UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

FORM 10-K
(Mark One)
 
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2008

o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________to__________

Commission file Number 0-25429

DIVERSIFIED PRODUCT INSPECTIONS, INC.
(Name of registrant as specified in its charter)

Delaware
59-3087128
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)

1059 East Tri-County Blvd., Oliver Springs, TN
37840
(Address of principal executive offices)
(Zip Code)

Registrant's telephone number, including area code: (865) 482-8480

Securities registered pursuant to Section 12(b) of the Exchange Act:

   
Name of exchange on
Title of each class
 
which registered
None
 
None
     

Securities registered pursuant to Section 12(g) of the Exchange Act:

Common Stock, $0.01 Par Value
(Title of Class)
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes     x No
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act . o Yes      x No
 
Indicate by check mark whether the registrant  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days.
 
Yes   x   No   o
 
 
 
 
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K x

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 aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.   The aggregate market value of the voting stock held by non-affiliates of the Company, computed by reference to the closing price of such stock as of June 30, 2008 ($.026) was approximately $136,352. For purposes of the computation we consider all directors, management and holders of 10% or more of our common stock to be affiliates. Therefore, the number of shares of our common stock held by non-affiliates as of June 30, 2008 was 5,244,293. The registrant has no outstanding non-voting stock.
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer,”  “accelerated filer" and “smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer  o
Accelerated filer  o
Non-accelerated filer  o
(Do not check if a smaller reporting company)
Smaller reporting company  x

As of March 13, 2009, there were 20,105,867 shares of common stock, $0.01 par value, issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

 
 
 

PART I

Item 1. Business.

Statements included in this report regarding our financial position, business strategy and other plans and objectives for future operations, and assumptions and predictions about future product demand, supply, manufacturing, costs, marketing and pricing factors are all forward-looking statements. When we use words like "intend," "anticipate," "believe," "estimate," "plan" or "expect," we are making forward-looking statements. We believe that the assumptions and expectations reflected in such forward-looking statements are reasonable, based on information available to us on the date hereof, but we cannot assure you that these assumptions and expectations will prove to have been correct or that we will take any action that we may presently be planning. We have disclosed certain important factors that could cause our actual results to differ materially from our current expectations elsewhere in this report. You should understand that forward-looking statements made in this report are necessarily qualified by these factors. We are not undertaking to publicly update or revise any forward-looking statement if we obtain new information or upon the occurrence of future events or otherwise.

Corporate Background

We were organized as Fairfax Group, Inc. under the laws of the State of Florida on April 23, 1998. We became the successor to Fairfax Group, Inc., a Nevada corporation ("Fairfax Nevada") as a result of a merger consummated on September 8, 1998. Prior to the merger, Fairfax Nevada had never engaged in any substantive commercial business or other business operations, but had a shareholder base of approximately 500 shareholders. Unless the context otherwise requires, all references to the "Company" "we" "our" and other similar terms means the corporation originally incorporated under the name Fairfax Group, Inc. in Florida.

 On March 6, 2001, we, Diversified Product Investigations, Inc., a Florida corporation, and the individual holders of the outstanding capital stock of Diversified Product Investigations, Inc. (the "Holders") consummated a reverse acquisition (the "Reorganization") pursuant to a certain Share Exchange Agreement ("Agreement") of such date. Pursuant to the Agreement, the Holders tendered to us all of the issued and outstanding shares of common stock of Diversified Product Investigations, Inc. in exchange for 10,332,420 shares of our common stock. The reorganization was accounted for as a reverse acquisition.
 
Simultaneously with the closing of the Reorganization, the then sole officer and director of the Company resigned his positions in accordance with the terms of the Agreement. John Van Zyll, Ann M. Furlong, Marvin Stacy, Dean Madden and David Dowell were elected to serve on the Board of Directors of the Company (the "Board"). The Board subsequently appointed John Van Zyll as Chairman of the Board, President and Chief Executive Officer; Ann M. Furlong as Secretary; Dean Madden as Chief Financial Officer and Treasurer; and Marvin Stacy as Chief Operating Officer of the Company. The Board and the shareholders of the Company also approved and filed an amendment of the Company’s Articles of Incorporation in order to change the name of the Company from Fairfax Group, Inc. to Diversified Product Inspections, Inc.

Spin-Off of Company’s Business

On March 26, 2009, at a Special Meeting of Shareholders, the Company’s shareholders approved a Settlement Agreement and Asset Purchase Agreement, dated as of September 30, 2008 (the “Purchase Agreement”) pursuant to which the Company shall sell substantially all of the assets of the Company (except for $250,000) to Diversified Product Inspections, LLC, a Tennessee limited liability company (the “Buyer”) owned by John Van Zyll, Ann Furlong and Marvin Stacy (collectively, the “Management”), each of whom is a director, executive officer and shareholder of the Company. The Buyer will assume all of the Company’s liabilities as of the closing date of the Purchase Agreement. The assets of the Company to be sold include the real property owned by the Company which will be conveyed to the Buyer concurrently with the discharge of the existing mortgage on the real property (which mortgage will be assigned to and assumed by the Buyer on the closing date of the Purchase Agreement). The Buyer is paying for the assets by the Management’s cancelling all of their options and 6,459,877 of their shares of Common Stock.

 
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Sofcon, Limited, EIG Venture Capital, Limited and EIG Capital Investments, Limited (collectively the “Plaintiffs’), who are the plaintiffs in a lawsuit against the Company and Management that will be settled pursuant to the Purchase Agreement, will purchase from the Management the remaining 3,000,000 shares of Common Stock held by the Management for $300. EIG Venture Capital, Limited will also receive $250,000 from the Company at the closing of the Purchase Agreement.  
 
The assets to be sold to the Buyer shall not include:

(i) the Company’s corporate charter, qualifications to conduct business as a foreign corporation, arrangements with registered agents relating to foreign qualifications, taxpayer and other identification numbers, seals, minute books, stock transfer books, blank stock certificates, and other documents relating to the organization, maintenance, and existence of the Company as a corporation,

(ii) the $250,000 that will be paid by the Company  to EIG Venture Capital, Limited on the closing date of the Purchase Agreement, and

(iii) any rights of the Company to continue operating as a fully reporting Over-the-Counter Bulletin Board company following the closing of the Purchase Agreement.

The liabilities to be assumed by the Buyer under the Purchase Agreement include:

 
·
all of the Company’s obligations relating to all mortgages identified in the Purchase Agreement;

 
·
all of the Company’s obligations relating to its Line of Credit/Note Payable identified in the Purchase Agreement;

 
·
all of the Company’s obligations relating to the amounts owed to the Company’s legal counsel, transfer agent, auditor and all other service providers to the Company; and

 
·
all other liabilities of the Company including its trade liabilities, payroll and taxes, whether known or unknown.

Upon the closing of the Purchase Agreement, there will be a change of control of the Company and control will pass to the Plaintiffs, which are companies headed by Mr. Jan Telander.  Additionally, at the Closing of the Purchase Agreement, the Company’s current officers and directors will resign and the Company, which generated over $2.5 million in revenues in 2007 and over $2.6 million in 2008, will be an empty shell with no revenues or operations.

 For additional information concerning the sale of the Company’s assets and related transactions see the Company’s Proxy Statement, dated February 13, 2009 for the Special Meeting of Shareholders of the Company held on March 26, 2009, which is incorporated by reference herein.

Business

The following sets forth information about the business of the Company prior to the sale of assets of the Company which is anticipated to be consummated within several days after the filing of this Annual report on Form 10-K. Upon the closing of the Purchase Agreement, the Company will be an empty shell with no assets, revenues or operations.

We specialize in conducting investigations and laboratory analysis of a wide variety of products to determine the cause and origin of product failures. Our primary customers consist of national insurance companies that are interested in subrogating claims to recover losses. Subrogation is a legal principle, which provides that, to the extent an insurer has paid for a loss, the insurer receives the policyholder's right to recover from any third party that caused the loss. We have accumulated a large database of known defective products that includes photos and other documentation that are used in their investigations. Additionally, we provide for the storage of evidence and derive revenues from the secure storage of materials.

 
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We currently provide investigative services for over 2,200 insurance adjusters in more than 40 states. At the present time we do not have any contractual agreements with any particular insurance company. Our services are provided on a case by case per their requests. Assignments are provided to us by the individual insurance adjusters who are directed to use our services by their management.

We employ ten (10) state-licensed private investigators who are trained as "Cause and Origin" investigators, ten (10) laboratory technicians (3 of whom are state-licensed private investigators) and one engineer. We also have retained five people who provide us with engineering services on a part-time consulting basis. Also, we offer pre-failure evaluations of structures, building materials and appliances.

Since 1994, we have been concentrating almost exclusively on defective product investigations and we have accumulated a database of known defective products. Our current database has key identifiers for over 300,000 products, a library of over 380,000 35mm photographs, 515,000 digital photographs and other documentation along with hundreds of videos. Generally, we conduct an on-site forensic investigation to identify the products and materials involved in a claim loss and to determine the cause of the failure. For smaller items, we provide insurance adjusters with evidence collection kits and have the items shipped to our laboratories for testing. Also, we provide in-depth indoor air quality analysis to determine airborne contaminants that may be the causes of "sick" buildings.

A crucial element of a subrogation claim is the maintenance of "chain of custody" of the defective item. We maintain secure facilities and our personnel are trained in procedures for the proper handling, storing and cataloging of the evidence so that it is available at time of trial.
 
Marketing

We market our product by sponsoring seminars to over 151 insurance companies and through our website located at dpi-inc.com. Our website provides information for consumers, the insurance industry and manufacturers. We provide our seminars at the offices of numerous insurance companies located throughout the United States. Our seminar presentations are geared towards insurance claim adjusters and our seminars include information about our company and information teaching the adjusters how to locate and obtain faulty defective items, which have created damage to the insured's residence. Our seminars also teach the adjusters how to best secure a particular item for inspection to be conducted by our company. At the time of the seminar training, the adjusters are equipped with an adjusters use kit. This kit contains an instruction booklet on how to use our services and it also contains the necessary materials for shipping pieces of evidence involved in claims, to our Tennessee location.

In addition to our industry services, for the consumer, we began providing in 2004 a service called HomeCheckSafety.com. This is a way for the consumer to identify and remove recalled products from their home. When a consumer registers, items that are entered are monitored continuously. If at any time one or all of these items are recalled, the consumer is notified. Some consumers will have the added benefit of qualifying for a reduction in their homeowner rates as several major insurance companies are evaluating our service for future implementation.

Also, we publish a monthly newsletter that appears on our website. Each newsletter features a particular hazard or defective product reports or official product recall notices.

Subrogation Claims and Other Investigations

Below are samples of some of the actual cases in which our investigations enabled the client to be successful in their subrogation claim.
 
2008

·
We began an investigation regarding a fire in a $7 million residence in Dandridge, Tennessee in which the homeowner suffered head injuries due to an explosion. The investigation is currently continuing.
 
·
We conducted product testing for a manufacturer before the product was marketed to the public.
 
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·
We conducted an air contamination investigation in the home of a well-known football player.

2007

·
We conducted an investigation on a high rise medical facility with severe roof leaks, which were the result of improper construction.

·
We extended our services to include several cases involving medical device manufacturers. One of these cases involved a full leg brace being used by a polio victim where the leg brace collapsed, resulting in a broken leg to the user. Another case involved the metal fracture of an artificial knee implant during normal use with the result that the implant had to be replaced. In both of these cases we provided research, engineering analysis and photo documentation; both cases are still pending,

·
The semi-truck axel claim law suit described in the first bullet point under 2006 was brought to a satisfactory conclusion.

2006

·
We conducted an investigation involving a commercial truck wreck on Interstate 75 near the Kentucky border. This wreck resulted in the fatalities of two drivers. Components of the lead truck had been buried as part of a landfill operation by the towing company. We provided investigation and recovery of the components. Some components were buried five to six feet deep. These components were critical to the accident reconstruction.

·
We provided consulting services involving an artificial implant which failed causing additional injury to the patient.

·
We conducted an investigation involving clothes dryer fires. The U.S. Consumer Product Safety Commission had done extensive testing to further understand the failure mode. After purchasing a dryer unit, equipping it with vision inspection ports and installing temperature sensors at four locations, we determined that air flow patterns could affect the sensing capabilities of the operational thermostat and the high limiter thermostat. This resulted in higher than normal operating temperatures within the dryer cabinet and also affected the heating cycle and the external temperatures of the dryer cabinet, particularly in the area where the heating element is located.

·
We conducted extensive testing of gas water heater control valves. Throughout the year several claims were handled investigating fires involving gas hot water heaters.

2005

·
We received three requests from clients to identify product parts using our exemplar (sample parts) inventory. The purpose was to use our exemplars to identify severely burned items in connection with determining origins of fires. One of the requests involved a claim estimated to be $10 million dollars. All three parts were successfully identified using our inventory. We believe that such success will promote future opportunities to provide this type of service.

·
We provided services which assisted our clients in recovering 100% of their subrogation claims. A few examples were: a recovery of $6,000 as a result of a defective braided supply line; a recovery of $47,000 as a result of a defective copper supply line; and a recovery of $19,500 as a result of a defective vinyl supply line.

·
Our Customer Service Department conducted a survey regarding the outcome of our clients’ claims. We surveyed a total of 83 claims in which our clients sought an aggregate of $918,984. The amount recovered by our clients in such cases due, at least in part to our reports, was a total of $ 641,654 representing a 69.82% recovery rate. The average inspection cost to our clients was $250.00. Therefore, in the claims we surveyed, our clients spent approximately $20,750 for our services and recovered $641,654.

 
5
 

Prior to 2005

·
Masonite Siding Class Action lawsuit. We were an expert witness in this lawsuit. We investigated and took samples from over 2,000 homes in 20 states. The lawsuit covered 13.9 million homes in the United States and resulted in a $4.3 billion class action settlement. (1995)

·
Louisiana Pacific Class Action lawsuit regarding defective siding. We inspected 2,000 homes in 19 states. It was the defense's contention that the siding could not be positively identified once installed. We developed a method of positively identifying the product through visual inspection and demonstrated this during deposition. The result was a $750,000 class action settlement. (1997)

·
Defective Battery Charger. A battery charger in California caused a fire in a strip mall causing heavy damage. We were able to positively identify the origin, cause and manufacturer. Reliance Insurance was able to subrogate a $1,000,000 claim. (1999)

·
Ply-Gen (Hoover) vs. Pulte Home. Defective siding was installed in over 13,000 homes in Florida. Our investigations and lab analysis resulted in a $23.3 million settlement to the homeowners. (1997)

·
Auto accident in Orlando. Driver stated that she had applied brakes, but that they did not work. An independent mechanic inspected the brake system and reported that it was properly functioning and that the driver was at fault. The insurance company hired us to inspect the brakes. Our lab was able to determine that the brake pad material had non-uniform wear characteristics that resulted in high and low spots. The braking friction of the pads was only 30% of their design specifications. The insurance company successfully subrogated the claim. The driver was found to be "not at fault", thus saving her from points on her license and an increase in her insurance premium. (1996)

·
Lamborghini Automobile in Orlando that burned because of a failure of the   rubber fuel lines. Our laboratory was able to determine that the rubber fuel lines were not defective. The owner had installed a high-pressure fuel pump that delivered a hydraulic pressure in excess of the fuel line manufacturer's recommendations. It was determined that the owner was at fault. (1995)

·
Chevy Silverado burns in Orlando. We were able to determine that the cause and origin was due to a problem in the manufacturing process of the dipstick for the transmission. The dipstick would eject under pressure,     allowing transmission fluid to spray on the exhaust and cause fires. The     insurance company was able to successfully subrogate the claim and GM has since corrected the problem. (1997)

·
Pedestal fan failures. We assisted a television consumer investigative reporter in a report concerning a line of pedestal fans marketed under the trade name SMC which had caused fires in the Seattle, Washington area. Our research department provided the reporter with information regarding failures of the same product in other areas of the country. (2004)

Intellectual Property

   We currently hold a federal trademark registration from the United States Patent and Trademark Office (Reg. No: 2206610) for our Diversified Products Inspections, Inc. logo. We also maintain a registered domain name for our Internet Web site located at http://www.dpi-inc.com and http://www.homechecksafety.com.

 
6
 

Recent Events

On December 11, 2008, the Company merged into a newly formed Delaware corporation, Diversified Product Inspections, Inc. which was formed exclusively for the purpose of merging with the Company. The merger changed the state of incorporation for the Company from Florida to Delaware through the execution of the Agreement and Plan of Merger (the “Merger Agreement”). Under the Merger Agreement, the surviving Delaware corporation assumed all of the Company’s assets and liabilities, including obligations under the Company’s outstanding indebtedness and contracts, and the Florida corporation ceased to exist as a corporate entity.

At the effective time of the reincorporation, each outstanding share of the Company’s common stock, $0.01 par value automatically converted into one share of common stock, $0.01 par value of the surviving Delaware corporation,. Stockholders did not have to exchange their existing stock certificates for stock certificates of the surviving company.

Stockholders whose shares of common stock were freely tradable before the reincorporation own shares of the surviving corporation that are freely tradable after the reincorporation. Similarly, any stockholders holding securities with transfer restrictions before the reincorporation hold shares of the surviving corporation that have the same transfer restrictions after the reincorporation.

Under Rule 12g-3 promulgated by the Securities and Exchange Commission, the common stock of the surviving company is deemed to be registered under Section 12 of the Securities Exchange Act of 1934 (the “Exchange Act”). After the reincorporation, the Company continues to be a publicly held corporation, with its common stock trading on the Over-the-Counter Bulletin Board. The trading symbol remained the same. The Company will continue to file periodic reports under the Exchange Act.

Employees

   As of March 13, 2009, we have approximately 36 full time employees. We have never experienced a work stoppage and we believe that our employee relations are good. Our success depends to a large extent upon the continued services of our key managerial employees and investigators. The loss of such personnel could have a material adverse effect on our business and our results of operations.
 
Transfer agent

Our transfer agent is Interwest Transfer Co., 1981 East Murray Holladay Road, Suite 100,, Salt Lake City, Utah 84117.

Item 1A. Risk Factors

 You should carefully consider the following risks and the other information contained in this report. The price of our common stock could decline due to any of these risks, and you could lose all or part of your investment. You also should refer to the other information included in this report, including the financial statements and related notes thereto. In addition, the risks described below are not the only ones facing us. We have described only the risks we consider material. However, there may be additional risks that we view as not material or of which we are not presently aware.

  If any of the events described below were to occur, our business, prospects, financial condition or results of operations or cash flow could be materially adversely affected. When we say that something could or will have a material adverse effect on it, we mean that it could or will have one or more of these effects.

Risks Related to Current Operations of the Company

The loss of one or more of our key employees may adversely affect our growth objectives.
 
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Our success in achieving our growth objectives depends upon the efforts of our top management team including the efforts of Messrs. John Van Zyll, Marvin Stacy and Ms. Ann M. Furlong. The loss of the services of any of these individuals may have a material adverse effect on our business, financial condition and results of operations. We do not have employment agreements with Messrs. VanZyll, Stacy or Ms. Furlong. We can give no assurance that we will be able to maintain and achieve our growth objectives should we lose one or all of these individuals' services.

Our current and potential competitors, some of whom have greater resources and experience than we do, may develop products and technologies that may cause demand for, and the prices of, our products to decline.

The product investigation industry in regards to subrogation for product failure is a new and growing market. While there may be several companies that offer fire or product investigations which have achieved substantially greater market share than we have, and have longer operating histories, have larger customer bases, have substantially greater financial, development and marketing resources than we do, to our knowledge there are few, if any, companies that offer a full scope of services that are tailored to the insurance industry. Our service includes fire investigation, product failure analysis, engineering and air & mold contamination investigations. Existing or future competitors may develop or offer products that are comparable or superior to ours at a lower price, which could adversely harm our business, results of operations and financial condition.

Risks Related to the Company Becoming a Shell Company if the Purchase Agreement is Closed

The Company's status as a shell company will make its potential difficult to assess its prospects.

           Upon the closing of the asset sale, the Company will become a shell company with no assets or financial resources.  The Company will, in all likelihood, sustain operating expenses without corresponding revenues, at least until the consummation of a business combination.  This will most likely result in the Company incurring a net operating loss which will increase continuously until the Company can consummate a business combination with a target company. There is no assurance that the Company can identify such a target company and consummate such a business combination.

The  Company  has  no  agreement  for a  business  combination  and  no  minimum requirements for a business combination.

            The Company has no current arrangement, agreement or understanding with respect to engaging in a business combination with a specific entity.  There can be no assurance that the Company will be successful in identifying and evaluating suitable business opportunities or in concluding a business combination. No particular industry or specific business within an industry has been selected for a target company. The Company has not established a specific length of operating history or a specified level of earnings, assets, net worth or other criteria which it will require a target company to have achieved, or without which the Company would not consider a business combination with such business entity. Accordingly, the Company may enter into a business combination with a business entity having no significant operating history, losses, limited or no potential for immediate earnings, limited assets, negative net worth or other negative characteristics. There is no assurance that the Company will be able to negotiate a business combination on terms favorable to the Company.

There is no assurance of success or profitability of the Company.

           There is no assurance that the Company will acquire a favorable business opportunity. Even if the Company should become involved in a business opportunity, there is no assurance that it will generate revenues or profits, or that the market price of the Company's outstanding shares will be increased thereby. The type of business to be acquired may be one that desires to avoid effecting its own public offering and the accompanying expense, delays, uncertainties, and federal and state requirements which purport to protect investors. Because of the Company's limited capital, it is more likely than not that any acquisition by the Company will involve other parties whose primary interest is the acquisition of control of a publicly traded Company. Moreover, any business opportunity acquired may be currently unprofitable or present other negative factors.

 
8
 

Other Risks
 
We may issue additional shares of our common stock which would reduce the percent ownership of existing shareholders and also dilute the share value of our common stock.

Our certificate of incorporation authorizes the issuance of 50,000,000 shares of common stock, par value $.01 per share. Our certificate of incorporation does not authorize us to issue shares of preferred stock. The future issuance of all or part of our remaining authorized common stock may result in substantial dilution in the percentage of our common stock held by our then existing shareholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and might have an adverse effect on any trading market for our common stock.

A significant portion of our total outstanding shares may be sold into the public market in the near future, which could   cause the market price of our common stock to drop significantly, even if our business is doing well.

If our existing stockholders sell a large number of shares of our common stock or the public market perceives that existing stockholders might sell shares of common stock, the market price of our common stock could decline significantly.

Our common stock may be affected by limited trading volume and may fluctuate significantly.

There has been a limited public market for our common stock and there can be no assurance that an active trading market for our common stock will develop. As a result, this could adversely affect our shareholders' ability to sell our common stock in short time periods, or possibly at all. Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations which could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially.

Since we have not paid any dividends on our common stock and do not intend to do so in the foreseeable future, a purchaser of our common stock will only realize an economic gain on his or her investment from an appreciation, if any, in the market price of our common stock.
     
The application of ‘penny stock rules" could adversely affect the market price of our common stock.

Our securities are deemed to be penny stock. Penny stocks generally are equity securities with a price of less than $5.00 per share other than securities registered on certain national securities exchanges or quoted on the NASDAQ Stock Market, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. Our securities may be subject to "penny stock rules" that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the "penny stock rules" require the delivery, prior to the transaction, of a disclosure schedule prescribed by the Commission relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information on the limited market in penny stocks. Consequently, the "penny stock rules" may restrict the ability of broker-dealers to sell our securities and may have the effect of reducing the level of trading activity of our common stock in the secondary market. The foregoing required penny stock restrictions will not apply to our securities if such securities maintain market price of $5.00 or greater. We can give no assurance that the price of our securities will reach or maintain such a level.

 
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Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

In December 2004 we purchased an approximately 45,000 square foot facility located at 1059 East Tri-County Blvd., Oliver Springs, Tennessee 37840 which we now use as our corporate headquarters and as our warehouse. The facility was purchased for $800,000. The entire purchase price was financed by a mortgage loan from a bank. The loan is repayable in monthly installments of interest only at the rate of 6% per annum through June 2005; thereafter, in monthly installments of $6,751 through May 2010, including interest at 6% per annum, with the remaining balance due June 2010.

Item 3. Legal Proceedings.
   
On August 18, 2006, Donald E. Savard Co. commenced a lawsuit against the Company. The basis of the lawsuit is trade libel, negligence and intentional interference with economic advantage. Judgment was entered in favor of the plaintiff on December 22, 2006 for $37,500 in general and punitive damages. The judgment was vacated after a hearing held on May 1, 2007. During March 2008, the Company and the plaintiff reached a settlement on the lawsuit for $30,000, which was fully paid in 2008.

On September 8, 2006 Sofcon Limited, EIG Venture Capital Ltd. and EIG Capital Investments, Ltd. commenced a lawsuit against the Company and three of the Company's largest shareholders in the Circuit Court of the 15th Judicial Circuit of Florida in and for Palm Beach County, Florida. The complaint alleges, among other things, that the defendants violated certain federal securities laws, fraudulently misrepresented facts and breached certain contracts with the plaintiffs and fiduciary duties to the plaintiffs in connection with investments made by the plaintiffs in the Company during the period from 1999 to 2002.

On September 29, 2008, the Company signed a Settlement Agreement and Asset Purchase Agreement (the “Agreement”) providing for it to transfer all of its assets, except $250,000, to a Tennessee corporation (the “Tennessee Corporation”) which will assume all liabilities. The transaction was approved by the Company’s shareholders on March 26, 2009.  The closing of the transaction is expected to be on March 31, 2009.

Under the agreement, the Tennessee corporation will be owned by the Company’s current directors.  The pending litigation against the Company and its directors will be dismissed. The Company’s current management will cancel 6,459,877 shares of common stock of the Company and sell to the plaintiffs 3,000,000 shares of common stock for nominal consideration as part of the settlement.  Finally, the Company will pay the $250,000 to one of the plaintiff's.  Following the closing contemplated by the Agreement, the Company will have no assets and no liabilities and will have 13,645,990 shares of common stock outstanding in contrast to 20,105,867 outstanding as of the date of this Annual Report on Form 10-K filing.  The plaintiffs in the litigation will designate the Company’s officers and directors.

Except for the foregoing, the Company knows of no legal proceedings to which it is a party or to which any of its property is the subject which are pending, threatened or contemplated or any unsatisfied judgments against the Company.

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

There were no matters submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders, through the solicitation of proxies or otherwise.

PART II
 
Item 5. Market for Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities.

Market Information

 
10
 

Our common stock is quoted on the OTC Bulletin Board under the symbol "DPRI". The following table sets forth the range of high and low bid quotations of our common stock, as reported on the OTC Bulletin Board, for the periods indicated. The prices represent inter-dealer quotations, which do not include retail markups, markdowns or commissions, and may not represent actual transactions.

   
Common Stock
 
   
High Bid
   
Low Bid
 
             
First Quarter 2008
  $ 0.05     $ 0.03  
Second Quarter 2008
  $ 0.04     $ 0.041  
Third Quarter 2008
  $ .04     $ 0.035  
Fourth Quarter 2008
  $ 0.04     $ 0.032  
                 
First Quarter 2007
  $ 0.05     $ 0.03  
Second Quarter 2007
  $ 0.09     $ 0.041  
Third Quarter 2007
  $ 0.041     $ 0.035  
Fourth Quarter 2007
  $ 0.06     $ 0.032  
 
Security Holders

At March 13, 2009 there were 20,105,867 shares our common stock outstanding which were held by approximately 530 stockholders of record.

Dividend Policy

We have not paid any dividends on our common stock, and it is not anticipated that any dividends will be paid in the foreseeable future. Our Board of Directors intends to follow a policy of using retained earnings, if any, to finance our growth. The declaration and payment of dividends in the future will be determined by our Board of Directors in light of conditions then existing, including our earnings, if any, financial condition, capital requirements and other factors.

Recent Sales of Unregistered Securities

There were no issuances or repurchases by the Company of equity securities of the Company during the year ended December 31, 2008.

Item 6. Selected Financial Data.

Not applicable.
 
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation

General

We specialize in conducting investigations and laboratory analysis of a wide variety of products to determine the cause and origin of product failures. Our primary customers consist of national insurance companies that are interested in pursuing claims to which they have become subrogated. Subrogation is a legal principle, which provides that, to the extent an insurer has paid for a loss, the insurer receives the policyholder`s right to recover from any third party that caused the loss. We have accumulated a large database of known defective products that includes photos and other documentation that are used in our clients’ investigations. Additionally, we provide for the storage of evidence collected during an investigation, until our customer requests that it be disposed.

 
11
 

Critical Accounting Policies

Our significant accounting policies are discussed in Note 1 to the financial statements. We consider the following accounting policies to be the most critical:

·
Revenue Recognition - We recognize inspection report revenue when the earnings process is completed. This typically occurs after our final written report has been reviewed, approved and submitted. Once the final report has been approved by management and submitted to the customer, we have no further obligation to the customer in regards to this matter. We recognize our storage fee revenue on a pro-rata basis as earned.

·
Stock Options - The Company accounts for its stock options under the fair value recognition provisions of Financial Accounting Standards Board (“FASB”) Statement No. 123(R ) , Share-Based Payment (“FAS 123(R)”), using the modified-prospective-transition method. Under that transition method, compensation costs recognized include: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of FAS 123, and (b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of FAS 123(R).
  
·
Property and Equipment - Our property and equipment is recorded at cost and depreciation is computed using the straight-line method over the estimated useful lives of the assets. We charge repairs and maintenance to expense as it is incurred.

·
Estimates - The preparation of financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. We base our estimates and judgments on historical experience and on various other factors that we 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. There can be no assurances that actual results will not differ from those estimates. On an ongoing basis, we evaluate our accounting policies and disclosure practices. In our opinion, the critical accounting estimates which are more complex in nature and require a higher degree of judgment include the estimation of deferred revenue, the determination of the reserve for doubtful accounts and any valuation allowance that might be needed related to our deferred income tax assets.
 
Results of Operations for the Fiscal Year Ended December 31, 2008 as Compared to the Fiscal Year Ended December 31, 2007

Our revenues for 2008 increased $161,239 or 6.4% to $2,682,640 from $2,521,401 in 2007. This increase reflects our continuance of increased sales levels over the past three years. The increases were due to our performing more engineering investigations offset somewhat by the absence of use agreement revenue in 2008.

Our total operating expenses for 2008 were $2,519,009, a slight increase of $6,299 or 0.3% compared to 2007.  Our salary expense increased by $61,810, or 4.0%, primarily due to compensation raises and additional employees in 2008 to support increased revenues, offset by lower bonuses in 2008.  Other general and administrative expenses decreased by $60,856 or 12.8%, primarily due to lower discretionary spending on office supplies and maintenance purchases in 2008.

Other income and expense variances are mainly due to a $146,250 gain on the sale of 2.15 acres of vacant land in 2007, along with the tentative settlement of a lawsuit for $250,000, more fully described in Note 11 of our audited financial statements, that we recorded as a liability in 2008.  During 2007 we had an unrelated lawsuit settlement expense of $30,000.

 
12
 
 
Also, since, as more fully described in Note 11 of our audited financial statements, during 2008, we signed a Settlement Agreement and Asset Purchase Agreement whereby, following the future closing contemplated by the Agreement, the Company will have substantially no assets and no liabilities.  Therefore, at December 31, 2008, we recognized $369,010 of deferred tax expense mainly to fully reserve our net deferred tax assets, as we cannot presently determine when we will be able to generate sufficient taxable income to realize these deferred tax assets.

Net loss for 2008 was $480,810 or $0.02 per share compared to a 2007 net income of $44,750 or less than $0.01 per share mainly reflecting our 2008 recognition of lawsuit settlement and deferred tax expenses offset by our improved operating results.

Results of Operations for the Fiscal Year Ended December 31, 2007 as Compared to the Fiscal Year Ended December 31, 2006

Our revenues for 2007 increased $233,679 or 10.2% to $2,521,401 from $2,287,722 in 2006. This increase reflects the continuance of increased sales levels that started in the last half of 2005. The increases were due to our performing more engineering investigations.  

Our total operating expenses for 2007 were $2,512,710, an increase of $462,438 or 22.6% compared to the same period in 2006. Our salary expense increased by $302,404, or 24.3%, primarily due to the payment of management and employee bonuses (timed with the sale of land discussed below) and additional personnel to support our increased revenue levels in 2007. Professional fees increased by $108,534 or 71.0%, primarily due to legal fees associated with our defense in two lawsuits more fully discussed elsewhere herein.

Other income and expense variances are mainly due to a $146,250 gain on the sale of 2.15 acres of vacant land in 2007, along with the tentative settlement of a lawsuit for $30,000 in 2008 that we recorded a liability for in 2007. During 2006 we had lawsuit settlement expense of $55,000 related to an early termination of our prior lease commitment.
 
Net income for 2007 was $44,750 or less than $0.01 per share compared to a 2006 net income of $67,331 or less than $0.01 per share mainly reflecting our 2007 decrease in operating income offset by our gain on sale of real estate.

Liquidity and Capital Resources

During 2008, our cash increased by $43,370, an increase of 9.4% from 2007. We believe we have sufficient cash provided by ongoing operating activities to meet our on future operating needs.
 
Investing and financing activities for 2008 reflect purchases of equipment totaling $34,110, and payments totaling $55,503 on our long-term debt and capital lease obligations. At December 31, 2008, all $400,000 is available under our line of credit.

During 2008, we entered into a Settlement Agreement and Asset Purchase Agreement pursuant to which all assets and liabilities of the Company will be distributed to a separate company owned by the Company’s directors. If the agreement is not consummated, we are not aware of any material trend, event or capital commitment, which would potentially adversely affect our liquidity. In the event such a trend develops, we believe that we will have sufficient funds available to satisfy working capital needs through lines of credit and the funds expected from equity sales.
Impact of Inflation

Inflationary factors have not had a significant effect on our operations.
 
Other

 
13
 

Except for historical information contained herein, the matters set forth above are forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ from those in the forward-looking statements. Potential risks and uncertainties include such factors as the level of business and consumer spending, the amount of sales of the Company's products, the competitive environment within the investigative services industry, the ability of the Company to continue to expand its operations, the level of costs incurred in connection with the Company's expansion efforts, economic conditions and the financial strength of the Company's customers and suppliers. Investors are directed to consider other risks and uncertainties discussed in documents filed by the Company with the Securities and Exchange Commission.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 8. Financial Statements and Supplementary Data.

Index to Financial Statements

Years ended December 31, 2008 and 2007

Report of Independent Registered Public Accounting Firm
F-1
   
Audited Financial Statements
 
   
Balance Sheets
F-2
Statements of Income
F-4
Statements of Stockholders’ Equity
F-5
Statements of Cash Flows
F-6
Notes to Financial Statements
F-7
 
 
14
 

Report of Independent Registered Public Accounting Firm
 
The Board of Directors and Stockholders
Diversified Product Inspections, Inc.

We have audited the accompanying balance sheets of Diversified Product Inspections, Inc. (the “Company”), as of December 31, 2008 and 2007, and the related statements of operations, stockholders’ equity and cash flows for the years then ended.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion the financial statements referred to above present fairly, in all material respects, the financial position of Diversified Product Inspections, Inc. as of December 31, 2008 and 2007, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

As further discussed in Note 11 to the financial statements, as part of a lawsuit settlement, the Company expects to pay $250,000 to the plaintiff on March 31, 2009, and transfer all of its remaining assets and liabilities to a new company owned by three of the Company’s current directors (who are also the Company ’ s three largest stockholders).

/s/ Coulter & Justus, P.C.

Knoxville, Tennessee
March 23, 2009
 
F-1

Diversified Product Inspections, Inc.

Balance Sheets

   
December 31
 
   
2008
   
2007
 
             
Assets
           
Current assets:
           
Cash
  $ 505,812     $ 462,442  
Accounts receivable, net of reserve for doubtful accounts of $30,000 in 2008 and $50,000 in 2007
    225,943       276,482  
Note receivable
    74,885       –  
Current portion of deferred income taxes
    –       79,343  
Prepaid expenses and other current assets
    27,615       18,655  
Total current assets
    834,255       836,922  
                 
Property and equipment:
               
Land
    96,250       96,250  
Building and building improvements
    757,645       735,318  
Equipment, furniture and fixtures
    359,940       402,058  
Vehicles
    132,949       132,949  
      1,346,784       1,366,575  
Less accumulated depreciation and amortization
    430,437       409,700  
Net property and equipment
    916,347       956,875  
                 
Other assets
    5,000       5,000  
Deferred income taxes, less current portion
    –       289,667  
                 
Total assets
  $ 1,755,602     $ 2,088,464  

F-2
 
   
December 31
 
   
2008
   
2007
 
             
Liabilities and stockholders’ equity
           
Current liabilities:
           
Accounts payable and accrued expenses
  $ 56,285     $ 74,682  
Accrued salaries
    27,631       28,783  
Accrued income taxes
    3,741       3,741  
Accrual for settlement of lawsuit
    250,000       30,000  
Deferred revenue
    130,000       127,000  
Current portion of long-term debt
    51,490       52,626  
Current portion of capital lease obligations
    –       1,933  
Total current liabilities
    519,147       318,765  
                 
Long-term debt, less current portion
    663,747       716,181  
Total liabilities
    1,182,894       1,034,946  
                 
Stockholders’ equity:
               
Common stock:
Par value—$0.01 per share
Authorized shares—50,000,000
               
Issued and outstanding shares—20,105,867 in 2008 and 2007
    201,058       201,058  
Additional paid-in capital
    1,998,586       1,998,586  
Accumulated deficit
    (1,626,936 )     (1,146,126 )
Net stockholders’ equity
    572,708       1,053,518  
                 
Total liabilities and stockholders’ equity
  $ 1,755,602     $ 2,088,464  
 
See accompanying Notes to Financial Statements.

F-3

Diversified Product Inspections, Inc.

Statements of Operations

   
Year ended December 31
 
   
2008
   
2007
 
             
Revenues:
           
Inspections
  $ 2,383,029     $ 2,147,771  
Storage fees
    299,611       291,463  
Use agreement
    –       82,167  
Total revenues
    2,682,640       2,521,401  
 
               
Operating expenses:
               
Salaries and related benefits
    1,607,200       1,545,390  
Professional fees
    255,815       261,356  
Shipping and handling costs
    168,105       158,714  
Depreciation and amortization
    74,638       73,143  
Other general and administrative
    413,251       474,107  
Total operating expenses
    2,519,009       2,512,710  
Operating income
    163,631       8,691  
 
               
Other income (expense):
               
Interest expense
    (47,931 )     (49,944 )
Rent income
    22,500       7,500  
Gain on sale of land
    –       146,250  
Settlement of lawsuit
    (250,000 )     (30,000 )
Net other (expenses) income
    (275,431 )     73,806  
 
               
(Loss) income before income taxes
    (111,800 )     82,497  
                 
Income tax expense:
               
Current state income taxes
    –       3,741  
Deferred income taxes
    369,010       34,006  
Total income tax expense
    369,010       37,747  
Net (loss) income
  $ (480,810 )   $ 44,750  
 
               
(Loss) earnings per share:
               
Basic
  $ (0.02 )   $ 0.00  
Diluted
  $ (0.02 )   $ 0.00  

See accompanying Notes to Financial Statements.

 
F-4
 

Diversified Product Inspections, Inc.

Statements of Stockholders’ Equity

   
Number of
Shares
Issued and
Outstanding
   
 
Common
Stock
   
Additional
Paid-in
Capital
   
 
Accumulated
Deficit
   
Net
Stockholders’
Equity
 
Balance at January 1, 2007
    20,180,867     $ 201,808     $ 1,997,836     $ (1,190,876 )   $ 1,008,768  
Retired stock
    (75,000 )     (750 )     750       –       –  
Net income for 2007
    –       –       –       44,750       44,750  
Balance at December 31, 2007
    20,105,867       201,058       1,998,586       (1,146,126 )     1,053,518  
Net loss for 2008
    –       –       –       (480,810 )     (480,810 )
Balance at December 31, 2008
    20,105,867     $ 201,058     $ 1,998,586     $ (1,626,936 )   $ 572,708  

See accompanying Notes to Financial Statements.

 
F-5
 
 
Diversified Product Inspections, Inc.

Statements of Cash Flows

   
Year ended December 31
 
   
2008
   
2007
 
Operating activities
           
Net (loss) income
  $ (480,810 )   $ 44,750  
Adjustments to reconcile net (loss) income to net cash
               
provided by operating activities:
               
Deferred income tax expense
    369,010       34,006  
Change in provision for bad debts
    (20,000 )     –  
Depreciation
    72,862       69,591  
Amortization
    1,776       3,552  
Gain on sale of land
    –       (146,250 )
Changes in operating assets and liabilities:
               
Accounts receivable
    70,539       9,991  
Note receivable
    (74,885 )     –  
Prepaid expenses and other assets
    (8,960 )     (15,741 )
Accounts payable and accrued expenses
    (18,397 )     16,889  
Accrued salaries
    (1,152 )     7,008  
Accrued income taxes
    –       3,741  
Accrual for settlement of lawsuit
    220,000       30,000  
Deferred revenue
    3,000       (31,333 )
Net cash provided by operating activities
    132,983       26,204  
                 
Investing activities
               
Proceeds from sale of land
    –       200,000  
Purchases of property and equipment
    (34,110 )     (95,206 )
Net cash (used in) provided by investing activities
    (34,110 )     104,794  
                 
Financing activities
               
Proceeds from long-term debt
    –       56,513  
Principal payments on long-term debt and capital lease obligations
    (55,503 )     (56,862 )
Net cash used in financing activities
    (55,503 )     (349 )
                 
Net increase in cash
    43,370       130,649  
                 
Cash at beginning of year
    462,442       331,793  
Cash at end of year
  $ 505,812     $ 462,442  
                 
Supplemental disclosures of cash flow information
               
Cash paid for interest
  $ 47,931     $ 49,944  

See accompanying Notes to Financial Statements.
 
F-6
 
Diversified Product Inspections, Inc.

Notes to Financial Statements

December 31, 2008

1.
Significant Accounting Policies

Description of Business

Diversified Product Inspections, Inc. (the “Company”) specializes in conducting investigations and laboratory analysis of a wide variety of products to determine the “cause and origin” of product failures.  The Company’s primary customers consist of national insurance companies that are interested in subrogating claims to recover losses.  Subrogation is a legal principle which provides that, to the extent an insurer has paid for a loss, the insurer receives the policyholder’s right to recover from any third party that caused the loss.  The Company has accumulated a large database of known defective products that includes photos and other documentation that are used in their investigations.  After an investigation is complete, the Company issues an inspection report related to the product failure.  The Company also provides storage of the evidence collected during the investigation, until it is requested by the customer to be disposed.

Reincorporation

On December 11, 2008, the Company merged into a newly formed Delaware corporation, Diversified Product Inspections, Inc. (“DPI”), which was formed exclusively for the purpose of merging with the Company. The merger changed the state of incorporation for the Company from Florida to Delaware through the execution of the Agreement and Plan of Merger (the “Merger Agreement”). Under the Merger Agreement, DPI assumed all of the Company’s assets and liabilities, including obligations under the Company’s outstanding indebtedness and contracts, and the Florida company ceased to exist as a corporate entity.

At the effective time of the reincorporation, each outstanding share of the Company’s common stock, $0.01 par value automatically converted into one share of common stock of DPI, $0.01 par value. Stockholders did not have to exchange their existing stock certificates for stock certificates of DPI.

Stockholders whose shares of common stock were freely tradable before the reincorporation own shares of DPI that are freely tradable after the reincorporation. Similarly, any stockholders holding securities with transfer restrictions before the reincorporation hold shares of DPI that have the same transfer restrictions after the reincorporation.
 
After the reincorporation, DPI continues to be a publicly held corporation, with its common stock trading on the Over-the-Counter Bulletin Board. The trading symbol remained the same. DPI will also file with the SEC and provide to its stockholders the same information that was previously filed and provided. DPI will be referred to in the subsequent notes as the “Company”.

F-7
 
Diversified Product Inspections, Inc.

Notes to Financial Statements (continued)

1.
Significant Accounting Policies (continued)

Major Customers and Credit Concentration

The Company’s largest customers are national insurance customers.  Revenues from the Company’s largest individual customers accounted for approximately 23%, 13% and 10% in 2008 and approximately 17% and 14% in 2007 of total revenues.

Revenue Recognition

The Company recognizes inspection report revenue when the earnings process is complete, which is typically after an investigation has been completed and the final written report has been reviewed and approved by management and submitted to the customer.  Once the final report has been approved by management and submitted to the customer, the Company has no further obligation to the customer in regards to this matter.

The Company recognizes storage fee revenue on a pro-rata basis as earned.

Advertising Costs

Advertising costs are expensed as incurred and totaled $3,350 in 2008 and $16,697 in 2007.

Legal Costs

Legal costs associated with loss contingencies are expensed as incurred.

Accounts Receivable

Two customers account for 25% and 11% each of total accounts receivable at December 31, 2008 and three customers accounted for 13% each of total accounts receivable at December 31, 2007.  The Company performs ongoing credit evaluations of its customers’ financial condition, but does not require collateral to support customer receivables.  The Company charges accounts to bad debt expense as they are determined to be uncollectible based upon a review of aging and collections.  Credit losses, when realized, have been within the range of the Company’s expectations and, historically, have not been significant.

Property and Equipment

Property and equipment is carried at cost.  Repairs and maintenance are charged to expense as incurred.  Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows:

Building
39 years
Building improvements
20-39 years
Equipment, furniture and fixtures
 3-7 years
Vehicles
5 years
 
F-8
 
Diversified Product Inspections, Inc.

Notes to Financial Statements (continued)

1.
Significant Accounting Policies (continued)

Stock Options

The Company accounts for its stock options under the fair value recognition provisions of Financial Accounting Standards Board (“FASB”) Statement No. 123(R ) , Share-Based Payment (“FAS 123(R)”), using the modified-prospective-transition method.  Under that transition method, compensation costs recognized include:  (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of FASB Statement No. 123, and (b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of FAS 123(R).

The Company had no compensation costs related to stock options for either 2008 or 2007.

Income Taxes

The Company files federal and state income tax returns.  The Company’s major tax jurisdictions in which it files income tax returns include federal (United States of America) and the state of Tennessee. The tax years that remain subject to examination for the Company’s major tax jurisdictions at December 31, 2008 include 2005 through 2008.  The Company’s policy is to classify penalties and interest associated with uncertain tax positions, if required, as a component of its income tax provision.

Fair Value of Financial Instruments

The fair value of the Company’s financial instruments approximates their carrying value based upon the type and nature of the financial instruments.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures.  Accordingly, actual results could differ from those estimates.

2.
Note Receivable

During December 2008, the Company entered into an unsecured promissory note with a customer for payment of services rendered. The terms call for the customer to pay the full sum owned after settlement of the insurance claims. The note bears interest at an annual rate of 2%. Management of the Company anticipates this note receivable will be fully collected during 2009. Accordingly, the amount has been classified as current in the accompanying December 31, 2008 balance sheet and no reserve for doubtful accounts has been established related to this receivable.
 
F-9
 
Diversified Product Inspections, Inc.

Notes to Financial Statements (continued)

3.
Line of Credit and Long-Term Debt

Under the terms of the Company’s $400,000 line of credit agreement with a financial institution, any borrowings bear interest at the financial institution’s prime rate (3.25% at December 31, 2008) and are secured by the Company’s land and building.  This line of credit is due on demand.  At December 31, 2008, the Company had $400,000 available under this agreement.

Long-term debt is summarized as follows as of December 31:
   
2008
   
2007
 
Note payable, secured by land and a building, due in monthly installments of $6,751 through May 2010, including interest at 6%, with the remaining balance due June 2010
  $ 670,871     $ 714,639  
Note payable, secured by a vehicle, due in monthly installments of $1,142, including interest at 7.75%, through September 2012
      44,366         54,168  
 
    715,237       768,807  
Less portion classified as current
    51,490       52,626  
Long-term portion
  $ 663,747     $ 716,181  

Land and building securing the line of credit and note payable has a carrying amount of $780,049 and a vehicle securing a note payable has a carrying amount of $46,142 at December 31, 2008.

Aggregate maturities of the Company’s long-term debt as of December 31, 2008, are as follows:

2009
 
$ 51,490  
2010
    641,407  
2011
    12,390  
2012
    9,950  
    $ 715,237  

4.  Lease

The Company leased certain office space at its main office to a tenant who also serves as the Company’s general counsel.  The lease agreement was mutually terminated during 2008.  Rental income under this agreement was $22,500 in 2008 and $7,500 in 2007.

F-10

 
Diversified Product Inspections, Inc.

Notes to Financial Statements (continued)

5.      Concentration of Risk

Periodically, the Company has cash on deposit with financial institutions which exceed Federal Deposit Insurance Corporation (“FDIC”) limits.  Balances in excess of the insurance limits are subject to the risk the financial institution will not pay upon demand.  At December 31, 2008, the Company’s balances on hand with financial institutions exceed the FDIC coverage by approximately $111,000.

6.  Use Agreement

In 2006, the Company entered into a use agreement whereby the user was allowed exclusive use of certain research data of the Company on product failure or failure patterns and quarterly updates of such data.  The use agreement called for an initial payment of $50,000 and monthly payments of $5,000 beginning September 1, 2006, and continuing over the term of the agreement. In August 2007, the user terminated the use agreement within the terms of the agreement. As a result of the termination, the Company recognized an additional $22,482 of use agreement revenue in 2007.  The Company had revenues totaling $82,167 in 2007 related to this agreement.

7.      Income Taxes

For tax purposes the Company has federal net operating loss (“NOL”) carryovers which are available to offset future taxable income.  These NOL carryovers expire as follows:

Year
 
Year of
 
NOL
 
Generated
 
Expiration
 
Carryover
 
           
2000
 
2020
  $ 12,696  
2001
 
2021
    88,508  
2002
 
2022
    114,597  
2004
 
2024
    53,238  
2005
 
2025
    89,993  
        $ 359,032  

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.

F-11
 
Diversified Product Inspections, Inc.

Notes to Financial Statements (continued)

7.      Income Taxes (continued)

Significant components of the Company’s deferred tax assets and liabilities are as follows as of December 31:

   
2008
   
2007
 
             
Deferred tax assets:
           
NOL carryovers
  $ 122,071     $ 167,122  
Deferred revenue
    49,777       48,628  
Expenses not currently deductible
    138,966       138,966  
Accrued legal settlement
    95,725       11,487  
Reserve for doubtful accounts
    11,487       19,145  
Other
    523       523  
Total deferred tax assets
    418,549       385,871  
Valuation allowance
    (382,503 )     –  
Net deferred tax assets
    36,046       385,871  
Deferred tax liability – tax over book depreciation
    (36,046 )     (16,861 )
Net deferred tax assets (including $79,343 in 2007 classified as current)
  $ –     $ 369,010  

FASB Statement No. 109, Accounting for Income Taxes , requires the Company to periodically assess whether it is more likely than not that it will generate sufficient taxable income to realize the deferred income tax assets.  The ultimate realization of these assets is dependent upon the generation of future taxable income sufficient to offset the related deductions and NOL carryovers within the applicable carryover periods as previously discussed.  As more fully described in Note 11, during 2008, the Company signed a Settlement Agreement and Asset Purchase Agreement providing for the Company to transfer all of its assets, except $250,000, to a Tennessee limited liability company which will also assume all of the Company’s liabilities, on a future closing date.  As such, management cannot presently determine when the Company will be able to generate sufficient taxable income to realize the deferred tax assets.  Accordingly, the valuation allowance was increased to $382,503 in 2008.

The reconciliation of income tax expense attributable to continuing operations computed at the U.S. federal statutory tax rates to the income tax benefit recorded is as follows for the years ended December 31:

   
2008
   
2007
 
             
Income tax at U.S. statutory rates of 34%
  $ (38,012 )   $ 28,049  
Effect of permanent differences
    1,259       3,630  
State income taxes
    –       3,741  
Increase in valuation allowance
    382,503       –  
Other
    23,260       2,327  
    $ 369,010     $ 37,747  
 
F-12
 
Diversified Product Inspections, Inc.

Notes to Financial Statements (continued)
 
8.        Employee Stock Options

The Company has no formal stock option plan. However, in November 2002, the Company issued to employees options to acquire 8,028,000 shares of the Company’s common stock (8,000,000 of which were issued to five employees who are also board members).  These options vested at the rate of 20% annually beginning at the grant date and expire upon termination of employment.  As of December 31, 2008 and 2007 the Company has issued options to purchase 8,000,000 shares of the Company’s common stock which are outstanding and exercisable at an exercise price of $0.11 per share. As a result, the Company has reserved 8,000,000 shares of common stock for future issuance.

As more fully described in Note 11, during 2008, the Company signed a Settlement Agreement and Asset Purchase Agreement providing for, among other things, the cancellation of the above options, on a future closing date.

9.      (Loss) Earnings Per Share Data

Basic (loss) earnings per share assumes no dilution and is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during each period.  Diluted (loss) earnings per share reflect, in periods in which they have a dilutive effect, the effect of common shares issuable upon the exercise of stock options and warrants, using the treasury stock method of computing such effects.

The following table sets forth the computation of basic and diluted (loss) earnings per share for the years ended December 31:

   
2008
   
2007
 
Basic and diluted:
           
Net (loss) income
  $ (480,810 )   $ 44,750  
Average shares outstanding
    20,105,867       20,157,790  
Basic and diluted (loss) earnings per share
  $ (0.02 )   $ 0.00  

10.      Commitments and Contingencies

During March 2008, the Company reached a tentative settlement on an outstanding lawsuit related to certain investigative reports prepared by the Company for $30,000.  Accordingly, the Company has recorded a liability related to this matter as of December 31, 2007.  The Company’s 2008 proposed settlement of another lawsuit is discussed in Note 11.

F-13
 
Diversified Product Inspections, Inc.

Notes to Financial Statements (continued)

11.       Proposed Settlement

During 2006, the Company was named, along with its three largest stockholders, as a defendant in a lawsuit by certain related investment companies that are also stockholders of the Company. The lawsuit alleges, among other things, the defendants violated certain securities laws, misrepresented facts and breached certain contracts and fiduciary duties.

On September 29, 2008, the Company signed a Settlement Agreement and Asset Purchase Agreement (the “Agreement”) with the plaintiffs providing for DPI to transfer all of its assets, except $250,000 (the “Excluded Amount”), to a Tennessee limited liability company (the “Tennessee Company”) which will also assume all of the Company’s liabilities. The effective date of the Agreement is expected to be March 31, 2009.

The Tennessee Company will be owned by three of the Company’s current directors. As part of the settlement, the pending litigation against the Company and its directors discussed above will be dismissed and the Company’s management will cancel 6,459,877 shares of common stock of the Company and sell to the plaintiffs 3,000,000 shares of common stock for nominal consideration. Under the Agreement, the Company will pay the entire $250,000 Excluded Amount to one of the plaintiffs.  Accordingly, the Company has recorded a liability and expense of $250,000 related to this matter as of December 31, 2008.  Following the closing contemplated by the Agreement, the Company will have no assets and no liabilities and will have 13,645,990 shares of common stock outstanding in contrast to 20,105,867 outstanding as of March 23, 2009.  The plaintiffs in the litigation will designate the Company’s new officers and directors and will have majority control of the Company.

F-14
 
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

There were no changes in or disagreements with accountants on accounting and financial disclosure for the period covered by this report.

Item 9A. Controls and Procedures.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management's control objectives.

In connection with this report, John Van Zyll, our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation he concluded that our disclosure controls and procedures were not effective in alerting him in a timely manner to information relating to the Company required to be disclosed in this report. In the future, the Company intends to more frequently engage external assistance, implement additional control procedures and as finances allow, hire sufficient accounting staff.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

 (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
 
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and
 
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2008. In making this assessment, management used the framework set forth in the report entitled Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring.
 
15
 
Based on its evaluation of our disclosure controls and procedures, our management has concluded that during the period covered by this report, such disclosure controls and procedures were not effective and there is a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The material weakness mainly relates to the lack of accounting staff that results in a lack of segregation of duties and the absence of accounting technical expertise necessary to maintain an effective internal control over financial reporting including preparation of financial statements, footnotes and financial data provided to the Company’s registered public accounting firm in connection with the annual audit, and we do not have an audit committee.

In order to mitigate this material weakness to the fullest extent possible, the Company currently engages external assistance in the recording of certain transactions and the preparation of all financial reports included in our quarterly and annual financial statements. As more fully described in this annual report, the Company signed a Settlement Agreement and Asset Purchase Agreement with an expected closing date of March 31, 2009.  Upon consummation of the agreement, the Company will be left with no assets or liabilities and no employees.  However, if the agreement is not consummated , in the future, the Company intends to more frequently engage external assistance, implement additional control procedures and as finances allow, hire sufficient accounting staff. Management believes these actions, once fully implemented, will remediate the material weakness by focusing additional attention and resources in our internal accounting functions. However, the material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

             This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permits us to provide only management's report in this annual report.

Item 9B.               Other Information
 
Reports on Form 8-K.
 
During the period commencing the last quarter of the period covered by this Report until the date of filing of this Report, the Company was not required to, and did not, file any Current Reports on Form 8-K.
 
PART III

Item 10. Directors and Executive Officers of the Registrant.

(a) Identity of our current directors and executive officers.
 
16
 
Name
 
Age
 
Positions with the Company
         
John Van Zyll
 
68
 
Chairman of the Board, Chief Executive Officer
         
Marvin Stacy
 
75
 
Chief Operating Officer and Director
         
Ann M. Furlong
 
56
 
Secretary and Director
         
Warren Wankelman
 
65
 
Director and Vice President of Marketing
         
Matt Walters
 
37
 
Director and Chief Information Officer
 
  John Van Zyll currently serves as the Chairman of the Board and Chief Executive Officer. Mr. Van Zyll has served in this capacity since March 2001 and previously served in similar capacities with Diversified Product Investigations, Inc., the Company's subsidiary since its formation in 1991. Mr. Van Zyll has over 10 years of construction and investigation experience. He is a member of the Southern Building Code Congress International and the National Fire Protection Association and is a licensed Private Investigator. He holds certificates from the National Association of Investigative Specialists with specialties in Insurance Claim Investigation and Advanced Fire Investigation Techniques. Mr. Van Zyll is considered an expert in the field of investigation and subrogation by the insurance industry and has conducted over 100 training seminars and trained over 1900 insurance adjusters.

     Marvin Stacy currently serves as a Director and the Company's Chief Operating Officer. Mr. Stacy has served in these capacities since March 2001 and previously served in similar capacities with Diversified Product Investigations, Inc., the Company's subsidiary since 1991. Mr. Stacy has over 40 years of experience in all aspects of electrical and mechanical engineering and design. As a licensed private investigator he assists with the operation of the laboratory and has designed custom testing equipment. Mr. Stacy assists Engineers with design solutions for manufacturers. Mr. Stacy is a member of IAMPO, the International Association of Mechanical and Plumbing Officials. Mr. Stacy assists in the Human Resource Dept., with regards to hiring qualified-professional personnel.

Ann M. Furlong currently serves as a Director and the Company's Secretary. Ms. Furlong has served in these capacities since March 2001 and previously served in similar capacities with Diversified Product Investigations, Inc., the Company's subsidiary since 1991. With over 29-years of management experience Ms. Furlong has provided administrative and organizations expertise. As a licensed private investigator she assists with research projects. She has traveled to assist with stock promotional shows for the Company along with seminar presentations to the Insurance Industry. Ms. Furlong focuses on special projects and assists in the operations of the Company.
 
  Warren Wankelman currently serves as a Director and as the Vice President of Marketing for the Company. Mr. Wankelman has served in these capacities since March 2001 and previously served in similar capacities with Diversified Product Investigations, Inc., the Company's subsidiary since 2001. Mr. Wankelman has over 25 years of experience in Sales/Marketing and Operations Management. A graduate of Northwestern University, Mr. Wankelman has consistently demonstrated effective marketing and management ability in a career of leadership positions, including Executive Vice President of Punta Gorda Isles, Inc., President and owner of Wankelman- Swen & Associates, Inc. and Director of Marketing for Saddlebrook, Inc. of Knoxville, Tennessee.

     Matt Walters currently serves as a Director and Chief Information Officer of the Company. Mr. Walters has served in this capacity since May 2001. Mr. Walters has over 10 years experience in IT (Information Technology) and Facilities Management. He is a graduate of Tusculum College with a BS in Organizational Management and has attended New Horizons Computer Learning Center. As a Microsoft Certified Professional, his client list includes TVA, SAIC, Lockheed-Martin, Pfizer Pharmaceuticals, Philips Magnavox, and BellSouth.Net.
 
17
 
 Mr. Walters has implemented various IT quality controls and security measures for the Company and is responsible for implementation of a new Company service, the HomeCheckSafety.com. He also assisted with designing a custom database and instituting digital photography and he has enhanced the Company's investigation reports.

Executive Officers

All of our executive officers also serve as our directors. The executive officers serve at the pleasure of our board of directors and our chief executive officer.
 
Section 16 Reporting

No person who, during the year ended December 31, 2008, was a director, officer or beneficial owner of more than ten percent of the Company's Common Stock (which is the only class of securities of the Company registered under Section 12 of the Securities Exchange Act of 1934 (the "Act") (a "Reporting Person") failed to file on a timely basis, reports required by Section 16 of the Act during the most recent fiscal year or prior years. The foregoing is based solely upon representations received by the Company from any reporting person that no Form 5 is required.

Code of Ethics

In April 2005 the Company adopted a Code of Ethics applying to its executive officers. Such Code of Ethics was filed as Exhibit 14.1 to the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2005.

Board Committees

The Company does not have a separate Compensation Committee, Audit Committee or Nominating Committee. These functions are done by the Board of Directors meeting as a whole. The Company is under no legal obligation to establish an audit committee and has elected not to do so at this time so as to avoid the time and expense of identifying independent directors willing to serve on the audit committee. The Company may establish an audit committee in the future if the Board determines it to be advisable or we are otherwise required to do so by applicable law, rule or regulation.
 
Item 11. Executive Compensation.

     The following Summary Compensation Table sets forth summary information as to compensation received by the Company's Chief Executive Officer for his services to the Company during the fiscal years ended December 31, 2008 and December 31, 2007. No executive officer of the Company or any other person received total compensation from the Company of $100,000 or more during such fiscal years.
 
Name and
Principal
Position
 
Year Ended
 
Salary
($)
 
Bonus
($)
 
Stock
Awards
 
Non-
Equity
Incentive
Plan
Compensa
tion ($)
 
Change in
Pension Value
and Non-
Qualified
Deferred
Compensation
Earnings ($)
 
All Other
Compensation
($)
 
Total
($)
John VanZyll CEO, CFO and Director
   
12/31/2008
12/31/2007
 
69,108
71,435
   
0
15,000
 
0
0
   
0
0
 
0
0
   
0
0
 
69,108
84,435
 
18
 
Compensation of Directors

During the fiscal year ended December 31, 2008, no officer or director received any type of compensation from our Company for serving as a director. No arrangements are presently in place regarding compensation to directors for their services as directors or for committee participation or special assignments.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth certain information as of March 13, 2009 regarding the beneficial ownership of our common stock held by each of our executive officers and directors, individually and as a group and by each person known to us which beneficially owns in excess of five percent of the common stock. Unless otherwise indicated, each of the persons listed has sole voting and dispositive power with respect to the shares shown as beneficially owned.

   
Number of
Shares of
  
Percent of
  
     
Common
Stock
  
Common
Stock
  
Name and Address
  
Beneficially
  
Beneficially
  
of Beneficial Owner (1)
  
Owned (2)
  
Owned
 
           
Jan Telander
   
4,724,500(3
)
23.5
%
             
John Van Zyll
   
7,664,011(4
)
33.9
%
             
EIG Capital, Ltd.
   
4,175,815(5
)
20.8
%
             
EIG Venture
           
Capital Ltd.
   
4,042,565
 
20.1
%
             
Ann M. Furlong
   
4,725,811(4
)
20.9
%
             
Marvin Stacy
   
4,629,055(4
)
20.5
%
             
Warren Wankelman
   
250,000(6
)
*
 
             
Matt Walters
   
255,000(6
)
*
 
             
All Executive Officers and
           
Directors as a Group
           
(five (5) persons)
   
17,523,877(7
)
62.3
%
 
* Represents less than one percent (1%) of the outstanding shares of our common stock.
 
19
 
 (1) Based upon 20,105,867 shares of our common stock issued and outstanding as of March 13, 2009. The number of shares of common stock beneficially owned by each person or entity is determined under the rules promulgated by the SEC. Under such rules, beneficial ownership includes any shares as to which the person or entity has sole or shared voting power or investment power and shares which such person or entity has the right to acquire within sixty days after March 14, 2008. The inclusion herein of any shares deemed beneficially owned does not constitute an admission by such person of beneficial ownership of such shares.

(2) The business address of each of Jan Telander, EIG Capital, Ltd., EIG Venture Capital, Ltd. and Sofcon, Ltd. is 60 Market Square, Belize City, Belize. The business address of each of the other person listed in the table is 1059 East Tri-County Blvd., Oliver Springs, Tennessee 37840.

(3) Includes all shares beneficially owned by EIG Capital Investments, Ltd., EIG Venture Capital, Ltd. and Sofcon, Ltd. Mr. Telander is President and a director of each of EIG Capital Investments, Ltd., EIG Venture Capital, Ltd. and Sofcon, Ltd.

(4) Includes options to purchase 2,500,000 shares of common stock currently exercisable at $.108 per share.

(5) Includes an aggregate of 133,250 shares owned directly by EIG Capital Investments Ltd. and an aggregate of 4,042,565 shares beneficially owned by EIG Venture Capital Ltd. EIG Capital Ltd. owns all of the outstanding capital stock of each of such entities.
 
 (6) Includes options to purchase 250,000 shares of our common stock currently exercisable at $.108 per share.

(7) Includes options to purchase an aggregate of 8,000,000 shares of our common stock currently exercisable at $.108 per share.
 
Item 13. Certain Relationships and Related Transactions, and Director Independence.

All five of our directors are employees of the Company and none is independent, as such term is defined by a national securities exchange or an inter-dealer quotation system.

Item 14. Principal Accountant Fees and Services.

The following table sets forth the fees billed to us for the fiscal years ended December 31, 2008 and December 31, 2007 by Coulter & Justus, P.C. (”C&J”):

   
Fiscal Year
   
Fiscal Year
 
    
Ended
   
Ended
 
    
December
31, 2008
   
December
31, 2007
 
             
Audit Fees (1)
  $ 66,824     $ 47,073  
Audit Related Fees
  $ –     $ –  
Tax Fees (2)
  $ 4,074     $ 4,363  
All Other Fees (3)
  $ –     $ 322  
 
(1) Consists of fees billed for professional services rendered for the audit of the financial statements of the Company as of December 31, 2008 and December 31, 2007 and reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-QSB or Form 10-Q for the quarters during such fiscal years.
 
20
 
(2) Consists of tax filing and tax related compliance and other advisory services.

(3) Consists of annual renewal fee for software provided to the Company.

Our Board of Directors determined that the provision of the above non-audit services was compatible with C&J maintaining its independence.

Pre-Approval of Services by the Independent Auditor

The Board of Directors has established policies and procedures for the approval and pre-approval of audit services and permitted non-audit services. The Board has the responsibility to engage and terminate the Company’s independent registered public accountants, to pre-approve their performance of audit services and permitted non-audit services and to review with the Company’s independent registered public accountants their fees and plans for all auditing services. All services provided by and fees paid to C&J in 2008 and 2007 were pre-approved by the Board of Directors.

Item 15. Exhibits and Financial Statement Schedules.

(a)  Exhibits

Exhibit
   
Number
 
Description
     
2.1
 
Share Exchange Agreement between with Diversified Product Inspections, Inc., a Florida corporation filed with the Commission on Form 8-K on March 6, 2001 and incorporated herein by reference.
     
3.1
 
Certificate of Incorporation of the Company.*.
     
3.2
 
Bylaws of the Company. *
     
3.3
 
Agreement and Plan of Merger between the Company and Diversified Product Inspections, Inc., a Florida corporation.*
     
3.4
 
Certificate of Merger of Diversified Product Inspections, Inc., a Florida corporation filed into the Company filed with the Florida Secretary of State.*.
     
3.5
 
Certificate of Merger of Diversified Product Inspections, Inc., a Florida corporation filed into the Company filed with the Delaware Secretary of State.*
     
10.1
 
Diversified Product Inspections, Inc. Year 2001 Employee/Consultant Stock Compensation Plan filed as an Exhibit to the Company's registration statement on Form S-8 filed with the Commission on March 6, 2001 and incorporated herein by reference.
 
21
 
10.2
 
Purchase and Sale Agreement and Escrow Instructions dated as of December 21, 2004 between TN-801 Tri-County, LLC and the Company. Incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004 (the “2004 10-KSB”).
     
10.3
 
Note for Business and Commercial Loans (Non-Revolving) in the principal amount of $800,000 dated December 21, 2004 from the Company to AmSouth Bank. Incorporated by reference to Exhibit 10.4 to the 2004 10-KSB.
     
10.4
 
Note for Business and Commercial Loans (Revolving), dated April 22, 2005 in the principal amount of $100,000 from the Company to AmSouth Bank. Incorporated by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005 (the “2005 10-KSB”).
     
10.5
 
Settlement Agreement and Asset Purchase Agreement dated as of September 30, 2008 among Diversified Product Inspections, LLC, a Tennessee limited liability company, the Company, John Van Zyll, Ann Furlong, and Marvin Stacy, Sofcon, Limited, EIG Venture Capital, Limited, and EIG Capital Investments Limited. Incorporated by reference to Annex A to the Company’s definitive proxy statement for its special meeting of shareholders held on March 26, 2009, filed on  February 13, 2009.
     
14.1
 
Code of Ethics. Incorporated by reference to Exhibit 10.5 to the 2005 10- KSB.
     
31.1
 
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
     
32.1
 
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
 
*Filed herewith.

(b) Financial Statement Schedules

None.
 
22
 
SIGNATURES

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

 
Diversified Product Inspections, Inc.
     
Dated: March 31, 2009
By:  
/s/ John Van Zyll
     
 
John Van Zyll
 
Chief Executive Officer
(Principal Executive Officer and Principal
Accounting Officer)
 
             Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
 
/s/ John Van Zyll
       
John Van Zyll
 
Chairman of the Board
 
March 31, 2009
         
/s/ Marvin Stacy
       
Marvin Stacy
 
Chief Operating Officer and Director
 
March 31, 2009
         
/s/ Ann M. Furlong
       
Ann M. Furlong
 
Secretary and Director
 
March 31, 2009
         
/s/ Warren Wankelman
       
Warren Wankelman
 
Director
 
March 31, 2009
         
/s/ Matt Walters
       
Matt Walters
 
Director
 
March 31, 2009
 
23
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BYLAWS

OF

DIVERSIFIED PRODUCT INSPECTIONS, INC.

As Adopted on

November 24, 2008
 
Article I. Meeting of Shareholders

Section 1.  Annual Meeting .  The annual meeting of the shareholders of this Corporation shall be held at the time and place designated by the Board of Directors of the Corporation.  Business transacted at the annual meeting shall include the election of directors of the Corporation.

Section 2.  Special Meetings .  Special meetings of the shareholders shall be held when directed by the Board of Directors, or when requested in writing by the holders of not less than 10 percent of all the shares entitled to vote at the meeting.

Section 3.  Place .  Meetings of shareholders may be held within or without the State of Delaware.

Section 4.  Notice .  Written notice stating the place, day and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than 10 nor more than 60 days before the meeting, either personally or by first class mail, by or at the direction of the president, the secretary, or the officer or persons calling the meeting to each shareholder of record entitled to vote at such meeting.  If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at his address as it appears on the stock transfer books of the Corporation, with postage there on prepaid. The provisions of Section 229 of the Delaware General Corporation Law (the “DGCL”) as to waiver of notice are applicable.

Section 5.  Notice of Adjourned Meetings .  When a meeting is adjourned to another time or place, it shall not be necessary to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken, and at the adjourned meeting any business may be transacted that might have been transacted on the original date of the meeting.  If, however, after the adjournment the Board of Directors fixes a new record date for the adjourned meeting, a notice of adjourned meeting, shall be given as provided in this section to each shareholder of record on the new record date entitled to vote at such meeting.

 
 
 

Section 6.  Closing of Transfer Books and Fixing Record Date .  For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other purpose, the Board of Directors may provide that the stock transfer books shall be closed for a stated period but not to exceed, in any case, 60 days.  If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least 10 days immediately preceding such meeting.

In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for the determination of shareholders, such date in any case to be not more than 60 days and, in case of a meeting of shareholders, not less than 10 days prior to the date on which the particular action requiring such determination of shareholders is to be taken.

If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the day preceding the day on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders.

When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof, unless the Board of Directors fixes a new record date for the adjourned meeting.

Section 7.  Shareholder Quorum and Voting .  A majority of the outstanding shares of each class or series of voting stock then entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders.  When a specified item of business is required to be voted on by a class or series of stock, a majority of the outstanding shares of such class or series shall constitute a quorum for the transaction of such item of business by that class or series.

If a quorum is present, the affirmative vote of the majority of those shares present at the meeting in person or by proxy of each class or series of voting stock and entitled to vote on the subject matter shall be the act of the shareholders unless otherwise provided however that the directors of the Corporation shall be elected by a plurality of such shares.

After a quorum has been established at a shareholders’ meeting, the subsequent withdrawal of shareholders, so as to reduce the number of shareholders entitled to vote at the meeting below the number required for a quorum, shall not affect the validity of any action taken at the meeting or any adjournment thereof.

Section 8.  Voting of Shares .  Each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders.

Treasury shares, shares of stock of this Corporation owned by another corporation, the majority of the voting stock of which is owned or controlled by this Corporation, and shares of stock of this Corporation, held by it in a fiduciary capacity shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares at any given time.

 
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A shareholder may vote either in person or by proxy executed in writing by the shareholder or his duly authorized attorney-in-fact.

At each election for directors every shareholder entitled to vote at such election shall have the right to vote, in person or by proxy, the number of shares owned by him for as many persons as there are directors to be elected at that time and for whose election he has a right to vote.

Shares standing in the name of another corporation, domestic or foreign, may be voted by the officer, agent, or proxy designated by the bylaws of the corporate shareholder; or, in the absence of any applicable bylaw, by such person as the Board of Directors of the corporate shareholder may designate.  Proof of such designation may be made by presentation of a certified copy of the bylaws or other instrument of the corporate shareholder.  In the absence of any such designation, or in case of conflicting designation by the corporate shareholder, the chairman of the board, president, any vice president, secretary and treasurer of the corporate shareholder shall be presumed to possess, in that order, authority to vote such shares.

Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name.  Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name.

Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority to do so is contained in an appropriate order of the court by which such receiver was appointed.

A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee or his nominee shall be entitled to vote the shares so transferred.

On and after the date on which written notice of redemption of redeemable shares has been mailed to the holders thereof and a sum sufficient to redeem such shares has been deposited with a bank or trust company with irrevocable instruction and authority to pay the redemption price to the holders thereof upon surrender of certificates therefor, such shares shall not be entitled to vote on any matter and shall not be deemed to be outstanding shares.

Section 9.  Proxies .  Every shareholder entitled to vote at a meeting of shareholders or to express consent or dissent without a meeting of a shareholders’ duly authorized attorney-in-fact may authorize another person or persons to act for him by proxy.

Every proxy must be signed by the shareholder or his attorney in-fact.  No proxy shall be valid after the expiration of three years from the date thereof unless otherwise provided in the proxy.  Every proxy shall be revocable at the pleasure of the shareholder executing it, except as otherwise provided by law.

 
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The authority of the holder of a proxy to act shall not be revoked by the incompetence or death of the shareholder who executed the proxy unless, before the authority is exercised, written notice of an adjudication of such incompetence or of such death is received by the corporate officer responsible for maintaining the list of shareholders.

If a proxy for the same shares confers authority upon two or more persons and does not otherwise provide, a majority of them present at the meeting, or if only one is present then that one, may exercise all the powers conferred by the proxy; but if the proxy holders present at the meeting are equally divided as to the right and manner of voting in any particular case, the voting of such shares shall be prorated.

If a proxy expressly provides, any proxy holder may appoint in writing a substitute to act in his place.

Section 10.  Action by Shareholders without a Meeting .  Any action required by law, these bylaws, or the certificate of incorporation of this Corporation to be taken at any annual or special meeting of shareholders of the Corporation, or any action which may be taken at any annual or special meeting of such shareholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.  If any class of shares is entitled to vote thereon as a class, such written consent shall be required of the holders of a majority of the shares of each class of shares entitled to vote as a class thereon and of the total shares entitled to vote thereon.

Promptly after obtaining such authorization by written consent, notice shall be given to those shareholders who have not consented in writing.  The notice shall fairly summarize the material features of the authorized action, and, if the action be a merger or consolidation for which appraisal rights are provided under the DGCL, be given in accordance with Section 262(d)(2) of the Act, as amended.

Section 11.  Advance Notice of Shareholder Nominees and Shareholder Business.

To be properly brought before an annual meeting or special meeting, nominations for the election of directors or other business must be:

 
(a)
specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors,

 
(b)
otherwise properly brought before the meeting by or at the direction of the Board of Directors, or

 
(c)
otherwise properly brought before the meeting by a shareholder.

 
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For such other nominations or other business to be considered properly brought before the meeting by a shareholder, such shareholder must have given timely notice and in proper form of his intent to bring such business before such meeting.  To be timely, such shareholder’s notice must be delivered to or mailed and received by the secretary of the Corporation not less than 90 days prior to the meeting; provided, however, that in the event that less than 100 days notice of prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder to be timely must be so received not later than the close of business on the 10 th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made.  To be in proper form, a shareholder’s notice to the secretary shall set forth:

 
(i)
the name and address of the shareholder who intends to make the nominations, propose the business, and, as the case may be, the name and address of the person or persons to be nominated or the nature of the business to be proposed;

 
(ii)
a representation that the shareholder is a holder of record of stock of the Corporation entitled to vote at such meeting and, if applicable, intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice or introduced the business specified in the notice;

 
(iii)
if applicable, a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder;

 
(iv)
such other information regarding each nominee or each matter of business to be proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been nominated, or intended to be nominated, or the matter been proposed, or intended to be proposed by the Board of Directors; and

 
(v)
if applicable, the consent of each nominee to serve as director of the Corporation if so elected.

The chairman of the meeting may refuse to acknowledge the nomination of any person or the proposal of any business not made in compliance with the foregoing procedure.

Article II. Directors

Section 1.  Function .  All corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed under the direction of, the Board of Directors.

 
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Section 2.  Qualification .  Directors need not be residents of this state or shareholders of this Corporation.

Section 3.  Compensation .  The Board of Directors shall have authority to fix the compensation of directors.

Section 4.  Duties of Directors .  A director shall perform his duties as a director, including his duties as a member of any committee of the board upon which he may serve, in good faith, in a manner he reasonably believes to be in the best interests of the Corporation, and with such care as an ordinarily prudent person in a like position would use under similar circumstances.

In performing his duties, a director shall be entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, in each case prepared or presented by:

(a)           one or more officers or employees of the Corporation whom the director reasonably believes to be reliable and competent in the matters presented,

(b)           counsel, public accountants or other persons as to matters which the director reasonably believes to be within such person’s professional or expert competence, or

(c)           a committee of the board upon which he does not serve, duly designated in accordance with a provision of the certificate of incorporation or the bylaws, as to matters within its designated authority, which committee the director reasonably believes to merit confidence.

A director shall not be considered to be acting in good faith if he has knowledge concerning the matter in question that would cause such reliance described above to be unwarranted.

A person who performs his duties in compliance with this section shall have no liability by reason of being or having been a director of the Corporation.

Section 5.  Presumption of Assent .  A director of the Corporation who is present at a meeting of its Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless he votes against such action or abstains from voting in respect thereto because of an asserted conflict of interest.

Section 6.  Number .  This Corporation shall have no less than three nor greater than nine directors.  The number of directors may be established from time to time by resolution of the Board of Directors, but no decrease shall have the effect of shortening the terms of any incumbent director.

Section 7.  Election and Term .  Each person named in the certificate of incorporation as a member of the initial Board of Directors and all other directors appointed by the Board of Directors to fill vacancies thereof shall hold office until the first annual meeting of shareholders, and until his successor shall have been elected and qualified or until his earlier resignation, removal from office or death.

 
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At the first annual meeting of shareholders and at each annual meeting thereafter the shareholders shall elect directors to hold office until the next succeeding annual meeting.  Each director shall hold office for the term for which he is elected and until his successor shall have been elected and qualified or until his earlier resignation, removal from office or death.

Section 8.  Vacancies .  Any vacancy occurring in the Board of Directors, including any vacancy created by reason of an increase in the number of directors, may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors.  A director elected to fill a vacancy shall hold office only until the next election of directors by the shareholders.

Section 9. Removal of Directors . At a meeting of the shareholders called expressly for that purpose, any director or the entire Board of Directors may be removed, with or without cause, by a vote of the holders of a majority of the shares of each class or series of voting stock, present in person or by proxy, then entitled to vote at an election of directors.

Section 10.  Quorum and Voting .  A majority of the number of directors fixed by these bylaws shall constitute a quorum for the transaction of business.  The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

Section 11.  Director Conflicts of Interest .  No contract or other transaction between this Corporation and one or more of its directors or any other corporation, firm, association or entity in which one or more of the directors are directors or officers or are financially interested, shall be either void or voidable because of such relationship or interest or because such director or directors are present at the meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such contract or transaction or because his or their votes are counted for such purpose, if:

(a)           The fact of such relationship or interest is disclosed or known to the Board of Directors or committee which authorizes, approves or ratifies the contract or transaction by a vote or consent sufficient for the purpose without counting the votes or consents of such interested directors; or

(b)           The fact of such relationship or interest is disclosed or known to the shareholders entitled to vote and they authorize, approve or ratify such contract or transaction by vote or written consent; or

(c)           The contract or transaction is fair and reasonable as to the Corporation at the time it is authorized by the board, a committee or the shareholders.  Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such contract or transaction.

Section 12.  Place of Meeting .  Regular and special meetings by the Board of Directors may be held within or without the State of Delaware.

 
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Section 13.  Time, Notice and Call of Meetings .  Regular meetings of the Board of Directors shall be held without notice on the second Tuesday of September of each year.  Notice of the time and place of special meetings of the Board of Directors shall be given to each director by either personal delivery, any form of electronic notice including facsimile transmission, as long as the director is able to retain a copy of the notice, or telegram at least one day before the meeting.

Notice of a meeting of the Board of Directors need not be given to any director who signs a waiver of notice either before or after the meeting.  Attendance of a director at a meeting shall constitute a waiver of notice of such meeting and waiver of any and all obligations to the place of the meeting, the time of the meeting, or the manner in which it has been called or convened, except when a director states, at the beginning of the meeting, any objection to the transaction of business because the meeting is not lawfully called or convened.

Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting.

A majority of the directors present, whether or not a quorum exists, may adjourn any meeting of the Board of Directors to another time and place.  Notice of any such adjourned meeting shall be given to the directors who were not present at the time of the adjournment and, unless the time and place of the adjourned meeting are announced at the time of the adjournment, to the other directors.

Meetings of the Board of Directors may be called by the president of the Corporation or by any director.

Members of the Board of Directors may participate in a meeting of such Board by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time.  Participation by such means shall constitute presence in person at a meeting.

Section 14.  Action Without a Meeting .  Any action required to be taken at a meeting of the directors of the Corporation, or any action which may be taken at a meeting of the directors, may be taken without a meeting if a consent in writing, setting forth the action to be taken, signed by all of the directors, is filed in the minutes of the proceedings of the Board.  Such consent shall have the same effect as a unanimous vote.

Section 15.  Committees .  The Board of Directors may designate from among its members such committees it deems prudent, such as, but not limited to, an executive committee, audit committee, compensation committee, finance committee and a litigation committee.

 
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Article III. Officers

Section 1.  Officers .  The officers of this Corporation shall consist of a president, one or more vice presidents, secretary, and treasurer, and any assistants to the office of vice president, treasurer or secretary as may be designated by the board of directors, each of whom shall be elected by the board of directors from time to time.  Any two or more offices may be held by the same person.  The failure to elect any of the above officers shall not affect the existence of this Corporation.

Section 2.  Duties .  The officers of this Corporation shall have the following duties and such other duties as delegated by the president.

The president shall be the chief executive officer of the Corporation, shall have general and active management of the business and affairs of the Corporation subject to the directions of the board of directors, and shall preside at all meetings of the shareholders and board of directors.

The vice president of finance shall be the chief financial and chief accounting officer.  He shall keep correct and complete records of account, showing accurately at all times the financial condition of the corporation.  He shall furnish at meetings of the Board of Directors, or whenever requested, a statement of the financial condition of the Corporation and shall perform such other duties as the bylaws provide or the Board of Directors may prescribe.

Any other vice president(s) shall perform such duties as may be prescribed by the Board of Directors or the president and shall act whenever the president shall be unavailable.

The secretary shall have custody of and maintain all of the corporate records except the financial records, shall record the minutes of all meetings of the shareholders and whenever else required by the Board of Directors or the president, and shall perform such other duties as may be prescribed by the Board of Directors.

The treasurer shall be the legal custodian of all monies, notes, securities and other valuables that may from time to time come into the possession of the Corporation.  He shall immediately deposit all funds of the Corporation coming into his hands in some reliable bank or other depositary to be designated by the Board of Directors and shall keep this bank account in the name of the Corporation.

Section 3.  Removal of Officers .  Any officer or agent elected or appointed by the Board of Directors may be removed by the Board whenever in its judgment the best interests of the Corporation will be served thereby.

Any officer or agent elected by the shareholders may be removed only by vote of the shareholders, unless the shareholders shall have authorized the directors to remove such officer or agent.

 
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Any vacancy, however, occurring, in any office may be filled by the Board of Directors, unless the bylaws shall have expressly reserved such power to the shareholders.
Removal of any officer shall be without prejudice to the contract rights, if any, of the person so removed; however, election or appointment of an officer or agent shall not of itself create contract rights.
 
Article IV. Stock Certificates

Section 1.  Issuance .  Every holder of shares in this Corporation shall be entitled to have a certificate, representing all shares to which he is entitled.  No certificate shall be issued for any share until such share is fully paid.

Section 2.  Form .  Certificates representing shares in this Corporation shall be signed by the president or vice president and the secretary or an assistant secretary or treasurer or assistant treasurer and may be sealed with the seal of this Corporation or a facsimile thereof.  The signature of the president or vice president and the secretary or assistant secretary or treasurer or assistant treasurer may be facsimiles if the certificate is manually signed on behalf of a transfer agent or a registrar, other than the Corporation itself or an employee of the Corporation.  In case any officer who signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of its issuance.

Every certificate representing shares issued by this Corporation shall set forth or fairly summarize upon the face or back of the certificate, or shall state that the Corporation will furnish to any shareholder upon request and without charge a full statement of, the designations, preferences, limitations and relative rights of the shares of each class or series authorized to be issued, and the variations in the relative rights and preferences between the shares of each series so far as the same have been fixed and determined, and the authority of the Board of Directors to fix and determine the relative rights and preferences of subsequent series.

Every certificate representing shares which are restricted as to the sale, disposition, or other transfer of such shares shall state that such shares are restricted as to transfer and shall set forth or fairly summarize upon the certificate, or shall state that the Corporation will furnish to any shareholder upon request and without charge a full statement of, such restrictions.

Each certificate representing shares shall state upon its face:  the name of the Corporation; that the Corporation is organized under the laws of this state; the name of the person or persons to whom issued; the number and class of shares, and the designation of the series, if any, which such certificate represents; and the par value of each share represented by such certificate, or a statement that the shares are without par value.

Section 3.  Transfer of Stock .  Except as provided in Section 4 of this Article, the Corporation shall register a stock certificate presented to it for transfer if the certificate is properly endorsed by the holder of record or by his duly authorized attorney, and the signature of such person has been guaranteed by a commercial bank or trust company or by a member of the New York or American Stock Exchange.

 
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Section 4.  Off-Shore Offerings .  In all offerings of equity securities pursuant to Regulation S of the Securities Act of 1933 (the “Act”), the Corporation shall require that its stock transfer agent refuse to register any transfer of securities not made in accordance with the provisions of Regulation S, pursuant to registration under the Act or an available exemption under the Act.

Section 5.  Lost, Stolen or Destroyed Certificates .  The Corporation shall issue a new stock certificate in the place of any certificate previously issued if the holder of record of the certificate (a) makes proof in affidavit form that it has been lost, destroyed or wrongfully taken; (b) requests the issuance of a new certificate before the Corporation has notice that the certificate has been acquired by a purchaser for value in good faith and without notice of any adverse claim; (c) gives bond in such form as the Corporation may direct, to indemnify the Corporation, the transfer agent, and registrar against any claim that may be made on account of the alleged loss, destruction, or theft of a certificate; and (d) satisfies any other reasonable requirements imposed by the Corporation.

Article V. Books and Records

Section 1.  Books and Records .  This Corporation shall keep correct and complete records and books of account and shall keep minutes of the proceedings of its shareholders, Board of Directors and committees of directors.

This Corporation shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its shareholders, giving the names and addresses of all shareholders, and the number, class and series, if any, of the shares held by each.

Any books, records and minutes may be in written form or in any other form capable of being converted into written form within a reasonable time.

Any person who shall have been a holder of record of shares or of voting trust certificates therefor at least six months immediately preceding his demand or shall be the holder of record of, or the holder of record of voting trust certificates for, at least five percent of the outstanding shares of any class or series of the Corporation, upon written demand stating the purpose thereof, shall have the right to examine, in person or by agent or attorney, at any reasonable time or times, for any proper purpose its relevant books and records of accounts, minutes and records of shareholders and to make extracts therefrom.

Section 2.  Financial Information . Not later than three months after the close of each fiscal year, this Corporation shall prepare a balance sheet showing in reasonable detail the financial condition of the Corporation as of the close of its fiscal year, and a profit and loss statement showing the results of the operations of the Corporation during its fiscal year.

 
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Upon the written request of any shareholder or holder of voting trust certificates for shares of the Corporation, the Corporation shall mail to such shareholder or holder of voting trust certificates a copy of the most recent such balance sheet and profit and loss statement.

The balance sheets and profit and loss statements shall be filed in the registered office of the Corporation in this state, shall be kept for at least five years, and shall be subject to inspection during business hours by any shareholder or holder of voting trust certificates, in person or by agent.

Article VI. Dividends

The Board of Directors of this Corporation may, from time to time, declare and the Corporation may pay dividends on its shares in cash, property or its own shares, except when the Corporation is insolvent or when the payment thereof would render the Corporation insolvent or when the declaration or payment thereof would be contrary to any restrictions contained in the certificate of incorporation, subject to the following provisions:

(a)           Dividends in cash or property may be declared and paid, except as otherwise provided in this section, only out of the unreserved and unrestricted earned surplus of the Corporation or out of capital surplus, howsoever arising but each dividend paid out of capital surplus shall be identified as a distribution of capital surplus, and the amount per share paid from such surplus shall be disclosed to the shareholders receiving the same concurrently with the distribution.

(b)           Dividends may be declared and paid in the Corporation’s own treasury shares.

(c)           Dividends may be declared and paid in the Corporation’s own authorized but unissued shares out of any unreserved and unrestricted surplus of the Corporation upon the following conditions:

(1)           If a dividend is payable in shares having a par value, such shares shall be issued at not less than the par value thereof and there shall be transferred to stated capital at the time such dividend is paid an amount of surplus equal to the aggregate par value of the shares to be issued as a dividend.

(2)           If a dividend is payable in shares without a par value, such shares shall be issued at such stated value as shall be fixed by the Board of Directors by resolution adopted at the time such dividend is declared, and there shall be transferred to stated capital at the time such dividend is paid an amount of surplus equal to the aggregate stated value so fixed in respect of such shares; and the amount per share so transferred to stated capital shall be disclosed to the shareholders receiving such dividend concurrently with the payment thereof.

(d)           No dividend payable in shares of any class shall be paid to the holders of shares of any other class unless the certificate of incorporation so provide or such payment is authorized by the affirmative vote or the written consent of the holders of at least a majority of the outstanding shares of the class in which the payment is to be made.

 
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(e)           A split-up or division of the issued shares of any class into a greater number of shares of the same class without increasing the stated capital of the Corporation shall not be construed to be a share dividend within the meaning of this section.

Article VII. Corporate Seal

The Board of Directors shall provide a corporate seal which shall be circular in form and shall have inscribed thereon the following:

 
Article VIII. Amendment

These bylaws may be repealed or amended, and new bylaws maybe adopted, by the Board of Directors or the shareholders in accordance with Section 109 of the Delaware General Corporation Law.

 
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CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
As Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
  I, John Van Zyll, certify that:
 
1.         I have reviewed this Annual Report on Form 10-K of Diversified Product Inspections, Inc.;
 
2.         Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.         Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.         I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and I have:
 
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant is made known to me by others within those entities, particularly during the period in which this report is being prepared;
 
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
 
5.         I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
(a) All significant deficiencies and material weaknesses in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date: March 31, 2009
/s/ John Van Zyll
 
John Van Zyll
 
Chairman of the Board, Chief Executive Officer,
and Chief Financial Officer
 
 
 
 
EXHIBIT 32.1
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Diversified Product Inspections, Inc. (the “Company”) on Form 10-K for fiscal year ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Van Zyll, Chairman of the Board, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

 
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
By:
/s/ John Van Zyll
   
John Van Zyll
   
Chief Executive Officer,
Chairman of the Board
   
and Chief Financial Officer