UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
DC 20549
  FORM
10-QSB
 
  QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 SECURITIES
EXCHANGE ACT OF 1934
  For
the period ended January 31, 2008
  Commission
file number: 333-83231
  GLOBAL
DIVERSIFIED INDUSTRIES, INC.
 (Exact
Name of Registrant as specified in its charter)
  NEVADA
              
              95-4741485(State
      of incorporation)
              
              (IRS
      Employer Identification No.)
    1200 Airport
      Drive,Chowchilla,CA
              
              93610(Address
      of principal executive offices)
              
              (Zip
      Code)
  (559)
665-5800
 (Registrant's
telephone number, including area code)
 
 
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).      Yes o No x
  State the
number of shares outstanding of each of the issuer's classes of common equity,
261,599,711 shares of Common Stock ($.001 par value) as of March 15,
2008.
  Transitional
Small Business Disclosure Format (Check one): Yes oNo x
  Table of Contents
 
 TABLE OF CONTENTSPART
      I  Financial
      InformationItem
      1.
                Financial Statements (Unaudited)
                3Condensed Consolidated Balance Sheet:  January 31,
      2008
                3Condensed Consolidated Statements of Operations: For the Three
      Months and Nine Months Ended January 31, 2008 and 2007
                5Condensed
      Consolidated Statements of Cash Flows:For the Nine Months Ended January
      31, 2008 and 2007
                6Notes to Unaudited Consolidated Financial Information:
      January 31, 2008
                7Item
      2.
                Management's
      Discussion and Analysis of FinancialCondition and Results of
      Operations
                18Item
      3.
                Controls and Procedures
                24PART
      II  Other
      InformationItem
      1.
                Legal Proceedings
                25Item
      2.
                Unregistered Sale of Equity Securities and Use of
      Proceeds
                25Item
      3.
                Defaults Upon Senior Securities
                25Item
      4.
                Submission of Matters to Vote of Security
      Holders
                25Item
      5.
                Other Information
                26Item
      6.
                Exhibits
                26
 
 Table of Contents
 
 PART
I FINANCIAL INFORMATION
 
 ITEM I. FINANCIAL STATEMENTS (UNAUDITED)
 
 GLOBAL DIVERSIFIED INDUSTRIES, INC.CONDENSED
      CONSOLIDATED BALANCE SHEET
  (Unaudited)January
      31, 2008ASSETS:Current
      assets:Cash
      and cash equivalents
                
                $
                3,059Accounts
      receivable, net of allowance for doubtful accounts of $0 at January 31,
      2008
                
                
                922,559Inventories
                
                
                3,672,542Advance
      to employees
                
                
                1,000Prepaid
      expenses and other
                
                
                110,537Total
      current assets
                
                $
                4,709,697Property,
      plant and equipment:Property,
      plant and equipment, at cost
                
                
                3,081,437Less:
      Accumulated depreciation
                
                
                (1,209,045
                )Total
      property, plant and equipment, net
                
                
                1,872,392Other
      assets:Deposit
      and others
                
                
                64,315Non
      current deferred tax asset (Note H)
                
                
                66,000Intellectual
      properties, net of accumulated amortization of $262,202 at January 31,
      2008 (Note F)
                
                
                923,638Total
      other assets
                
                
                1,053,953Total
      Assets
                
                $
                7,636,042
 See
accompanying notes to the unaudited condensed consolidated financial
information.
  3
 Table of Contents
  
 GLOBAL
      DIVERSIFIED INDUSTRIES, INC.CONDENSED
      CONSOLIDATED BALANCE SHEET
(Continued)
  (Unaudited)January
      31, 2008LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable and accrued liabilities
                
                $
                1,101,108Notes
      payable to related parties, current portion (Note B)
                
                
                296,500Notes
      payable, current portion (Note B)
                
                
                723,903Total
      current liabilities
                
                
                2,121,511Long-term
      liabilities:Notes
      payable, long term portion, net of debt discount (Note B)
                
                
                241,865Notes
      payable to related parties, long-term portion (Note B)
                
                
                588,815Total
      long-term liabilities
                
                
                830,680Commitment
      and contingencies
                
                
                --Stockholders'
      equity:Series
      A Preferred stock, par value $.001 per share; 10,000,000 shares
      authorized; 413,092shares issued and outstanding at January 31, 2008 (Note C)
                
                
                413Common
      stock, par value $.001 per share; 400,000,000 shares authorized;
                  172,739,245 shares issued and outstanding at January 31, 2008 (Note
      C)
                
                
                172,739Additional
      paid-in capital
                
                
                6,625,908Preferred
      stock subscription
                
                
                733,374Common
      stock subscription
                
                
                1,453,882Treasury
      stock (Note C)
                
                
                (50
                )Accumulated
      deficit
                
                
                (4,302,415Total
      stockholders' equity
                
                
                4,683,851Total
      liabilities and stockholders' equity
                
                $
                7,636,042
  See
accompanying notes to the unaudited condensed consolidated financial
information.
     4
 Table of Contents
 
 GLOBAL DIVERSIFIED INDUSTRIES, INC.CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)For
      The Three Months Ended
              
              
              For
      the Nine Months EndedJanuary
      31,
              
              
              January
      31,2008
              
              
              2007
              
              
              2008
              
              
              2007Revenues
              
              $
              547,103
              
              
              $
              509,898
              
              
              $
              5,462,669
              
              
              $
              5,093,974Cost
      of goods sold
              
              
              426,344
              
              
              
              394,067
              
              
              
              4,462,038
              
              
              
              3,971,325Gross
      profit
              
              
              120,759
              
              
              
              115,831
              
              
              
              1,000,631
              
              
              
              1,122,649Operating
      expenses:Selling,
      general andadministrative
      expenses
              
              
              240,455
              
              
              
              342,734
              
              
              
              837,919
              
              
              
              1,485,254Depreciation
      andamortization
              
              
              80,383
              
              
              
              79,419
              
              
              
              241,147
              
              
              
              232,107Total
      operating expense
              
              
              320,,838
              
              
              
              422,153
              
              
              
              1,079,066
              
              
              
              1,717,361Loss
      fromoperations
              
              
              (200,079
              )
              
              
              (306,322
              )
              
              
              (78,435
              )
              
              
              (594,712
              )Interest
      expense, net
              
              
              (
      96,138
              )
              
              
              (
      70,361
              )
              
              
              (305,903
              )
              
              
              (334,719
              )Loss
      from continuingoperations,
      before incometaxes
      and discontinuedoperations
              
              
              (296,217
              )
              
              
              (376,683
              )
              
              
              (384,338
              )
              
              
              (929,430
              )Income
      taxes benefit  (expenses)
              
              
              (30,000
              )
              
              
              -
              
              
              
              (30,000
              )
              
              
              179,200Loss
      from continuingoperations,
      beforediscontinued
      operations
              
              
              (326,217
              )
              
              
              (376,683
              )
              
              
              (414,338
              )
              
              
              (750,230
              )Loss
      from discontinuedoperations
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (29,543
              )Gain
      from disposal ofdiscontinued
      operations
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              328,286Net
      loss
              
              $
              (326,217
              )
              
              $
              (376,683
              )
              
              $
              (414,338
              )
              
              $
              (451,487
              )Losses
      per common share:Basic
      and assuming diluted
              
              $
              (0.00
              )
              
              $
              (0.00
              )
              
              $
              (0.00
              )
              
              $
              (0.00
              )Continuing
      operations
              
              
              (0.00
              )
              
              
              (0.00
              )
              
              
              (0.00
              )
              
              
              (0.00
              )Discontinued
      operations
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              0.00Weighted
      average shares outstanding used in losses pershare
      calculation:Basic
      and assuming diluted
              
              
              172,739,245
              
              
              
              172,379,808
              
              
              
              170,417,128
              
              
              
              156,980,382See
      accompanying notes to the unaudited condensed consolidated financial
      information
  5
 Table of Contents
 
 GLOBALDIVERSIFIED INDUSTRIES, INC.CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)For
      the Nine months endedJanuary
      31,2008
              
              
              2007Cash
      flows from operating activities:Net
      loss
              
              $
              (414,338
              )
              
              $
              (451,487
              )Add
      (deduct):Loss
      from discontinued operations
              
              
              -
              
              
              
              29,543Gain
      from disposal of discontinued operation
              
              
              -
              
              
              
              (328,286
              )Loss
      from continuing operations
              
              
              (414,338
              )
              
              
              (750,230
              )Adjustment
      to reconcile net loss to net cash (used in) provided
    by:Depreciation
      and amortization
              
              
              241,147
              
              
              
              232,107Common
      stock issued in exchange for services rendered
              
              
              18,000
              
              
              
              20,889Common
      stock subscribed in exchange for rent
              
              
              87,282
              
              
              
              149,936Amortization
      and write off of debt discount
              
              
              14,535
              
              
              
              76,001Common
      stock issued in exchange for compensation
              
              
              
              
              
              
              3,000Change
      in assets and liabilities:(Increase)/decrease
      in accounts receivable
              
              
              (240,196
              )
              
              
              2,830,587(Increase)
      in inventory
              
              
              (699,002
              )
              
              
              (776,721
              )(Increase)/decrease
      in prepaid expense and others
              
              
              102,648
              
              
              
              (143,031
              )(Increase)/decrease
      in employee advances
              
              
              745
              
              
              
              (62,831
              )(Decrease)
      in accounts payable and accrued liabilities
              
              
              (17,757
              )
              
              
              (25,317
              )Increase/(decrease)
      in deferred taxes
              
              
              30,000
              
              
              
              (180,000
              )Net
      cash provided by (used in) continuing operations
              
              
              (876,936
              )
              
              
              1,374,390Net
      cash provided by discontinue operations
              
              
              -
              
              
              
              25,243Net
      cash provided by (used in) operating activities:
              
              
              (876,936
              )
              
              
              1,399,633Cash
      flows from investing activities:Cash
      receivable in connection with disposition of MBS (Note
      G)
              
              
              -
              
              
              
              (1,000
              )Capital
      expenditure
              
              
              (28,950
              )
              
              
              (322,775
              )Net
      cash (used in) investing activities
              
              
              (28,950
              )
              
              
              (323,775
              )Cash
      flows from financing activities:Proceeds
      from sale of common stock and stock subscription, net of costs and
      fees
              
              
              630,000
              
              
              
              -Proceeds
      from (repayments of) notes payable, net
              
              
              45,000
              
              
              
              (1,611,237
              )Proceeds
      from (repayments of) related party notes payable,
net
              
              
              (122,624
              )
              
              
              111,000Net
      cash provided by (used in) financing activities
              
              
              552,376
              
              
              
              (1,500,237
              )Net
      decrease in cash and cash equivalents
              
              $
              (353,510
              )
              
              
              (424,379
              )Cash
      and cash equivalents at beginning of period
              
              
              356,569
              
              
              
              557,100Cash
      and cash equivalents at end of period
              
              $
              3,059
              
              
              $
              132,721Supplemental
      Disclosures of Cash Flow Information:Cash
      paid during the period for interest
              
              $
              385,588
              
              
              $
              251,699Common
      stock issued to employees for compensation
              
              
              -
              
              
              
              3,000Common
      stock issued in exchange for services rendered
              
              
              18,000
              
              
              
              20,889Common
      stock subscription in exchange for services rendered
              
              
              -
              
              
              
              149,936Common
      stock subscribed in exchange  for rent
              
              
              87,288
              
              
              
              -Common
      stock subscribed in exchange for notes payable
              
              
              -
              
              
              
              200,000Beneficial
      conversion feature of convertible notes
              
              
              14,535
              
              
              
              -Preferred
      stock issued in exchange for accrued interest
              
              
              -
              
              
              
              53,449Common
      stock subscribed in exchange for accrued interest
              
              
              20,000
              
              
              
              -See
      accompanying notes to the unaudited condensed consolidated financial
      information
          6
 Table of Contents






GLOBAL DIVERSIFIED INDUSTRIES,
  INC.
 NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL
INFORMATION
 January
      31, 2008
 (Unaudited)
 
 NOTE
A - SUMMARY OF ACCOUNTING POLICIES
 
 General
 
 The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
 
 In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Accordingly,
the results from operations for the three and nine-month period ended January
31, 2008, are not necessarily indicative of the results that may be expected for
the year ended April 30, 2008. The unaudited condensed consolidated financial
statements should be read in conjunction with the consolidated April 30, 2007
financial statements and footnotes thereto included in the Company's SEC Form
10-KSB.
 
 Business and Basis of
Presentation
 
 Global
Diversified Industries, Inc. (the "Company"), is incorporated under the laws of
the State of Nevada, and is in the business of designing, manufacturing and
marketing re-locatable modular structures such as classrooms and office
buildings to end users as well as to third party leasing agents for use
primarily within the state of California and other Western States.
 
 The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries, Lutrex Enterprises, Inc. ("Lutrex"), Global Modular,
Inc. ("Global Modular "), and MBS Construction, Inc. ("MBS"). All significant
intercompany balances and transactions have been eliminated in
consolidation.
 
 The
Company sold its MBS subsidiary in October 2006. The MBS business segment is
accounted for as discontinued operations, and accordingly, amounts in the
financial statements, and related notes for all periods shown have been restated
to reflect discontinued operations accounting. Summarized results of the
discontinued business and information relating to the sale of this subsidiary
are further described in Note G.
 
 Reclassification
 
 Certain
reclassifications have been made to conform to prior periods' data to the
current presentation. These reclassifications had no effect on reported
losses.
 
 Revenue
Recognition
 
 The
Company recognizes revenues, except several construction-type fixed-price
contracts, in accordance with Staff Accounting Bulletin No. 104, Revenue
Recognition ("SAB104"), which superseded Staff Accounting Bulletin No. 101,
Revenue Recognition in Financial Statements ("SAB101"). SAB 101 requires that
four basic criteria must be met before revenue can be recognized: (1) persuasive
evidence of an arrangement exists; (2) delivery has occurred; (3) the selling
price is fixed and determinable; and (4) collectibility is reasonably assured.
Determination of criteria (3) and (4) are based on management's judgments
regarding the fixed nature of the selling prices of the products delivered and
the collectibility of those amounts. Provisions for discounts and rebates to
customers, estimated returns and allowances, and other adjustments are provided
for in the same period the related sales are recorded. The Company defers any
revenue for which the product has not been delivered or is subject to refund
until such time that the Company and the customer jointly determine that the
product has been delivered or no refund will be required. In the event that the
Company's arrangements with its customers include more than one product or
service, the Company determines whether the individual revenue elements can be
recognized separately in accordance with Financial Accounting Standards Board
(FASB) Emerging Issues Task Force No. 00-21 (EITF 00-21), Revenue Arrangements
with Multiple Deliverables. EITF 00-21 addresses the determination of whether an
arrangement involving more than one deliverable contains more than one unit of
accounting and how the arrangement consideration should be measured and
allocated to the separate units of accounting.
 
 7
 Table of Contents
  The
Company recognizes revenue when persuasive evidence of an arrangement exists,
the price to the customer is fixed, collectibility is reasonably assured and
title and risk of ownership is passed to the customer, which is usually upon
shipment. However, in limited circumstances, certain customers traditionally
have requested to take title and risk of ownership prior to shipment. Revenue
for these transactions is recognized only when:
  (1)
                Title
      and risk of ownership have passed to the customer;(2)
                The
      Company has obtained a written fixed purchase
  commitment;(3)
                The
      customer has requested in writing the transaction be on a bill and hold
      basis;(4)
                The
      customer has provided a delivery schedule;(5)
                All
      performance obligations related to the sale have been
      completed;(6)
                The
      modular unit has been processed to the customer's specifications, accepted
      by the customer and made ready forshipment; and(7)
                The
      modular unit is segregated and is not available to fill other
      orders.
  The
remittance terms for these "bill and hold" transactions are consistent with all
other sales by the Company.
 
 In fiscal
2007, the Company entered into several fixed-price arrangements whereby the
Company is to construct and install several modular units for a school district.
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.
 
 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.
 
 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.
  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 has not determined the effect, if any, the adoption
of Statements 141(R) and 160 will have on the Company’s financial position or
results of operations.
  8
 Table of Contents
  NOTE
B - NOTES PAYABLE
 
 A summary
of notes payable at January 31, 2008 is as follows:
 
 Note
      payable to Company shareholder in monthly installments of interest only at
      10.0% per annum; unsecured; maturity date was on November 30, 2003. The
      Company amended the note with the shareholder in April 2004, extending the
      maturity date to May 1, 2009; the noteholder has an option to convert the
      unpaid principal balance of the loan, together with any accrued and unpaid
      interest to the Company's preferred stock. (a) Subsequent to the date of
      the financial statements, the noteholder converted the note to the
      Company’s preferred stock (Note K).
              
              
              $
              389,465Note
      payable to Company shareholders in monthly installments of interest only
      at 8.0% per annum; unsecured; maturity date extended to May 15,
      2008.   Noteholder has the option to convert the principal
      balance of the loan to the Company’s preferred stock.  (a)
      Subsequent to the date of the financial statements, the noteholder
      converted the note to the Company’s preferred stock (Note
    K).
              
              
              
              68,500Note
      payable to Company shareholders in monthly installments of interest only
      at 6.0% per annum; unsecured; maturity date is on May 1, 2009. Subsequent
      to the date of the financial statements, the noteholder converted the note
      to the Company’s preferred stock (Note K).
              
              
              
              199,350Note
      payable to Company shareholders in monthly installments of interest only
      at 5.0% per annum; unsecured; maturity date is on August 31, 2005,
      maturity extended to August 31, 2008 Noteholder has the option to convert
      the principal balance of the loan to the Company’s preferred stock. (a).
      Subsequent to the date of the financial statements, the noteholder
      converted the note to the Company’s preferred stock (Note
    K).
              
              
              
              6,000Note
      payable to Company shareholders in monthly installments of interest only
      at 8% per annum; unsecured; maturity date was in August 2007, which has
      been extended to August 2008. Noteholder has the option to convert the
      principal balance of the loan to the Company’s preferred stock. (a)
      Subsequent to the date of the financial statements, the noteholder
      converted the note to the Company’s preferred stock (Note
    K).
              
              
              
              111,000Note
      payable in 24 monthly installments beginning March 15, 2006; unsecured;
      maturity date is March 2008.
              
              
              
              22,547Note
      payable to Company shareholder in monthly installments of interest only at
      8% per annum, unsecured, maturity date was on January 31, 2006; maturity
      date extended to January 31, 2008. Subsequent to the date of the financial
      statements, the noteholder converted the note to the Company’s preferred
      stock (Note K).
              
              
              
              111,000Note
      Payable, interest only monthly beginning December 14, 2006 at 8% per
      annum, unsecured, maturity date is April 30, 2008.  Subsequent to the
      date of the financial statements, the noteholder converted the note to the
      Company’s preferred stock (Note K).
              
              
              
              30,000Note
      Payable in 24 monthly installments beginning January 28, 2007, interest
      only first six months at 7.5 % per annum, unsecured, maturity is December
      2008.  Subsequent to the date of the financial statements, the
      noteholder converted the note to the Company’s preferred stock (Note
      K).
              
              
              
              40,000Note
      Payable with monthly interest only payment at 8% per annum beginning July
      23, 2007, unsecured, maturity is July 31, 2009. Subsequent to the date of
      the financial statements, the noteholder converted the note to the
      Company’s preferred stock (Note K).
              
              
              
              40,000Note
      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. (b)
              
              
              
              241,865Note
      payable revolving agreement secured by receivable and property with
      interest and administrative fees payable monthly; balance due for the term
      note was $62,500 at January 31, 2008, balance due for the revolver was
      $528,856 at January 31, 2008. Interest rate is at 1.75% and 2.75% per
      annum over and above the Prime Rate or Deemed Prime Rate whichever is
      higher for the revolver and term note, respectively. The maturity date was
      extended to April 1, 2008 for the revolver and term note. The revolver has
      a maximum borrowing capacity of $3,000,000.
              
              
              
              591,3561,851,083Less:
      current portion
              
              
              
              (1,020,403
              )Total
      - notes payable – long term
              
              
              $
              830,680
  9
 Table of Contents
  (a) The
Company granted the noteholder an option to convert a total of $400,000 of
principal balance of the notes to the Company's 2,666,666 shares of preferred
stock, and each share of the preferred stock is convertible to ten shares of the
Company's restricted common stock. The noteholder has the option to convert the
notes to the Company's securities anytime within three years from the issuance
of the notes. The Company accounted for the notes payable and stock purchase
rights in accordance with APB No. 14, "Accounting for Convertible Debt and Debt
Issued with Stock Purchase Warrants" ("APB 14"). Proceeds from the issuance of
notes payable with equity securities are allocated between the debt and the
securities based on their relative fair values. The fair value of the company's
restricted common stock at the time the conversion option was granted
approximated the value of the debt if converted. Accordingly, there was no
beneficial conversion feature in connection with the convertible notes
payable.
  (b) 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. On October 31, 2006, the noteholder agreed to convert $200,000
of principal into 2,353,356 shares of the Company's common stock. These shares
were issued on September 9, 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 $14,535 and
$76,001for the nine months ended January 31, 2008 and 2007,
respectively.
 
 NOTE
C - CAPITAL STOCK
 
 On
November 7, 2001 the Company's Board of Directors approved an increase in the
Company's authorized common stock from 50,000,000 to 400,000,000 with a par
value of $.001. The Company also created a Series A Preferred class of stock,
$.001 par value, and authorized 10,000,000 shares. As of January 31, 2007, the
Company has issued and outstanding 413,092 shares of Series A preferred stock.
The Company has 172,739,245 shares of common stock issued and outstanding at
January 31, 2008. The Company has 50,000 shares of treasury stock at January 31,
2008.
 
 During
the nine months period ended January 31, 2008, the Company issued 2,000,000
shares of common stock to a consultant in exchange for $18,000 of services fees.
All valuations of common stock issued for services were based upon the value of
the services rendered, which did not differ materially from the fair value of
the Company's common stock during the period the services are rendered. The
Company agreed to issue 5,819,200 shares of common stock in exchange for $87,282
of rent expenses. The Company received $630,000 of cash, net of costs and fees
for 34,833,333 shares of common stock subscribed. In addition, the Company
agreed to issue to a related party an aggregate of 1,000,000 shares of common
stock in exchange for $20,000 of accrued interest in connection with a
promissory note. These shares have not been issued as of January 31, 2008, and
the Company has accounted for the shares subscribed as common stock
subscription. The Company issued an aggregate of 3,530,034 shares of common
stock in exchange for $200,000 of common stock subscribed during the nine months
ended January 31, 2007.
 
 Subsequent
to the date of financial statements, the Company amended its Articles of
Incorporation to (a) increase its authorized common stock from 400,000,000 to
2,736,500,000 shares, (b) increase its authorized preferred stock from
10,000,000 to 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 (Note K).
  10
 Table of Contents
  NOTE
D - STOCK OPTIONS AND WARRANTS
  Non-Compensatory Stock
Options
  Transactions
involving non-compensatory options and the related prices for the shares of the
Company's common stock issued to non-employees of the Company are summarized as
follows:
  Number
      of Shares
              
              
              Weighted
      Average Price Per ShareOutstanding
      at May 1, 2005
              
              
              5,500,000
              
              
              $
              1.40Granted
              
              
              -
              
              
              
              -Exercised
              
              
              -
              
              
              
              -Canceled
      or expired
              
              
              (1,500,000
              )
              
              
              5.00Outstanding
      at April 30, 2006
              
              
              4,000,000
              
              
              $
              0.05Granted
              
              
              -
              
              
              
              -Exercised
              
              
              -
              
              
              
              -Canceled
      or expired
              
              
              (4,000,000
              )
              
              
              0.05Outstanding
      at April 30, 2007
              
              
              -
              
              
              $
              -Granted
              
              
              -
              
              
              
              -Exercised
              
              
              -
              
              
              
              -Canceled
      or expired
              
              
              -
              
              
              
              -Outstanding
      at January 31, 2008
              
              
              -
              
              
              $
              -
 
 During
the period ended January 31, 2008 and 2007, the Company did not grant any
compensatory stock options to consultants or shareholders, and all previously
granted stock options were fully vested at the time the stock options were
granted. Accordingly, no compensation costs were charged to operations during
the period ended January 31, 2008 and 2007. The 4,000,000 warrants granted
during the year ended April 30, 2004 expired on January 31, 2007.
 
 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$
              0.03
              
              
              
              750,000
              
              
              
              0.08
              
              
              $
              0.03
              
              
              
              750,000
              
              
              $
              0.03
   11
 Table of Contents
  Transactions
involving warrants are summarized as follows:
 
 Number
      of Shares
              
              
              Weighted
      Average Price Per ShareOutstanding
      at May 1, 2005
              
              
              1,500,000
              
              
              $
              0.03Granted
              
              
              -
              
              
              
              -Exercised
              
              
              -
              
              
              
              -Canceled
      or expired
              
              
              -
              
              
              
              -Outstanding
      at April 30, 2006
              
              
              1,500,000
              
              
              $
              0.03Granted
              
              
              -
              
              
              
              -Exercised
              
              
              -
              
              
              
              -Canceled
      or expired
              
              
              (750,000
              )
              
              
              0.03Outstanding
      at April 30, 2007
              
              
              750,000
              
              
              $
              0.03Granted
              
              
              -
              
              
              
              -Exercised
              
              
              -
              
              
              
              -Canceled
      or expired
              
              
              -
              
              
              
              -Outstanding
      at January 31, 2008
              
              
              750,000
              
              
              $
              0.03
 
 The
Company granted 750,000 of warrants during the year ended April 30, 2003 in
connection with acquisition of MBS in February 2003.  The warrants
granted have an original expiration date on January 31, 2004, 750,000 of the
warrants were extended to and expired on July 31, 2006, and the remaining
750,000 warrants were extended to February 28, 2008.
 
 NOTE
E - EMPLOYEE STOCK INCENTIVE PLAN
 
 In
September 2001, the Board of Directors of the Company implemented an Employee
Stock Incnetive Plan ("2001 Stock Option Plan") for officers, employees and
certain non-employees (collectively referred to as "Employees") in an amount
equal to 15,000,000 shares of common stock. The 2001 Stock Option Plan provides
for the issuance of stock options 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 Incnetive Plan ("2004 Stock Option Plan") for officers, employees
and certain non-employees (collectively referred to as "Employees") in an amount
equal to 2,000,000 shares of common stock. The 2004 Stock Option Plan provides
for the issuance of stock options at an exercise price of $0.05 per share (or
110% of the fair market value of the common stock on the date of the grant of
the option, for employees holding greater than ten percent (10%) of the total
voting power of all stock of the Company). The maximum life of the options is
ten years from the date the stock options are granted.
  There are
no stock options issued and outstanding during the nine month period ending
January 31, 2008.
  NOTE
F- ACQUISITION OF INTANGIBLE ASSETS
  The
Company has adopted SFAS No. 142, Goodwill and Other Intangible Assets, whereby
the Company periodically test its intangible assets for impairment. On an annual
basis, and when there is reason to suspect that their values have been
diminished or impaired, these assets are tested for impairment, and write-downs
will be included in results from operations.
  12
 Table of Contents
  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. The building engineering and architectural plans acquired have
estimated useful lives of ten years.
  Total
identifiable intangible assets acquired and their carrying values at January 31,
2008 are:
  Gross
      Carrying Amount
              
              
              Accumulated
      Amortization
              
              
              Net
              
              
              Residual
      Value
              
              
              Weighted
      Average Amortization Period (Years)Amortized
      Identifiable Intangible Assets:Building
      engineering and architectural plans
              
              $
              835,840
              
              
              $
              (262,202
              )
              
              $
              573,638
              
              
              $
              -
              
              
              
              10.0Total
      Amortized Identifiable Intangible Assets
              
              $
              835,840
              
              
              $
              (262,202
              )
              
              $
              573,638
              
              
              $
              -
              
              
              
              10.0Unamortized
      Identifiable Intangible Assets:Trade
      Name
              
              
              350,000
              
              
              
              -
              
              
              
              350,000
              
              
              
              350,000Total
      Unamortized Identifiable Intangible Assets
              
              
              350,000
              
              
              
              -
              
              
              
              350,000
              
              
              
              350,000Total
              
              $
              1,185,840
              
              
              $
              (262,202
              )
              
              $
              923,638
              
              
              $
              350,000
  Estimated
amortization expense as of January 31, 2008 is as follows:
  For
      the twelve months ended January 31,2009
              
              $
              87,8642010
              
              
              87,8642011
              
              
              87,8642012
              
              
              87,8642013
      and after
              
              
              222,182Total
              
              $
              573,638
   13
 Table of Contents
  NOTE
G - DIVESTITURES AND DISCONTINUED OPERATIONS
  In
October 2006, the Company sold one of its subsidiaries, MBS Construction, Inc.
("MBS") to Paragon Modular, Inc ("PMI") through a Stock Purchase Agreement
("Purchase Agreement"). Pursuant to the Purchase Agreement, PMI acquired certain
assets and assumed certain liabilities of MBS and agreed to pay $1,000 in cash.
As a result of the sale of the MBS business segment, the Company accounted for
the segment as a discontinued operation, and accordingly, the amounts in the
financial statements and related notes for all period presented have been
restated to reflect discontinued operations accounting.
  The
following summarizes the disposition of the MBS business
segment:
  Cash
      consideration
              
              $
              1,000Debts
      assumed by PMI
              
              
              372,819Net
      assets disposed of
              
              
              (45,533
              )Net
      gain on disposal of MBS
              
              $
              328,286
 
 The
financial statements reflect the operating results and balance sheet items of
the discontinued operations separately from continuing operations. Prior years
have been restated. Operating results for the MBS discontinued operations for
the nine months ended January 31, 2008 and 2007 were:
  2008
                
                
                2007Revenues
                
                $
                --
                
                
                $
                --Costs
      and Expenses
                
                
                --
                
                
                
                29,543Net
      loss before tax
                
                
                --
                
                
                
                (29,543
                )Income
      tax provision (benefit)
                
                
                --
                
                
                
                --Net
      loss
                
                
                --
                
                
                
                (29,543
                )Net
      gain on sale of MBS, before tax
                
                
                --
                
                
                
                328,286Income
      tax provision (benefit)
                
                
                --
                
                
                
                --Gain
      on sale, net of tax
                
                
                --
                
                
                
                328,286Gain
      on discontinued operations, net of tax
                
                
                --
                
                
                $
                298,743
 14
 Table of Contents
  NOTE
H - 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 carryforwards for income tax
purposes with a valuation allowance against the carryforwards 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 State net operating
loss carryforwards of $3,204,943, which will expire beginning in 2024, and a
Federal net operating loss carryforward of $3,204,943, which will expire
beginning in 2024. 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 January 31, 2008, we have provided a valuation allowance reducing the
net realizable benefits of these deductible differences to $ 384,400 at January
31, 2008. The net change in the valuation allowance from April 30, 2007 was an
increase of $60,000.  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.
  The
income tax provision (benefit) for the nine months ended January 31, 2008 and
January 31, 2007 consists of the following:
 
 January
      31, 2008
              
              
              January
      31, 2007Continuing
      OperationsCurrentFederal
              
              $
              --
              
              
              $
              --State
              
              
              --
              
              
              
              800--
              
              
              
              800DeferredFederal
              
              
              23,000
              
              
              
              (152,000
              )State
              
              
              7,000
              
              
              
              (38,000
              )30,000
              
              
              
              (190,000
              )30,000
              
              
              $
              (189,200
              )
  Discontinued
Operations
 Federal
              
              
              --
              
              
              
              10,000State
              
              
              --
              
              
              
              ----
              
              
              
              10,000Total
              
              $
              30,000
              
              
              $
              (179,200
              )
 
 15
 Table of Contents
  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:
  Nine
      Months Ended January 31, 2008
                
                
                Nine
      Months Ended January 31, 2007Computed
      “expected” income tax expense at approximately 34%
                
                $
                (127,000
                )
                
                $
                (154,000
                )Increase
      (decrease) in NOL carryforwards
                
                
                127,000
                
                
                
                117,000Discretionary
      change in valuation allowances of deferred income taxes
                
                
                24,000
                
                
                
                (150,000
                )Various
      other
                
                
                6,000
                
                
                
                (2,200
                )$
                30,000
                
                
                $
                (189,200
                )
 Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Significant components of our deferred
tax assets and liabilities as of January 31, 2008 are as follows:
  January
      31, 2008Deferred
      tax assets:Federal
      and state net operating loss
                  
                  $
                  1,282,000Allowance
      and accruals not recognized for income tax purposes
                  
                  
                  -Total
      gross deferred tax assets
                  
                  
                  1,282,000Less
      : Valuation allowance
                  
                  
                  (1,128,000
                  )Net
      deferred tax assets
                  
                  $
                  154,000Deferred
      tax liabilities:Total
      gross deferred tax liabilities:Depreciation
      and amortization, net
                  
                  
                  (86,000
                  )Deferred
      state tax liability
                  
                  
                  (2,000
                  )Total
      net deferred tax liabilities
                  
                  $
                  (88,000
                  )
 
 16
 Table of Contents


These
amounts have been presented in the consolidated balance sheets as
follows:




January
      31, 2008Current
      deferred tax asset
              
              $
              -Non
      current deferred tax asset
              
              
              66,000Non
      current deferred tax liability
              
              
              -Total
      net deferred tax asset
              
              $
              66,000


NOTE
I - ECONOMIC DEPENDENCY





During
the nine months ended January 31, 2008, approximately $4,027,627, or74%, of
total revenues were derived from three major customers and $679,129 (or 74%) of
the total accounts receivable at January 31, 2008 were due from two of these
major customers.





During
the nine months ended January 31, 2007, approximately $2,328,442,
or  46%, of total revenues were derived from three major customers and
$ 120,874 (or 45%) of the total accounts receivable at January 31, 2007 were due
from two of these major customers.





NOTE
J – LITIGATIONS





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.





The
Company is subject to other 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 should not have a material adverse effect on its
financial position, results of operations or liquidity.





NOTE
K – SUBSEQUENT EVENTS





On
February 22, 2008, the Company completed a private placement and issued (a) its
Series B Preferred Stock having an aggregate original principal balance of
$3,484,294, (b) its Series 1 Warrants exercisable, in the aggregate, for
696,858,800 shares of Common Stock, and (c) Series 2 Warrants exercisable, in
the aggregate, for 696,858,800 shares of Common Stock (the “Series B
Offering”).  The stated value of the Series B Preferred Stock converts
into Common Stock at a conversion price of one-half of one cent ($0.005) per
share.  The Series 1 Warrants have an exercise price of one cent
($.01) and the Series 2 Warrants have an exercise price of two cents
($.02).  The total cash paid for the Securities was (a) $2,000,000 in
cash, and (b) the conversion of outstanding debt having aggregate principal and
interest of $1,484,294.  In connection with the offering of such
securities, the broker-dealers were paid aggregate cash commissions equal to
$202,000.  In addition, the broker-dealers received (a) Common Stock
Purchase Warrants entitling the broker-dealers to purchase, in the aggregate,
40,000,000 shares of the Company’s Common Stock at an exercise price of one-half
of one cent ($.005) per share, (b) Common Stock Purchase Warrant entitling the
broker dealers to purchase, in the aggregate, 40,000,000 shares of the Company’s
Common Stock at an exercise price of one cent ($.01),  and (c) Common
Stock Purchase Warrants entitling the broker-dealers to purchase, in the
aggregate, 40,000,000 shares of the Company’s Common Stock at an exercise price
of two cent ($.02). The stated value of the Series B Preferred Stock 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. Dividends on such
stated value (or any balance thereof outstanding from time to time) accrue at an
annual rate of twelve percent (12%).





On
February 22, 2008, the total of six note holders of the Company converted a
total of aggregate principal and interest of $1,484,294 into 1,484,294 shares of
Series B Convertible Preferred Stock.





Effective
February 21, 2008, the Company 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.




17
 Table of Contents


ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JANUARY 31,
2008





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





Introduction





The
Company is a Nevada company with a limited operating history. On December 11,
2001, Global Diversified Industries, Inc., formerly Global Foods Online, Inc.
(the "Company") acquired two wholly-owned subsidiaries, Majestic Modular
Buildings, Ltd. ("Modular"), and, Lutrex Enterprises, Inc. "Lutrex", an entity
controlled by the Company's President and Chief Executive Officer.





Modular
was 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 single story classrooms for two school
districts in southern California.





The
Company is a holding company for two wholly owned subsidiaries, Lutrex
Enterprises, Inc., an entity, which holds equipment and inventory for the
registrant, and Global Modular, Inc., a sales, marketing, manufacturing and
construction site work of modular type structures.





Overview





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





In the
quarter ending October 31, 2006, Global Modular was awarded a five year contract
with Victor Valley School District that contained a "piggyback clause.
This allows Global Modular to provide educational customers with product
contracted under a "piggyback clause". The State of California allows school
districts to canvass proposals from modular classroom vendors under a bidding
process where the successful bidder can provide other public school districts
and municipalities portable classrooms under a "piggyback contract" issued by
the originating school district. This process saves school districts valuable
time and resources from the necessity of soliciting bids. A modular vendor who
possesses a "piggybackable contract" containing competitive pricing and a
variety of design options may have access to future business for up to five
years, depending on the term of the piggyback contract. This piggyback contract
includes all appropriate pricing parameters pertinent to Global's "permanent
modular construction" designs. Global Modulars' new piggyback contract provides
them the flexibility to offer California public schools and municipalities an
expanded variety of design and pricing alternatives to meet virtually any design
request by the school district and/or architect.




18
 Table of Contents




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





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





During
the remainder of 2008, the Global Modular will continue to focus its attention
on the sales and marketing of portable classrooms and modular buildings to the
California public and private school sectors including California
municipalities. Since the state of California has been experiencing an influx in
student enrollment over the past several years, and the forecast for the next
ten years is for continual increasing enrollments, the portable classroom
manufacturing industry has become more successful. In an effort to keep up with
demand for additional classroom space, modular manufactures are expecting
increased production backlogs throughout the remainder of 2008 and into
2009.





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





COMPARISON
OF THE THREE MONTHS ENDED JANUARY 31, 2008 TO THE THREE MONTHS ENDED JANUARY 31,
2007





Results of
Operations





Total
revenues from continuing operations increased to $547,103 in the quarter ended
of January 31, 2008 from $509,898 in the quarter ended January 31, 2007. The
quarter ending January 31 is traditionally very slow in the industry due to
school districts closing for the Christmas and New Years
holidays.  The Company also slowed down manufacturing operations
during the holiday season and focused on raising capital.





Cost of
revenues from continuing operations was $426,344 and $394,067, respectively for
the quarters ended January 31, 2008 and 2007. The cost of revenue from
continuing operations increased because of a 7% increase in revenue from the
quarter ended January 31, 2008 as compared to the quarter ended January 31,
2007. Gross profit from continuing operations was $120,759 and $115,831,
respectively for the quarters ended January 31, 2008 and 2007. The gross profit
from continuing operations increased by 4%. The gross margin was 22% and 23%,
respectively, for the quarter ended January 31, 2007 and for the quarter ended
January 31, 2008,





Total
operating expenses decreased to $320,838 in the three months ended January 31,
2008 from $422,153 in the three months ended January 31, 2007. The decrease in
operating expense was due to general and administrative cost being controlled by
the management’s cost reduction plan.




COMPARISON
OF THE NINE MONTHS ENDED JANUARY 31, 2008 TO THE NINE MONTHS ENDED JANUARY 31,
2007





Results of
Operations





Total
revenues from continuing operations increased to $5,462,669 for the nine months
ended of January 31, 2008 from $5,093,974 for the nine months ended January 31,
2007. Two projects that were scheduled to go onto the manufacturing line during
the quarter ending January 31, 2008 were delayed due to both clients redesigning
their projects, which are now complete and scheduled to put on the manufacturing
line in the quarter ending April 30, 2008.




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 Table of Contents




Cost of
revenues from continuing operations was $4,462,038 and $3,971,325, respectively
for the nine months ended January 31, 2008 and 2007. The cost of revenue from
continuing operations increased by 12% with revenues increasing 7% from the nine
months ended January 31, 2008 as compared to the nine months ended January 31,
2007. Gross profit from continuing operation was 1,000,631 and $1,122,649,
respectively for the nine months ended January 31, 2008 and 2007.The gross
margin decreased from 22% for the nine-months ended January 31, 2007 to 18% for
the nine months ended January 31, 2008, because the Company incurred costs
outside of the contract terms for a client during the quarter ended October 31,
2007.  During the quarter ending April 30, 2008, the Company will
pursue legal proceeding to collect these costs which were not part of the
original contract terms and conditions.





Total
operating expenses decreased to $1,079,066 in the nine months ended January 31,
2008 from $1,717,361 in the nine months ended January 31, 2007. The operating
expenses decreased due to cost cutting measured implemented by
management.





The
Company sold their stock in MBS to a third party and recorded a gain on the sale
of MBS for $328,286 on October 31, 2006





Currently,
the Company has a signed backlog and projects being negotiated  in
excess of $8,000,000 with California school districts.




Liquidity and Capital
Resources




As of
January 31, 2008, the Company had a working capital surplus of $2,588,186. Net
loss for the nine months ended January 31, 2008 was $414,338. The Company
generated a negative cash flow from operations of $876,936 for the nine-month
period ended January 31, 2008. The negative cash flow from operating activities
for the period is primarily attributable to the Company's net loss from
continuing operations adjusted for depreciation and amortization of $241,147,
common stock issued and subscribed in exchange for services and rent of
$105,288, amortization of debt discount of $14,535, an decrease in deferred
taxes assets of $30,000, a increase in accounts receivable of $240,196 an
increase in inventory of $699,002, an decrease in employee advances of $745, a
decrease in other assets of $102,648, and an decrease in accounts payable of
$17,757.





Cash
flows used in investing activities for the nine-month period ended January 31,
2008 consisted of the acquisition of $28,950 of equipment, leasehold
improvements and architectural plans used in operations.





The
Company funded operations during the nine months ended January 31, 2008 by
reducing debt to stockholders by $122,624, increasing debt to third parties by
$45,000 and proceeds of $630,000 from common stock subscribed.





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





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





By
adjusting its operations and development to the level of capitalization,
management 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.





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




20
 Table of Contents




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.





Critical
Accounting Policie





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





Revenue
Recognition





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





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


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


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


(4) The
customer has provided a delivery schedule;


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


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


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





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





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





In fiscal
2007 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.




21
 Table of Contents




Inventories





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





Allowance
for Uncollectible Account





We are
required to estimate the collectibility of our trade receivables. A considerable
amount of judgment is required in assessing the realization of these receivables
including the current creditworthiness of each customer and related aging of the
past due balances. In order to assess the collectibility of these receivables,
we perform ongoing credit evaluations of our customers' financial condition.
Through these evaluations we may become aware of a situation where a customer
may not be able to meet its financial obligations due to deterioration of its
financial viability, credit ratings or bankruptcy. The reserve requirements are
based on the best facts available to us and are reevaluated and adjusted as
additional information is received. Our reserves are also based on amounts
determined by using percentages applied to certain aged receivable categories.
These percentages are determined by a variety of factors including, but are not
limited to, current economic trends, historical payment and bad debt write-off
experience. We are not able to predict changes in the financial condition of our
customers and if circumstances related to our customers deteriorate, our
estimates of the recoverability of our receivables could be materially affected
and we may be required to record additional allowances. Alternatively, if we
provided more allowances than are ultimately required, we may reverse a portion
of such provisions in future periods based on our actual collection experience.
As of January 31, 2008, we determined a reserve was not required against our
account receivables.





Employees




As of
January 31, 2008, the company had 50
employees. The Company anticipates the number of employees will increase over
the next six months. The Company does not expect to have any collective
bargaining agreements covering its employees.





Properties





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





Trends, Risks and
Uncertainties





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





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





Our
annual report on April 30, 2007 Form 10-KSB includes a detailed list of
cautionary factors that may affect future results. Management believes that
there have been no material changes to those factors listed, however other
factors besides those listed could adversely affect us. That annual report can
be accessed on EDGAR.




22
 Table of Contents




LIMITED
OPERATING HISTORY; ANTICIPATED LOSSES; UNCERTAINTY OF FUTURE
RESULTS





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





POTENTIAL
FLUCTUATIONS IN ANNUAL OPERATING RESULTS





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




LIMITED
PUBLIC MARKET, POSSIBLE VOLATILITY OF SHARE PRICE




The
Company's common stock is currently quoted on the NASD OTC Electronic Bulletin
Board under the ticker symbol GDVI. As of March 22, 2008, there were
approximately 261,599,711 shares of common stock outstanding, of which
approximately 90,338,310were tradablewithout restriction
under the Securities Act. There can be no assurance that a trading market will
be sustained in the future. Factors such as, but not limited to, technological
innovations, new products, acquisitions or strategic alliances entered into by
the Company or its competitors, failure to meet security analysts' expectations,
government regulatory action, patent or proprietary rights developments, and
market conditions for manufacturing stocks in general could have a material
effect on the volatility of the Company's stock price.





MANAGEMENT
OF GROWTH





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





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





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




23
 Table of Contents




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.





IMPLEMENTATION
OF SECTION 404 OF THE SARBANS-OXLEY ACT





We may
not be able to implement Section 404 of the Sarbanes-Oxley Act on a timely
basis. The SEC, as directed by Section 404 of the Sarbanes-Oxley Act,
adopted rules generally requiring each public company to include a report of
management on the company’s internal controls over financial reporting in its
annual report on Form 10-K that contains an assessment by management of the
effectiveness of the company’s internal controls over financial reporting. This
requirement will first apply to our annual report on Form 10-K for the
fiscal year ending April 30, 2008. In addition, commencing with our annual
report for the fiscal year ending April 30, 2010 our independent registered
accounting firm must attest to and report on management’s assessment of the
effectiveness of our internal controls over financial reporting.





We have
in the past discovered, and may in the future discover, areas of our internal
controls that need improvement. How companies should be implementing these new
requirements including internal control reforms to comply with Section 404’s
requirements and how independent auditors will apply these requirements and test
companies’ internal controls, is still reasonably uncertain.





Upon
completion of a Section 404 plan, we may not be able to conclude that our
internal controls are effective, or in the event that we conclude that our
internal controls are effective. Any failure to implement required new or
improved controls, or difficulties encountered in their implementation, could
negatively affect our operating results or cause us to fail to meet our
reporting obligations.







ITEM 3. CONTROLSAND PROCEDURES





The
Company's management including the President, Chief Executive Officer and Chief
Financial Officer, have evaluated, within 90 days prior to the filing of this
quarterly report, the effectiveness of the design, maintenance and operation of
the Company's disclosure controls and procedures. Management determined that the
Company's disclosure controls and procedures were effective in ensuring that the
information required to be disclosed by the Company in the reports that it files
under the Exchange Act is accurate and is recorded, processed, summarized and
reported within the time periods specified in the Commission's rules and
regulations.





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





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




24
 Table of Contents




PART
II. OTHER INFORMATION
  ITEM 1.LEGAL PROCEEDINGS
 
 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.




ITEM 2. UNREGISTEREDSALE OF EQUITY SECURITIES AND USE OF
PROCEEDS





On
February 22, 2008, the company filed a Form 8-K report to the SEC, which stated
that the company completed a private placement and issued (a) its Series B
Preferred Stock having an aggregate original principal balance of $3,484,294,
(b) its Series 1 Warrants exercisable, in aggregate, for 696,858,800 shares of
Common Stock, and (c) Series 2 Warrants exercisable, in the aggregate for
696,858,800 shares of Common Stock ( the “Series B Offering”). The stated value
of the Series B Preferred Stock converts into Common Stock at a conversion price
of one-half of one cent ($.005) per share.  The Series 1 Warrants have
an exercise price of one cent ($.01) and the Series 2 Warrants have an exercise
price of two cents ($.02).  The total cash paid for the Securities was
(a) $2,000,000 in cash and (b) the conversion of outstanding debt having
aggregate principal and interest of $1,484,294.





ITEM 3. DEFAULTS UPON SENIOR SECURITIES





None
during this reporting period.





ITEM 4. SUBMISSIONOF MATTERS TO A VOTE OF SECURITY
HOLDERS




None
during this reporting period.




ITEM 5. OTHERINFORMATION





None
during this reporting period.





ITEM 6. EXHIBITS





Exhibits








No.
            
            Description31.1
            
            Certification
      of Phillip Hamilton Pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.31.2
            
            Certification
      of E. Adam DeBard to Section 302 of the Sarbanes-Oxley Act of
      2002.32.1
            
            Certification
      of Phillip Hamilton Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2
            
            Certification
      of E. Adam DeBard Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.












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 Table of Contents





SIGNATURES





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





GLOBAL
      DIVERSIFIED INDUSTRIES, INC.Date: March
      17, 2008
            By:
            /s/ Phillip
      HamiltonPresident
      and Chief Executive Officer
              (Principal
      Executive Officer)





Date: March
      17, 2008
            By:
            /s/ Adam
      DeBardChief
      Operating Officer (Principal
              Accounting
      and Financial Officer)






26