Global Diversified Industries Inc. (OTCBB: GDVI)
Global Diversified Industries Inc. (OTCBB: GDVI) is a holding company that currently operates two wholly owned subsidiaries, Lutrex Enterprises, Inc., an entity, which holds equipment and inventory for the holding company and Global Modular, Inc., a sales, marketing and manufacturing of modular type structures and also is responsible for modular construction work and renovation. Global Modular incorporates the latest in construction software, allowing it to better manage and monitor projects from start to finish incorporating cost vs. profit ratios, construction and manufacturing schedules, purchasing, receiving and other facets of industrial management. The company’s work is found in Northern and Southern California, with numerous projects on budget for school systems throughout the state. GDVI used to operate MBS Corporation as separate subsidiary that handled all construction services, but has recently decided to create a construction division within Global Modular. This change has reduced operating and other expenses and improved project coordination during construction.
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The Company
Global Diversified Industries Inc. 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 company was created in December 2001 and has been manufacturing modular buildings for the past 3 years.
The company’s vision is to secure a significant portion of the educational market by initially focusing on meeting demand for modular classrooms and buildings on the West Coast and then replicate this success in other states in the nation, such as Florida and Arizona that have warmer climates, more suited towards modular structures. This will likely be accomplished via an acquisition based strategy that will be subject to identifying companies that can complement GDVI’s core business and sourcing the raising capital to complete such acquisitions.
Customers & Factory
The company’s primary customer base include educational institutions, child care and municipality sectors. Its product line consists of portable classroom designs, including single-story and two-story floor plans. GDVI incorporates the latest in construction software and the company’s portable classroom structures are engineered and constructed in accordance with pre-approved building plans known as P.C.’s (pre-checked) plans. All of the buildings in the product line comply with safety specifications that are administered by the California Department of State Architects (DSA) and considered earthquake-resistant.
The company increased the selection of its base models from 3 designs to 12 following the purchase of Aurora. Modular buildings are manufactured in a plant and shipped to the site of the client pre-fabricated as opposed to traditional buildings which are constructed on-site. The new generation of modular buildings is permanent construction built right on a cement slab and some designs are without floors that literally put them on the same footing as other buildings. Global Diversified Industries, Inc., opened its 100,000 square foot facility in Chowchilla in 2003. This new facility is equipped and staffed to produce and deliver product at a full annual capacity of $50 million. As of April 30, 2006 the company had 145 employees and GDVI anticipates that the current number of employees will satisfy its production backlog during the next 6 months. The company does not expect to have any collective bargaining agreements covering any of its employees.
Designs for both Aurora and Global Modular include (amongst other) the following building types, most of which can be tailored for the clients needs:
* Cafeteria/Auditorium
* Child Care/ Headstart
* Classroom
* Instant Schools
* Library/Science Labs/Multimedia
* Office/Administration
* Restrooms
* Two-Story
Industry & Strategy
California is the 3rd largest school district system in the nation. Public school enrollment exceeds 6 million and is growing. There are almost 1,000 school districts accounting for 8,000 individual schools and over $80 billion in school facilities. The budget crisis in the school system in the State of California poses a massive challenge and remains unresolved. State legislation effective since 1998 to help address this situation now requires that at least 20% of all new state funded classrooms be portable or modular structures. This is due to the fact that modular classrooms are faster to build, more cost-effective, offer flexibility of use, are easier to finance and provide financing incentives. There is an undeniable increased demand for portable school buildings for the state of California.
According to a recent interview with Global CEO Phil Hamilton, he mentioned that today 73% of all classrooms in CA are over 25 years old and that in California Public school expenditures exceed $50 billion annually. Moreover it is estimated that the state currently needs 40,000 new classrooms at a total projected cost of $40 billion including improvements to existing buildings.
The recent departure of Aurora Modular and another competitor has reduced the supply side of the modular industry in California to only 10 players, including GDVI. Global believes it can capture more business and market share in the state since it is centrally based in Chowchilla, CA and willing and able to ship both in Northern and Southerly directions, unlike most of its rivals. Several California school district projects have been delayed last year after the bankruptcy of Aurora and another modular builder. This has set the stage for moving towards the most active and busiest quotation period the company has experienced since it started production 3 years ago.
The company’s marketing team recently displayed its Aurora products at the 27th Annual C.A.S.H. Conference in Sacramento. C.A.S.H. is The California Coalition for Adequate School Housing. This was a very successful conference for the company because of the enormous interest among schools needing new facilities in the Aurora line. C.A.S.H. says that public school enrollment.
In November 2005, voters passed a $4 billion Los Angeles School Bond Measure that would provide money to complete an ambitious overhaul and expansion in the Los Angeles school system, which is one of the most overcrowded in the nation. Since 1997, voters have supported three similar bonds worth $9.5 billion. The Measure was endorsed by many politicians and civic groups, including Los Angeles Mayor Antonio Villaraigosa. The project, which is scheduled for completion in 2012, calls for about 160 new schools and extensive renovations to hundreds of others.
The impact from previously passed bond measures has already been felt throughout the industry and GDVI expects the most recent bond measures to impact favorably on its results over both the near and medium term.
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