY AND CONCENTRATION





During the year ended April 30, 2009, approximately $3,399,798 or 65%, of total revenues were derived from four (4) major customers and $1,085,058  (63%) of the total  accounts  receivable  at April  30,  2009  were  due  from three  (3)  major
customers.





During the year ended April 30, 2008, approximately $4,107,777, or 72%, of total revenues were derived from three  (3) major customers and $292,746 (76%) of the total accounts receivable at April 30, 2008 were due from two (2) major customers.





All of our revenue was from school districts and municipalities of California, any material event that causes harm to our customers may materially impact our company.





NOTE G – NOTES PAYABLE





A summary of notes payable at April 30, 2009 and April 30, 2008 is as follows:





April 30,2009


April 30,2008Note payable to Company shareholders in monthly installments of interest only at 8.0% per annum; unsecured; maturity dated is August 1, 2008


-



5,500Note payable in 24 monthly installments beginning March 15, 2006; unsecured; maturity date is March 2008.


-



22,547Note payable in five annual payments beginning December 31, 2006, with interest payable monthly at 10% per annum.  Lender has an option at the end of each twelve months (“anniversary date”) to receive restricted shares of the Company’s common stock in lieu of the annual cash payment of $100,000. The conversion
price is equal to 75% of the closing price for the day that is twelve months prior to each anniversary date. The minimum conversion price shall be $0.05 per share. (c)


153,974



246,710Note payable secured by receivable and property with principal payments in four equal lump sum payments being due December 19, 2010, second payment due December 19, 2011, third payment due December 19, 2012 and final payment due December 19, 2013.  Interest rate is 13% per annum payable monthly, however, during the first twelve
months the accrued interest shall be deferred and payable in one lump sum payment on the first anniversary date of the Original Issuance Date (d)


5,445,502Note payable revolving agreement secured by receivable and property with interest and administrative fees payable monthly; interest rate is at 2.75% per annum over and above the Prime Rate or Deemed Prime Rate whichever is higher; maturity date is November 1, 2007. Maximum borrowing capacity of $3,000,000.


-



(163
)5,599,476



274,594Less: current portion


100,000



(27,884
)Total - notes payable – long term

$
5,499,476



246,710


F-14
 Table of Contents





GLOBAL DIVERSIFIED INDUSTRIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


APRIL 30, 2009 AND 2008





NOTE G – NOTES PAYABLE (Continued)





(c) The Company granted the noteholder an option to receive restricted shares of the Company’s common stock in lieu of the annual cash payment of $100,000 at the end of each twelve months (“anniversary date”).  The conversion price is equal to 75% of the closing price for the day that is twelve months prior
to each anniversary date. The minimum conversion price shall be $0.05 per share.  The Company has sufficient authorized and unissued shares available to settle the debt, and has reserved 10 million shares of common stock to settle the debt in the event that the noteholder converts at the minimum conversion price of $0.05 per share.  The Company accounted for the convertible in accordance with Emerging Issues Task Force Issue 98-5, Accounting for Convertible Securities with a Beneficial Conversion
Features or Contingently Adjustable Conversion Ratios ("EITF 98-5"), and recognized an imbedded beneficial conversion feature present in the convertible note. The Company recognized and measured an aggregate of $166,667 of the proceeds, which is equal to the intrinsic value of the imbedded beneficial conversion feature, to additional paid in capital and a discount against the convertible note. The debt discount attributed to the beneficial conversion feature is amortized over the maturity period (five years)
as interest expense.  In October 31, 2006, the noteholder agreed to convert $200,000 of principal into 2,353,356 shares of the Company's common stock (Note J). These shares were issued in September 2007. The Company wrote off the unamortized debt discount in connection with the converted portion of principal, and non-cash interest expense of $54,900 was charged to operations in connection with the conversion of notes. Total non-cash interest expense the Company charged to operations in connection with
amortization and write-off of debt discount attributed to the beneficial conversion feature amounted $19,380 and $19,380 for the year ended April 30, 2009 and 2008, respectively.





(d) On December 19, 2008, the Company entered into a Loan and Securities Purchase Agreement with Debt Opportunity Fund, LLLP (the "Fund") and issued a Senior Secured Promissory Note (the "Senior Note" for the principal amount of $6,000,000, which was funded in four tranches of $1,5000.00 each on the following dates of December 19,
2008, January 14, 2009, January 21, 2009 and January 29, 2009.   Interest on the Senior Note accrues at the rate of 13% per annum. and is payable monthly in arrears., However, during the first twelve months the accrued interest will be deferred and payable in one lump sum on December 19, 2010.  The principal amount is payable in four equal payments of $1,500,000 with the first payment due on December 14, 2010, second payment due on December 14, 2011, third payment due on December 14,
2012 and final payment on December 14, 2013.The SeniorNote is secured by a lien on all the personal property and assets of the Company pursuant to a security agreement from the Company.The obligations under theNote are guaranteed pursuant to a guaranty agreement by the Company's wholly ownedsubsidiaries, Lutrex
Enterprises, Inc., and Global Modular, Inc. All of the obligations of each Subsidiary under its guaranty agreement are secured by a lien on all the personal property and assets of the subsidiaries. On December 30, 2008, the note was assigned by Debt Opportunity Fund LLP to Vicis Capital Master Fund.


NOTE H - RELATED PARTY TRANSACTIONS





Effective February 15, 2008, the Company issued to Phillip Hamilton, 6,833,340 shares of Convertible Series A preferred stock related to a past subscription payable.   Effective March 11, 2008, the 6,833,340 shares of Convertible Series A were converted into 34,166,660 shares of common stock.  The conversion was
five shares of common stock issued for one share of Convertible Series A preferred stock.  There was no gain of loss recorded on the conversion.





Effective February 15, 2008, the Company issued 3,360,417 shares of common stock to two related parties related to a past subscription payable balance.





NOTE I – CONVERTIBLE REDEEMABLE PREFERRED STOCK





In February 2008, the Board of Directors authorized the issuance of up to 3,500,000 shares of Series B 12% convertible voting preferred stock (“Series B”) having a stated value of $1.00 per share. The Series B shares are convertible at any time, at the option of the holder, into the Company’s common stock at an initial
conversion rate determined by dividing the stated value of $1.00 by the initial conversion price of $0.005 (post stock split $0.07) per share. The conversion price is subject to certain anti-dilution provisions in the event the Company issues shares of its common stock or common stock equivalents below the stated conversion price or pays a stock dividend or otherwise makes a distribution payable in shares of common stock, with the exception of any shares issued upon conversion or payment of dividend on this issuance,
or other similar events such as stock splits or common stock reclassifications.  The holders are entitled to receive a cumulative 12% dividend based on the stated value of $1.00 per share, payable on the calendar quarter in cash.





Upon any liquidation, dissolution or winding-up of the Company, the Series B shareholders shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to 100% of the stated value, plus any accrued and unpaid dividends thereon and any other fees or liquidated damages owing thereon, for each Series
B share before any distribution or payment shall be made to the holders of any other securities, and if the assets of the Company shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Series B shareholders shall be ratably distributed among the Series B shareholders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. The liquidation value as of April 30, 2008 was $3,484,294 plus accrued dividends
of $40,211.





In February 2008, the Company issued 2,000,000 Series B shares at $1.00 per share to accredited investors in a private placement. The Company received $2,000,000 less issuance costs totaling $202,000. Net cash proceeds at April 30, 2008 were $1,798,000. Additionally, in February 2008, the Company issued 1,484,294 Series B shares at $1.00
per share in exchange for existing convertible debentures.





Under the terms of the Series B Stock Certificate of Designation, the holders have a right, at any time after the second year anniversary and upon providing written notice to the Company (a “Put Notice”), to force the Company to redeem all or part of the shares of Series B Convertible Preferred Stock held by such Holders at
a cash redemption price per share equal to 100% of the then outstanding Stated Value of the Series B Convertible Preferred Stock, plus all accrued and unpaid dividend thereon, plus all other amounts, costs, expenses and liquidated damages due in  respect of the Series B Convertible Preferred Stock (the “Put Redemption Amount”).




F-15
 Table of Contents





GLOBAL DIVERSIFIED INDUSTRIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


APRIL 30, 2009 AND 2008





NOTE I – CONVERTIBLE REDEEMABLE PREFERRED STOCK (Continued)




As a result of this obligation, the Company has determined the Series B shares includes redemption features that have the potential to be outside the control of the Company, and accordingly, the Company has classified the Series B shares outside of shareholders’ equity in accordance with Emerging Issues Task Force (“EITF”)
Topic D-98, Classification and Measurement of Redeemable Securities (“EITF Topic D-98”). In accordance with EITF Topic D-98, the fair value allocated to the Preferred Stock at the date of issuance was recorded outside of common shareholders’ equity in the accompanying consolidated balance sheet.




In connection with the February 22, 2008 issuance of the Series B Preferred Stock, the Company entered into a registration rights agreement with the purchasers of the Series B shares, which requires the Company to obtain an effective registration statement with the SEC covering the sale of the common stock issuable upon conversion of the
Series B shares on or before 150 calendar days. If the Company is unable to do so, the Company will have to pay liquidated damages in cash to the holders of the Series B shares.  The amount of damages that may be due is one and a one-half percent of the stated value of 12% Preferred Stock per month; provided, however, that in no event shall the aggregate amount paid exceed nine percent of the stated value. The Company is in default of this requirement but has obtained a waiver on this provision from
the holders.  In accordance with SFAS 5, “Accounting for Contingencies,” no penalty accrual has been made as management has concluded that none will be payable.





The Company, after the effective date of the registration, and with certain market conditions, can force redemption of the Series B 12% Convertible Preferred Stock.





In connection with the Convertible Redeemable Series B Preferred Stock issuance dated February 22, 2008, the Company entered into a Security Agreement whereby the holder or holders of the Company’s Series B Convertible Preferred Stock have a security interest in substantially all of the Company’s tangible and intangible
assets.





As additional consideration for the purchase of the Series B shares, the Company granted to the holders of the Series B shares a) warrants entitling it to purchase 34,842,940 common shares of the Company’s common stock at the price of $0.07 per share expiring five years from issuance and b) warrants entitling it to purchase
34,842,940 common shares of the Company at a price of $0.07 per share expiring seven years from issuance.  The warrants are covered under the registration rights agreement. As further discussed in Note S to these consolidated financial statements, the Company’s original accounting for the warrants and the related preferred stock classified the warrants as liabilities and recorded their estimated fair value at date of issue to be $7,760,305 using the Black-Scholes formula assuming no dividends,
a risk-free interest rate of 2.81% to 3.26 %, expected volatility of 115.06%, and expected warrant life of five to seven years.





In addition, the Company issued to broker/dealers a) warrants entitling it to purchase 2,000,000 common shares of the Company’s common stock at the price of $0.07 per share expiring five years from issuance; b) warrants entitling it to purchase 2,000,000 common shares of the Company at a price of $0.07 per share expiring
five years from issuance and c) warrants entitling it to purchase 2,000,000 common shares of the Company’s common stock at the price of $0.07 per share expiring seven years from issuance.  The warrants are covered under the registration rights agreement. The Company estimated the fair value at date of issue of the stock purchase warrants issued in connection with the issuance of the Series B preferred stock to be $682,133 using the Black-Scholes formula assuming no dividends, a risk-free interest
rate of 2.81% to 3.26 %, expected volatility of 115.06%, and expected warrant life of five to seven years.





The Company determined that the warrants issued in connection with the Series B Preferred Stock meet the applicable exceptions in EITF 00-19 for treatment as equity instruments and the Company previously restated their 2008 financial statements.   The resulting discount is being accreted over the two-year period until the
mandatory redemption of the preferred stock.  After the accretion of the discount, the Series B Preferred Stock had a carrying value of $44,624 at April 30, 2009.










F-16
 Table of Contents





GLOBAL DIVERSIFIED INDUSTRIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


APRIL 30, 2009 AND 2008





NOTE J – CONVERTIBLE REDEEMABLE PREFERRED STOCK – SERIES C





On June 26, 2008 the  Company entered into a an Amended and Restated Securities Agreement with Babirak Carr, P.C., solely as administrative agent for Vicis Capital Master Fund ("Vicis"), and the holders of the Company's Series B Convertible Preferred Stock, pursuant to which the Company issued and sold (a) a series of its Series
C Convertible Preferred Stock having an aggregate original stated value of $1,750,000 (total of 1,750,000 shares of Series C Preferred Stock), and (b) its Series 3 Common Stock Purchase Warrants exercisable, in the aggregate, for 35,000,000 shares of Common Stock.  The total cash paid to the Company for the Series C Preferred Stock and Series 3 Warrants was $1,750,000.  The Company paid $75,000 in expenses to Vicis, which included legal fees of Vicis.





The Series C Preferred Stock: a) has a stated amount of $1.00 per share; (b) is convertible at the option of the holder at a price of $.07 per share at any time into a total of 25,000,000 Series C Preferred Stock; c)  is subject to redemption in one lump sum payment on the date two years from the date of issuance, unless earlier
converted; d) accrues dividends on any balance outstanding at an annual rate of twelve percent, due and payable quarterly in arrears in cash.  Redemption of the outstanding principal and any accrued but unpaid dividends is guaranteed by the Registrant’s subsidiaries.  Payment thereof is secured by a blanket lien encumbering the assets of the Registrant and its subsidiaries.





The Series 3 Warrants for a total of 35,000,000 shares of Common Stock have an exercise price of $.10 per share and have a term of 7 years from the date of issuance.





Under the terms of the Series C Preferred Stock and the Series 3 Warrants, Vicis may convert the Series C Preferred Stock and exercise the Series 3 Warrants, provided that such Conversion and/or exercise do not result in Vicis beneficially owning more that 4.99% of our outstanding shares of Common Stock after giving effect to the issuance
of shares of Common Stock issuable upon conversion of the Series C Preferred Stock and/or exercise of the Series 3 Warrants. This limitation may be changed from 4.99% to 9.99% upon not less than 61 days notice to the Company by Vicis.





Midtown Partners & Co. Inc. acted as Placement Agent for the Company and was paid: a) a 10% cash commission of $175,000; a Series BD-4 Warrant to purchase 2,500,000 shares of Common Stock at an exercise price of $.07 per share exercisable for 5 years from the date of issuance; and c) a Series BD-5 Warrant to purchase 3,500,000 shares
of Common Stock at an exercise price of $.10 per share exercisable for 7 years from the date of issuance.





The Series 3 Warrants, the Series BD-4 and Series BD-5 Warrants have "cashless exercise" provisions and certain anti-dilution rights.  The Company agreed to register the Common Stock underlying the Series C Preferred Stock, the Series 3 Warrants, the Series BD-4 Warrants and the Series BD-5 Warrants pursuant to a Registration
Rights Agreement.





The issuance of the Series C Preferred Stock, the Series 3 Warrants, the Series BD-4 Warrants and the issuance of the Series BD-5 Warrants were exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(2) of the Act for transactions not involving a public offering and Rule 506 of Regulation
D.





The Company used the same basis of accounting to record the Series C Preferred Stock and each of the warrant series issued therewith as it used when it corrected the accounting for the Series B Preferred and related warrants as disclosed in Note I. The relative fair values of the preferred and the warrants were apportioned and then the
effective beneficial conversion feature of the relative fair value of the preferred was calculated. The initial step of the calculation was the determination of the Black-Scholes value assuming no dividends, a risk-free interest rate of 3.50% to 3.74 %, expected volatility of 233.64%, and expected warrant life of five or seven years.  The relative fair values derived were as follows: Series C Preferred: $563,939; Series C Warrants: $1,012,835; Broker Warrants: $173,226.  The effective beneficial
conversion feature was $1,186,061, which was limited to the remaining undiscounted value of the preferred of $563,939.  Accordingly the initial carrying value of the preferred was zero. Accretion of the discount amounted to $5,860 at April 30, 2009 which is the carrying value at that date.





NOTE K – CAPITAL STOCK





On November 7, 2001 the Company's Board of Directors approved an increase in the Company's authorized common stock from 50,000,000 to 400,000,000 with a par value of $.001. The Company also created a Series A Preferred class of stock, $.001 par value, and authorized 10,000,000 shares.  On February 3, 2003, the Company’s
Board of Directors approved to change the conversion right of the Series A Preferred Stock from a ratio of five common for one preferred share to ten common for one preferred share.  Effective February 21, 2008, the Registrant amended its Articles of Incorporation to (a) increase its authorized common stock from four hundred million (400,000,000) to two billion seven hundred thirty six million five hundred thousand (2,736,500,000) shares, (b) increase its authorized preferred stock from ten million
(10,000,000) to thirteen million five hundred thousand (13,500,000) shares, (c) authorize blank check preferred stock and delegate the right to designate preferences and limitations for such preferred stock to the Board of Directors, and (d)  establish the designations, rights and preferences of the Series B Preferred Stock.





As of April 30, 2009 and 2008, the Company has 15,369,887 and 15,369,887 shares of common stock issued and outstanding, respectively.





On May 21, 2008, the Company affected a one-to-twenty stock split of our common stock.  We did not reduce the number of shares we are authorized to issue or change the par value of the common stock.  All references to share value in these consolidated financial statements have been restated to reflect this split.





F-17
 Table of Contents





GLOBAL DIVERSIFIED INDUSTRIES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 APRIL 30, 2009 AND 2008




NOTE K – CAPITAL STOCK (Continued)




During the year ended April 30, 2008, the Company issued 100,000 shares of common stock to consultants for $18,000 of service fees and 290,960 shares of common stock in exchange for factory rent of $87,288.  All valuations of common stock issued for services were based upon the value of the services rendered, which did not differ
materially from the fair value of the Company’s common stock during the period the services were rendered.  The Company also issued 791,667 shares of stock, valued at $250,000 to a shareholder.    The Company also issued an aggregate of 3,536,919 shares of common stock in exchange for $900,000 of common stock subscribed.





During the year ended April 30, 2008, at the request of a preferred stock shareholder, the Company converted 8,746,424 shares of Preferred Series A stock to 2,289,880 shares of common stock.  The Company also issued 8,333,332 shares of Preferred Series A stock in exchange for $733,374 of Preferred Series A stock, subscribed.





There were no capital stock transactions for the fiscal year ending April 30, 2009.





NOTE L - EMPLOYEE STOCK INCENTIVE PLAN





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





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





During the year ended April 30, 2005, the Company granted an aggregate of 986,840 options to Employees pursuant to 2001 Stock Option Plan, and all options were exercised on the grant date (Note J). There are no employee stock options outstanding at April 30, 2009.





NOTE M – NON-EMPLOYEE STOCK OPTIONS AND WARRANTS





Non-Compensatory Stock Options





Transactions involving options are summarized as follows:


Number of Shares


Weighted Average Price
Per ShareOutstanding at April 30, 2007


-


$
-Outstanding at April 30, 2008


-



-Outstanding at April 30, 2009

$
68,168,164


$
0.05


During the quarter ended January 31, 2009, the Company granted a stock option to the CEO of the Company to purchase all or any part of an aggregate of 68,168,164 shares. The exercise price for each share is $0.05 with a maximum option term of seven years. The option shall vest and become exercisable upon the satisfaction in full (inclusive
of all principal, interest and penalties) of the six million loan made to the Company by Debt Opportunity Fund, LLP. The Company accounted for the options as contingent, since the holder does not earn the right to the award until the Debt Opp. Fund, LLP is repaid in full.  All other previously granted stock options were fully vested at the time the stock options were granted. Accordingly, no compensation costs were charged to operations during the years ended April 30, 2009 and 2008. All previously
granted stock options expired as of April 30, 2007.





F-18
 Table of Contents





GLOBAL DIVERSIFIED INDUSTRIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 APRIL 30, 2009 AND 2008
   NOTE M – NON-EMPLOYEE STOCK OPTIONS AND WARRANTS (Continued)




Non-Compensatory Warrants





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




Warrants Outstanding

Warrants ExercisableExercise Prices

Number Outstanding

Weighted Average Remaining Contractual Life (Years)


Weighed Average Exercise Price

Number Exercisable

Weighted Average Exercise Price$


0.07

38,842,940


3.83


$
0.07

38,842,940

$

0.07$


0.07

36,842,940


5.83


$
0.07

36,842,940

$

0.07$


0.07

2,500,000


4.25


$
0.07

2,500,000

$

0.07$


0.1

73,500,000


6.25


$
0.1

73,500,000

$

0.1$


0.05

74,984,980


6.67


$
0.05

74,984,980

$

0.05Total

226,670,860





$
0.08

226,670,860

$

0.08.





Transactions involving warrants are summarized as follows:





Number of Shares


Weighted Average Price
Per ShareOutstanding at April 30, 2007


37,500


$
0.6Granted


75,685,880


$
0.07Exercised


-



-Canceled or expired


(37,500
)


-Outstanding at April 30, 2008


75,685,880


$
0.07Granted


150,984,980


$
0.07Exercised


-



-Canceled or expired


-



-Outstanding at April 30, 2009


226,670,860


$
0.08





F-19
 Table of Contents





GLOBAL DIVERSIFIED INDUSTRIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


APRIL 30, 2009 AND 2008





NOTE M – NON-EMPLOYEE STOCK OPTIONS AND WARRANTS (Continued)




The Company granted 75,685,880 warrants in conjunction with the year ended April 30, 2008 funding by Vicis Capital Master Funds.  Of the 75,685,880 warrants granted during the year ended April 30, 2008, 40,842,940 will expire on February 21, 2013 and the remaining 34,842,940 warrants expire on February 21, 2015. The 41,000,000
warrants granted in June 24, 2008 and the 35,000,000 warrants granted in July 27, 2008 will expire on June 25, 2015 and July 28, 2015 respectively.





The Company granted 74,984,980 warrants in December 2008 in connection the issuance of a promissory note by Debt Opportunity Fund LLP.  The warrants granted will expire on December 11, 2015.





NOTE N- DEFERRED FINANCING COST





On December 19, 2008, the Company issued 6,816,816 warrants with an exercise price of $0.05 per share by December 11, 2015, as part of the fees to secure a $6,000,000 funding through the issuance of a promissory note.  Using the effective interest method, the deferred financing cost was $59,538 as of April 30, 2009, and is being
amortized to interest expense.  For the year ended April 30, 2009, the total non-cash interest charged to operations amounted to $4,140 and $0 for the year ended April 30, 2008.  The aggregate fair value of the warrants was determined with the assistance of a valuations consultant using the multinomial lattice formula assuming no dividends, the stock would have no growth with an annual volatility of 80%, reset events projected to occur 5% of the time at $0.04 generating an adjusted warrant
exercise price of $0.0495.





Prepaid financing expenses relating to issuance of Series B Preferred Stock, Series C Preferred Stock and the Promissory Note for $6,000,000 totaled $1,035,076, of which $100,092 had been amortized as of April 30, 2009.  The remaining net deferred financing costs per
the balance sheet at April 30, 2009 was $59,538 for the December 2008 funding and $934,984 for the Series B Preferred Stock and Series C Preferred Stock fundings.  For deferred financing costs, the Company amortizes the amount using the straight line method. Since the term is only two years, the difference from using the effective interest method is immaterial.  The fees were paid for legal, placement agent, due diligence and financial consultants fees.





NOTE O – GUARANTEE FEE AGREEMENT





On July 29, 2008, the Company entered into a Guarantee Fee, Indemnification, and Security Agreement with two individuals,  collectively, the “Guarantors” pursuant to which in consideration for the continuing guarantee by the Guarantors of various surety bonds issued to the Company, the Company: a) issued a "Blanket-Lien",
in favor of the Guarantors, on all of the Company's and the Company's subsidiaries' assets, b) issued the Guarantors warrants to purchase 26,950,000 and 8,050,000 shares, respectively,   of the Company’s common stock, all at an exercise price of $.10 per share, exercisable for the seven year period from the date of issuance.  The warrants have certain anti-dilution rights.





The warrants have an aggregate fair value of $273,288, as determined by the multinomial lattice formula assuming no dividends, the stock would have no growth with an annual volatility of 80%, reset events projected to occur 10% of the time at $0.07 generating an adjusted warrant exercise price of $0.097 and expected warrant life of seven
years.  The agreement has been modified to specify a minimum term of five years.  Since the warrant holders have agreed to forfeit the percentage of warrants unearned should they not fulfill their five year guaranty, the Company is recognizing the related expense proportionately over five years. For year ended April 30, 2009, the Company recorded expense of $41,152 with an equivalent offset to additional paid-in capital.





The issuance of the above warrants were exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(2) of the Act for transactions not involving a public offering and Rule 506 promulgated by the United States Securities and Exchange Commission under the Securities Act of 1933.






F-20
 Table of Contents





GLOBAL DIVERSIFIED INDUSTRIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


APRIL 30, 2009 AND 2008





NOTE P- INCOME TAXES





Deferred income taxes result from the temporary differences arising from the use of accelerated depreciation methods for income tax purposes and the straight-line method for financial statement purposes, from differences in the timing of recognition of the state income tax provision for book and tax reporting purposes, and an accumulation
of Net Operating Loss carry-forwards for income tax purposes with a valuation allowance against the carry-forwards for book purposes.





In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Included in deferred tax assets are Federal and State net operating loss carry-forwards of approximately $5,100,000, which will expire beginning in 2028.  The
ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon our cumulative losses through April 30, 2009, we have provided a valuation allowance reducing the net realizable benefits of these deductible differences to $0 at April
30, 2009.  The amount of the deferred tax asset considered realizable could change in the near term if projected future taxable income is realized.  Due to significant changes in the Company's ownership, the Company's future use of its existing net operating losses may be limited.





There was an income tax provision of $0 and $96,000 for the twelve months ended April 30, 2009 and 2008, respectively.





A reconciliation between the actual income tax expense and income taxes computed by applying the statutory federal and state income tax rates to income from continuing operations before income taxes is as follows:





Twelve Months Ended
April 30, 2009


Twelve Months Ended
April 30, 2008Computed “expected” income tax expense(benefit) at approximately34%

$
(499,000
)

$
(386,000
)Effect of available NOL carry-forwards


398,000



386,000Losses not producing benefits


101,000



-Discretionary change in valuation allowances of deferred income taxes


-



90,000Various other


-



6,000$
-


$
96,000








F-21
 Table of Contents





GLOBAL DIVERSIFIED INDUSTRIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


APRIL 30, 2009 AND 2008





NOTE Q - EARNINGS (LOSS) PER SHARE





Basic and fully diluted earnings (losses) per share are calculated by dividing net income (loss) available to common shareholders by the weighted average of common shares outstanding during the year.  The following table sets forth the computation of basic and diluted earnings (losses) per share:




2009


2008Net income (loss) available to common stockholders

$
(2,111,611
)

$
(2,057,895
)Earnings (losses) per share:Basic and diluted earnings per share

$
(0.14
)

$
(0.21
)Weighted average number of common shares outstanding for  computation:Basic and diluted


15,369,885



9,774,281


For the years ended April 30, 2009 and April 30, 2008, 226,670,860 potential shares and 75,685,880 potential shares respectively, were excluded from shares used to calculate diluted losses per share as their inclusion would reduce net losses per share.





NOTE R - COMMITMENTS AND CONTINGENCIES





Consulting Agreement





The Company has various consulting agreements with outside contractors to provide business development and consultation services. The Agreements are generally for a term of 12 months from inception and renewable automatically from year to year unless either the Company or Consultant terminates such agreement by written notice.





Lease Agreement





In October 2002, the Company entered into a three-year lease for its corporate offices and facilities in Chowchilla, California.  The Company renewed the lease in February 2007, at a rate of $24,021 per month.  Rental expenses charged to operations for the year ended April 30, 2009 and 2008 are $288,252 and $327,113,
respectively.  There were thirteen rental payments made in the year ended April 30, 2008.





Estimated rental expense as of April 30, 2009 is as follows:





2010

$
288,2522011


288,2522012


120,1052013


-2014


-Total

$
696,609





Litigation





On December 13, 2007, the company filed a lawsuit against Financial Pacific Insurance Company, Inc and Salmeri Insurance Agency, Inc. for terminating the company’s bonding line of credit during the quarter ended January 31, 2006, without good cause and in contravention of its past dealings. The lawsuit seeks reimbursement for damages
in excess of $10 million.  As this litigation is in its initial stages, the Company can make no assurances with respect to the outcome of this matter.





In February, 2008, the company filed a lawsuit against Santa Rosa City Schools for damages in excess of $600,000.





The Company is subject to legal proceedings and claims which arise in the ordinary course of its business.  Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters will not have a material adverse effect on its financial position, results of operations or
liquidity.






F-22
 Table of Contents





GLOBAL DIVERSIFIED INDUSTRIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


APRIL 30, 2009 AND 2008


NOTE S- SUBSEQUENT EVENTS





Amendment to Articles of Incorporation or Bylaws





On July 26, 2009, the board of directors of the Company designated 2,700,000 shares of authorized but unissued preferred stock to be designated as "Series D Convertible Preferred Stock" and filed a Statement of Designations with the State of Nevada establishing the terms, rights and preferences of the Series D Preferred Stock





The Series D Preferred Stock: a) has a stated amount of $1.00 per share; is convertible at the option of the holder at a price of $.04 per share at any time (total of 67,500,000 shares of common stock) c)  is subject to redemption in one lump sum payment (the “Redemption Amount”) on the date two years from the date
of issuance, unless earlier converted; d)  Payment of the Redemption Amount is guaranteed by the Registrant’s subsidiaries.  Payment of the Redemption Amount is secured by a blanket lien encumbering the assets of the Registrant and its subsidiaries.





Securities Purchase Agreement





On July 26, 2009 Global Diversified Industries, Inc. (the  "Company") entered into a Securities Purchase Agreement with Vicis Capital Master Fund ("Vicis"), and the holders of the Company's Series B Convertible Preferred Stock and Series C Convertible Preferred Stock, pursuant to which the Company issued and sold (a) a series
of its Series D Convertible Preferred Stock (the “Series D Preferred Stock”) having an aggregate original stated value of $2,700,000 (total of 2,700,000 shares of Series D Preferred Stock), (b) its Series 5 Common Stock Purchase Warrants exercisable, in the aggregate, for 40,000,000 shares of Common Stock (individually, a “Series 5 Warrant” and collectively, the “Series 5 Warrants”).  The total cash paid for the Series D Preferred Stock and Series 5 Warrants was $2,150,000.





The Conversion Price of the Series D Preferred Stock and the Exercise Price of the Series 5 Warrants shall be subject to adjustment for issuances of equity or equity linked financing at a purchase price of less than the Conversion Price or Exercise Price, such that the conversion price or exercise price shall be adjusted using full ratchet
price based price protection on such new issuances subject to customary adjustments such that the Conversion Price of the Preferred Stock and the Exercise Price of the Series D Warrants shall be fully adjusted down to that future common stock or conversion price as price-based anti-dilution.  The  Series B and Series C Preferred Stock and related warrants will be adjusted to $0.04 per share.





The Series D Preferred Stock: a) has a stated amount of $1.00 per share; is convertible at the option of the holder at a price of $.04 per share at any time (total of 67,500,000 shares of common stock); b)  is subject to redemption in one lump sum payment (the “Redemption Amount”) on the date two years from the date
of issuance, unless earlier converted.  Payment of the Redemption Amount is guaranteed by the Registrant’s subsidiaries.  Payment of the Redemption Amount is secured by a blanket lien encumbering the assets of the Registrant.





The Series 5 Warrants have an exercise price of $.04 per share (total of 40,000,000 shares of Common Stock and have a term of 7 years from the date of issuance.





Under the terms of the Series D Preferred Stock and the Series 5 Warrants, Vicis may convert the Series D Preferred Stock and exercise the Series 5 Warrants, provided that such Conversion and/or exercise do not result in Vicis beneficially owning more that 4.99% of our outstanding shares of Common Stock after giving effect to the issuance
of shares of Common Stock issuable upon conversion of the Series D Preferred Stock and/or exercise of the Series 5 Warrants. This limitation may be changed from 4.99% to 9.99% upon not less than 61 days notice to the Company by Vicis.





The Company paid $40,000 in expenses to Vicis, which included legal fees of Vicis.





Midtown Partners & Co. Inc. acted as Placement Agent for the Company and was paid: a) a 8% commission ($216,000), b) Series BD-7 Warrant to purchase 6,750,000 shares of Common Stock at an exercise price of $.04 per share exercisable for 7 years from the date of issuance and c) Series BD-8 Warrant to purchase 4,000,000 shares of
Common Stock at an exercise price of $.0.04 per share exercisable for 7 years from the date of issuance.





The Series 5 Warrants, Series BD-7 and Series BD8 Warrants have "cashless exercise" provisions and certain anti-dilution rights.





The issuance of the Series D Preferred Stock, the Series 5 Warrants,  the Series BD-7 and Series BD-8 Warrants were exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(2) of the Act for transactions not involving a public offering and Rule 506 promulgated by the United
States Securities and Exchange Commission under the Securities Act of 1933.






F-23
 Table of Contents





NOTE T - RESTATEMENT


The Company has restated their financial statements as of and for their fiscal year ended April 30, 2008 to correct the classification of and related accounting for a total of 75,685,880 common stock purchase warrants issued in connection with the Company’s Series B Redeemable Convertible Preferred Stock.  These warrants
had been incorrectly classified as “Liabilities” (rather than “Equity”).  Classification as a liability required “Derivative” accounting treatment under Statement of Financial Accounting Standard No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”) and Emerging Issues Task Force Consensus 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own
Stock” (“EITF 00-19”), rather than recording the effective beneficial conversion feature under EITF 98-5, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios” and EITF 00-27, “Application of Issue No. 98-5 to Certain Convertible Instruments.”
 
 The accounting treatment previously applied resulted in the reporting of the preferred stock in the net carrying amount of $2,021,574 and the incorrect recognition of a $7,141,496 “Warrant” liability, both as of April 30, 2008; and a related net financing expense of $6,459,362,
after the offset a “Mark-to-Market” gain.  Additional paid in capital had been adjusted for the difference.  The restatement reversed each of the above entries on the Company’s books.  After applyingEITF’s 08-5 and 00-27, the $3,484,294 face value of the
related Series B Preferred Stock was fully offset by the aggregate discounts for the effective beneficial conversion feature of the preferred stock and the relative fair value of the warrants.  At April 30, 2008, $394 of such discount had been accreted, which amount is the carrying value of the preferred at that date.  The discount will continue to be accreted until the February 21, 2010 mandatory redemption date of the Series B Preferred Stock.
 
 The following tables show the principal financial statement line items initially reported as of and the year ended April 30, 2008, the restatement entries made and balances of the applicable financial statement items as restated.  There was no change to any asset accounts.
 
 As Reported


Adjustments


As RestatedWarrant Liability

$
7,141,496


$
(7,141,496
)

$
-Total liabilities


7,979,380



(7,141,944
)


837,436Series B Preferred Stock, net of unamortized discount


2,021,574



(2,021,180
)


394Stockholders' Equity (Deficiency)Additional paid in capital


9,282,089



2,501,076



11,783,165Accumulated deficit


(12,537,940
)


6,662,048



(5,875,892
)Total Stockholders' Equity (Deficiency)


(3,240,531
)


9,163,124



5,922,593Total Liabilities and Stockholders' Equity

$
6,760,423


$
-


$
6,760,423
 
 
 Effect of Adjustments on the 2008 Statement of Operations
 
 As Reported


Adjustments


As RestatedLoss from operations

$
(1,537,923
)


-


$
(1,537,923
)Fair value of warrants issued in connection with Series B Preferred


(7,760,305
)


7,760,305



-Unrealized change in fair value of warrants


1,300,943



(1,300,943
)


-Interest (expense), net


(353,892
)


-



(353,892
)Loss before provision for income taxes


(8,351,177
)


6,459,362



(1,891,815
)Net loss


(8,447,177
)


6,459,362



(1,987,815
)Preferred stock dividends, actual and imputed


202,686



(132,606
)


70,080Net loss attributable to common shareholders

$
(8,649,863
)

$
5,574,061


$
(2,057,895
)


F-24
 Table of Contents


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE





None.





ITEM 9A.   CONTROLS AND PROCEDURES





Evaluation of Disclosure Controls and Procedures





Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified
in the Securities and Exchange Commission’s rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriately to allow timely decisions regarding required disclosure.





Subsequent to that evaluation and in connection with the restatement and filing of this amendment, we conducted an reevaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange
Act.  Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and which also ensures that it files or submits under the Exchange Act is accumulated
and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.





Management’s Report on Internal Control over Financial Reporting





Management is responsible for establishing and maintaining adequate internal control over financial reporting of the Company.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.





Management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our internal control over financial reporting as of April 30, 2009 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission.  Based on this evaluation, because of the Company’s limited resources and limited number of employees, management concluded that, as of April 30, 2009, our internal control over financial reporting is not effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the U.S. generally accepted accounting principles.




Additionally, due to the size of the Company, we are unable to properly segregate our duties and functions.





This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary
rules of the SEC that permit the Company to provide only management’s report in this annual report.





Limitations on Effectiveness of Controls and Procedures





Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and  procedures or our internal controls will prevent all errors and all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met.  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 the Company have been detected.  These inherent limitations include, but are
not limited to, 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 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 goal under all potential future conditions.  Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.





Changes in internal controls





There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15d-15 under the Exchange Act that occurred during the year ended April 30, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.





18
 Table of Contents





ITEM 9B. OTHER INFORMATION





Not applicable





PART III.





ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE





Officers and Directors





The names, ages, and respective positions of the directors, executive officers, and key employees of the Company are set forth below; there are no other promoters or control persons of the Company. The directors named below will serve until the next annual meeting of the Company's stockholders or until their successors are duly elected
and have qualified. Directors are elected for a one-year term at the annual stockholders' meeting. Officers will hold their positions at the will of the board of directors, absent any employment agreement. The directors and executive officers of the Company are not a party to any material pending legal proceedings and, to the best of their knowledge, no such action by or against them has been threatened.





Compensation of Directors





Directors currently do not receive a salary for their services and are not paid a fee for their participation in meetings, although all Directors are reimbursed for reasonable travel and other out-of-pocket expenses incurred in attending meetings of the Board.  The Company anticipates that the Directors will be compensated for
attending meetings in the future.





Phil Hamilton, President/Chairman





Phillip Hamilton, age 62 has over thirty years entrepreneurial and senior management experience in the manufacturing business.  From February 2003 to current, Mr. Hamilton has been the CEO/ Chairman of the Company.  As the CEO, he has directed the marketing, sales and administrative activities of the Company.





From 1996 to January 2003, Mr. Hamilton was a consultant to Top Line Building Products.  Top Line Building Products is a truss manufacturing plants with annual revenues of approximately $8,000,000, which provides its products to major homebuilders in Northern California. As the CEO, Mr. Hamilton has directed the marketing, sales
and production activities of the company, as well as re-designing the original truss plant into a modern state of the arts manufacturing plant with new production stations.





From 1996 to Feb 2000, Mr. Hamilton was the Chairman and CEO of Pacesetter Industries, Inc.  Pacesetter Industries was one of the largest modular manufacturers of residential and commercial buildings in California.  As Chief Executive Officer, Mr. Hamilton was responsible for managing the marketing, sales and production
activities of the company. Pacesetter was built from inception into one of California’s largest modular manufacturers producing and installing thousands of residential and commercial building.  Pacesetter Industries, Inc. employed a staff of over 650 employees with annual sales of $50,000,000 in 1999.  Pacesetter Industries, Inc. filed a Chapter 11 bankruptcy on February 29, 2000 in Fresno County that was finally converted to a Chapter 7.





Mr. Hamilton attended Pacific Union College taking courses in Business Administration.





Adam Debard, Secretary/Treasurer/Director





Adam N. DeBard, age 40, has over sixteen years of experience in the manufacturing and technology business sectors.  From February 2003 to current, Mr. DeBard has been the Secretary/Treasurer of the Company and the President/Treasurer of Global Modular, Inc.  He is responsible for the cash management and accounting functions
of both companies.





From January 2001 to January 2003, Mr. DeBard was the Chief Information Officer- Top Line Building Products.  As the CIO, Mr. DeBard was responsible for the design, implementation and management of a corporate wide computer network, as well as preparation of production analysis reports for senior management and equipment leases
and acquisitions.





From 1997 to December 2000, Mr. DeBard was the Vice President and Chief Information Officer for Pacesetter Industries, Inc.  As such, Mr. DeBard was responsible for all computer software and hardware acquisitions, installations and maintenance for multiple branch offices, as well as responsible for preparing a monthly analysis
report of the automated production line for senior management.  Mr. DeBard was responsible for: computerizing the purchasing, estimation, production and engineering systems for the company.





Mr. DeBard attended Walla Walla College for four years in Business Administration





19
 Table of Contents





(b) Compliance with Section 16(a) of the Exchange Act





Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors, certain officers and persons holding 10% or more of the Company's common stock to file reports regarding their ownership and regarding their acquisitions and dispositions of the Company's common stock with the Securities and Exchange Commission. Such
persons are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.





Based solely on a review of the Forms 5 with respect to the fiscal year ended April 30, 2002 and subsequently, the Company is unaware that any required reports were not timely filed. The Company is currently conducting an internal audit to ensure that the Company's Officers and/or Directors, as well as persons holding more than 10%
of the Company's outstanding common stock, are in Compliance with Section 16(a) of the Securities and Exchange Act of 1934.  It is the Company's intention to ensure, where possible, from the date of this filing forward, complete compliance according to this Section.





ITEM 11. EXECUTIVE COMPENSATION





The following table sets forth certain information relating to the compensation paid by the Company during the last three fiscal years to the Company's President. No other executive officer of the Company received total salary and bonus in excess of $100,000 during the fiscal year ended April 30, 2009 and prior.





Summary Compensation Table





Annual compensation

Long-term compensationAwards

PayoutsName and principal position

Year


Salary ($)


Bonus ($)


Other annual compensation ($)

Restricted stock award(s) ($)

Securities underlying options/ SARs (#)

LTIP
payouts ($)

All other compensation ($)(a)

(b)


(c)


(d)


(e)

(f)

(g)

(h)

(i)Phil Hamilton, President2009



100,000



0


-

-

-

-

-2008



100,000



0


-

-

-

-

-2007



85,616



10,000



-

-


-

-

-2006



85,616



37,500



-

-


-

-

-2005



85,616



0



-

-


-

-

-


Executive Compensation





The Company has not paid any compensation to its officers and/or directors since its inception, and the Company does not expect to pay any compensation in any amount or of any kind to its executive officers or directors until the funds are available to pay them without inhibiting growth of the Company.






20
 Table of Contents





ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS





The following table sets forth information regarding the beneficial ownership of shares of the Company's common stock as of August 10, 2009 (issued and outstanding) by (i) all stockholders known to the Company to be beneficial owners of more than ten percent of the outstanding common stock; and (ii) all directors and executive officers
of the Company as a group:





Title of Class

Name and Address of Beneficial Owner

Amount of Beneficial Ownership (2)

Percent of ClassCommon Stock

Hamilton Trust (1), 1200 Airport Drive, Chowchilla, CA

110,000

0.007%Common Stock

Adam Debard(1), 1200 Airport Drive, Chowchilla, CA

180,000

0.012%Common Stock

Rebecca Manadic(3), 611 West Main Street, Merced, CA

3,991,448

25.97%Common Stock

Phillip Hamilton (1) 1200 Airport Drive, Chowchilla, CA

2,666,051

17.35%





(1) Each person has sole voting power and sole dispositive power as to all of the shares shown as beneficially owned by them.





(2) Other than as footnoted below, none of these security holders has the right to acquire any amount of the shares within sixty days from options, warrants, rights, conversion privilege, or similar obligations. The amount owned is based on issued common stock, as well as stock options that are currently exercisable.





(3) Phil Hamilton has sole voting power as to all of the shares owned by Rebecca Manandic.





ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS





During the past three years, and as not otherwise disclosed of in any other filing, there have not been any transaction that have occurred between the Company and its officers, directors, and five percent or greater shareholders, unless listed below.





Certain of the officers and directors of the Company are engaged in other businesses, either individually or through partnerships and corporations in which they have an interest, hold an office, or serve on a board of directors. As a result, certain conflicts of interest may arise between the Company and its officers and directors. The
Company will attempt to resolve such conflicts of interest in favor of the Company. The officers and directors of the Company are accountable to it and its shareholders as fiduciaries, which requires that such officers and directors exercise good faith and integrity in handling the Company's affairs. A shareholder may be able to institute legal action on behalf of the Company or on behalf of itself and other similarly situated shareholders to recover damages or for other relief in cases of the resolution of conflicts
is in any manner prejudicial to the Company.





The Company issued notes payable totaling of $473,965 to a significant shareholder.  The Company granted the shareholder an option to convert a total of $400,000 of principal balance of the notes to the Company’s 2,666,666 shares of the preferred stock, and each share of the preferred stock is convertible to ten shares of
the Company’s restricted common stock.  The shareholder has the option to convert the notes to the Company’s securities anytime within three years from the issuance of the notes.  The shareholder converted all of the preferred stock and  notes to common stock on February 22, 2008





In April 2004, two of the Company’s shareholders repaid an aggregate of $499,350 of notes payable due to a bank on behalf of the Company.  The Company issued to the shareholders $199,350 of notes payable with a maturity date on May 1, 2009 and the shareholders agreed to receive the Company’s preferred stock in exchange
for the remaining $300,000 due.  The shareholder converted all of the preferred stock and notes to common stock on February 22, 2008.






21
 Table of Contents





ITEM14. PRINCIPAL ACCOUNTANT FEES AND SERVICES





The following table sets forth fees billed to us by our auditors during the fiscal years ended April 30, 2009 and 2008 for: (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements, (ii) services by our auditor that are reasonably related to the performance of the audit
or review of our financial statements and that are not reported as Audit Fees, (iii) services rendered in connection with tax compliance, tax advice and tax planning, and (iv) all other fees for services rendered.





April 30, 2009


April 30, 2008(i)
Audit Fees

$
98,082


$
105,236(ii)
Audit Related Fees


--



--(iii)
Tax Fees


10,000



7,500(iv)
All Other Fees


2,000Total fees

$
110,082


$
112,736





AUDIT FEES. Consists of fees billed for professional services rendered for the audit of Global Diversified Industries, Inc.'s consolidated financial statements and review of the interim consolidated financial statements included
in quarterly reports and services that are normally provided by RBSM LLP and M & K CPAS, PLLC in connection with statutory and regulatory filings or engagements.




AUDIT-RELATED FEES. Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of Global Diversified Industries,
Inc.'s consolidated financial statements and are not reported under "Audit Fees." There were no Audit-Related services provided in fiscal 2009 or 2008.




TAX FEES. Consists of fees billed for professional services for tax compliance, tax advice and tax planning.




ALL OTHER FEES. Consists of fees for products and services other than the services reported above.




POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF INDEPENDENT AUDITORS




The Company currently does not have a designated Audit Committee, and accordingly, the Company's Board of Directors' policy is to pre-approve all audit and permissible non-audit services provided by the independent auditors.  These services may include audit services, audit-related services, tax services and other services. Pre-
approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to periodically report to the Company's Board of Directors regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. The Board of Directors may also pre-approve particular services
on a case-by-case basis.





22
 Table of Contents




ITEM 15. EXHIBITS





(a) List of Exhibits attached or incorporated by reference pursuant to Item 601 of Regulation S-B.





Exhibit No.

Description3
*
Articles of Incorporation incorporated by reference to Form SB-2, file no. 333-83231, incorporated by reference to Exhibit 3 filed on July 6, 20013.2
*
Amendment to Articles of Incorporation incorporated by reference to Form SB-2, file no. 333-83231, incorporated by reference to Exhibit 3.2 filed on July 6, 20013.3
*
Bylaws incorporated by reference to Form SB-2, file no. 333-83231,  incorporated by reference to Exhibit 3.3 filed on July 6, 20013.4
*
Articles of Merger between Global and IF&G Media Corporation incorporated by reference to Form SB-2, file no. 333-83231, incorporated by reference to Exhibit 3.4 filed on July 6, 20014
*
Specimen certificate for common stock incorporated by reference to Form SB-2, file no. 333-83231, incorporated by reference to Exhibit 4 filed on July 6, 20014.1
*
Specimen Warrant certificate incorporated by reference to Form SB-2, file no. 333-83231, incorporated by reference to Exhibit 4.1 filed on July 6, 2001





10.1
*
Consulting Agreement with Moody's Financial Services incorporated by reference to Form SB-2, file no. 333-8323110.2
*
Consulting Agreement with Joel Shine incorporated by reference to Form SB-2, file no. 333-8323110.3
*
Equity Line of Credit Agreement dated May2001 incorporated by reference to Form SB-2, file no. 333-83231 incorporated by reference to Exhibit 10.3 filed on July 6, 200110.4
*
Consulting Agreement with Persia Consulting Group, Inc. dated April 12, 2001 incorporated by reference to Form SB-2, file no. 333-83231 incorporated by reference to Exhibit 10.4 filed on July 6, 200110.5
*
Escrow Agreement with First Union incorporated by reference to Form SB-2, file no. 333-83231 incorporated by reference to Exhibit 10.5 filed on July 6, 200110.6
*
Registration Rights Agreement incorporated by reference to Form SB-2, file no. 333-83231 incorporated by reference to Exhibit 10.6 filed on July 6, 200110.7
*
Agreement with Yorkville Advisors Management, LLC incorporated by reference to Form SB-2, file no. 333-83231, incorporated by reference to Exhibit 10.7 filed on July 6, 200110.8
*
Agreement and Plan of Exchange between Global Diversified Industries and MBS, filed on March 17, 200310.9
*
Agreement and Plan of Exchange between Global Diversified Industries and Modular Modernization, Inc. filed on March 19, 200331.1
**
Certification of Chief Executive Officer/President Pursuant to Rule 13a-14(a) and 15d-14(a).31.2
**
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a).32.1
**
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
**
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


____________________


* Previously filed.


** Filed herewith.






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SIGNATURES





Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.











GLOBAL DIVERSIFIED INDUSTRIES, INC.Dated: August 13, 2009
By:
/s/ Phil HamiltonPhil HamiltonPresident and CEO








Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the date indicated:





Signature

Title

Date/s/Phil Hamilton

CEO/Chairman of the Board

August 13, 2009Phil Hamilton/s/Adam Debard

Secretary/Treasurer/Director

August 13, 2009Adam Debard








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