UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington
      D.C. 20549





FORM
      10-KSB




(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, 2006





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
      small business issuer in its charter)





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





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





Issuer's
      telephone number: (865) 482-8480





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




Title
                of each class
            Name
                of exchange on which
                registeredNone
            None




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





Common
      Stock, $0.01 Par Value


(Title
      of
      Class)





Check
      whether the issuer (1) 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





Check if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B is not contained in this form, and no disclosure will be
      contained, to the best of registrant's knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of this Form 10-KSB
      or any amendment to this Form 10-KSB 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
      issuer's revenues for its most recent fiscal year: $2,287,722





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 March
      14, 2007 ($.035) was $208,337. For purposes of the computation we consider
      all
      directors 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
      March 23, 2007 was 5,952,490.





As
      of
      March 23, 2007, there were 20,180,867 shares of common stock, $0.01 par value,
      issued and outstanding.





Transmittal
      Small Business Disclosure Format (check one) Yes oNox







PART
      I




Item
      1.
      Description of 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.




2





Business





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.





We
      currently provide investigative services for over 2,000 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
      eight (8) state-licensed private investigators who are trained as "Cause and
      Origin" investigators, two apprentice private investigators who are not yet
      state-licensed, 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, 315,000 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.




3





Marketing





We
      market
      our product by sponsoring seminars to over 140 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.





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.




4




·
            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.




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)
  5
  ·
              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)
  ·
                Home
                      in Kissimmee, Florida that was being consumed by mold. The
                      builder and
                      several engineering firms had been unable to determine the
                      cause. Upon
                      inspecting the home, we determined that there was a hidden
                      water leak in
                      the walls. The builder insisted that this was impossible, as
                      the water to
                      the home was turned off at the main. Our technicians quickly
                      located the
                      leak using ultrasonic equipment. The plumbing contractor had
                      installed an
                      unused icemaker line on the city side of the meter. This line
                      was slightly
                      pierced by a nail during drywall installation, causing saturation
                      inside
                      the walls and the mold growth throughout the home. It was determined
                      that
                      the plumbing contractor was at fault.****(1994)
 ·
              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 whichhad
                  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)
  6


Financings





In
      April
      2002, we entered into a subscription agreement with an investor to sell up
      to
      $300,000 of our 6% convertible debentures. Under the terms of the agreement,
      subject to the our satisfying certain conditions, the investor agreed to
      purchase three separate tranches of debentures, each tranche in the principal
      amount of $100,000 and to be payable three years after the issue date of the
      debenture. The tranches were purchased in April 2002, June 2002 and October
      2002, respectively. The principal amount of each of the debentures was
      convertible at any time at the option of the investor into the Company’s common
      stock at a conversion rate equal to the lesser of (i) 110% of the average five
      closing bid prices during the five trading days prior to the issuance date
      of
      the debenture or (ii) 75% of the average of the five lowest closing bid prices
      during the twenty trading days immediately prior to the conversion date. In
      the
      event all or any portion of the debentures are outstanding at the end of three
      years from the date of issuance, the debentures are subject to automatic
      conversion into the Company’s common stock based upon the conversion rate
      described above.





In
      connection with the sale of each tranche of the debentures, we issued warrants
      to purchase 462,963 shares of our common stock at exercise prices of $.2376,
      $.23 and $.088 per share, respectively. Each of the warrants was exercisable
      for
      four years from the date each related debenture was purchased under the
      agreement. Therefore, all of such warrants expired in or prior to October 2006.
      The repayment of the debentures was also secured by a pledge to the investor
      of
      an aggregate of 4,000,000 shares of common stock of the Company owned by our
      majority stockholders.





In
      2004,
      the investor converted the entire $300,000 principal amount of the debenture,
      plus accrued interest, into an aggregate of 4,173,857 shares of the Company’s
      common stock.





During
      April 2002 we also entered into an equity line of credit investment agreement
      with the investor which obligated the investor to purchase up to $3,000,000
      of
      our common stock at a price equal to 85% of the average trading price of our
      common stock, subject to our fulfillment of certain terms and conditions
      contained in the equity line of credit investment agreement. In connection
      with
      the equity line of credit, we issued to the investor a warrant to purchase
      1,388,889 shares of our common stock exercisable at $.2376 per share. The
      warrant expired April 2006. The equity line of credit expired in April 2004
      without being utilized.





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.





7




Recent
      Activities





On
      December 30, 2004, we entered into a joint venture agreement with two other
      companies to form Vulnerability Assessment Group (“VAG”). We have a one-third
      interest in VAG. The purpose of VAG is to provide comprehensive assessment
      plans
      to individuals, businesses, industries, organizations and institutions of their
      vulnerability to terrorism, external or internal sabotage, employee assessment
      and safety, product safety and chemical and biological safety. As of December
      31, 2006, VAG had no significant operations and the Company had incurred no
      significant costs related to VAG.





Employees





As
      of
      March 21, 2007, we have approximately 30 full time employees and one part-time
      employee. 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 4800 South, Salt Lake City,
      Utah 84117.





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.





The
      loss
      of one or more of our key employees may adversely affect our growth
      objectives.





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.




8





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.





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.





Outstanding
      shares of our common stock that are restricted from immediate resale, but which
      may be sold into the market in the future could cause the market price of our
      common stock to drop significantly, even if our business is doing
      well.





As
      of
      March 23, 2007, we had 20,180,867 shares of our common stock issued and
      outstanding. Certain of f such shares were restricted as to resale under the
      United States securities laws.. Rule 144 provides, in essence, that a person
      holding "restricted securities" for a period of one year may sell only an amount
      every three months equal to the greater of (a) one percent of a company's issued
      and outstanding shares, or (b) the average weekly volume of sales during the
      four calendar weeks preceding the sale. The amount of "restricted securities"
      which a person who is not an affiliate of our company may sell is not so
      limited, since non-affiliates may sell without volume limitation their shares
      held for two years if there is adequate current public information available
      concerning our company. In such an event, "restricted securities" would be
      eligible for sale to the public at an earlier date. The sale in the public
      market of such shares of common stock may adversely affect prevailing market
      prices of our common stock.





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.




9





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 a 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.





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.




10





Item
      3.
      Legal Proceedings.





On
      August
      23, 2005, Oak Ridge City Center, LLC, the lessor of our former corporate
      headquarters located at 3 East Main Street, Oak Ridge, Tennessee, commenced
      a
      lawsuit against the Company in the General Sessions Court in Anderson County,
      Tennessee. The basis of the lawsuit was an alleged breach of a commercial lease
      agreement dated December 19, 2000. During 2006, this lawsuit was settled by
      our
      payment to the lessor of $55,000.





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 Company
      believes that it has substantial defenses to the judgment and has set a Motion
      to Set Aside Default and Default Judgment pending for Hearing on May 1, 2007.
      A ccordingly,
      the Company has not recorded a liability related to this matter as of December
      31, 2006.





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 which
      are described in Item 1 Description of Business-Financings. A reasonable
      estimate of any possible future liability related to this lawsuit is not
      presently determinable, and accordingly, the Company has not recorded a
      liability related to this matter.





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 Common Equity, Related Stockholders Matters and Small Business Issuer
      Purchases of Equity Securities.





11




Market
      Information





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
                  StockHigh
                  Bid
              
              Low
                  BidFirst
                  Quarter 2005
              
              $
              0.23
              
              $
              0.13Second
                  Quarter 2005
              
              $
              0.15
              
              $
              0.11Third
                  Quarter 2005
              
              $
              0.125
              
              $
              0.09Fourth
                  Quarter 2005
              
              $
              0.10
              
              $
              0.075First
                  Quarter 2006
              
              $
              0.086
              
              $
              0.071Second
                  Quarter 2006
              
              $
              0.11
              
              $
              0.06Third
                  Quarter 2006
              
              $
              .086
              
              $
              0.0515Fourth
                  Quarter 2006
              
              $
              0.048
              
              $
              0.047





Security
      Holders





At
      March
      23, 2007 there were 20,180,867 shares our common stock outstanding which were
      held by approximately 531 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





All
      such
      sales have been previously reported by the Company in its Quarterly Reports
      on
      Form 10-QSB for the quarters ended March 31, 2007 and June 30,
      2006.




Item
      6.
      Management’s Discussion and Analysis or Plan 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.




12





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 - Prior to January 1, 2006, the Company accounted for its
                stock
                options under the recognition and measurement provisions of APB Opinion
                No. 25,*Accounting
                for Stock Issued to Employees*,
                and related Interpretations, as permitted by Financial Accounting
                Standards Board (“FASB”) Statement No. 123,*Accounting
                for Stock-Based Compensation*(“FAS
                123”). Effective January 1, 2006, the Company adopted the fair value
                recognition provisions of FASB Statement No. 123(R*)*,*Share-Based Payment*(“FAS
                123(R)”), using the modified-prospective-transition method. Under that
                transition method, compensation costs to be recognized effective
                January
                1, 2006 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). Results
                for
                prior periods have not been restated.





·
            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.





13





Results
      of Operations for the Fiscal Year Ended December 31, 2006 as Compared to the
      Fiscal Year Ended December 31, 2005





Our
      revenues for 2006 increased $360,124 or 18.7% to $2,287,722 from $1,927,598
      in
      2005. This increase reflects the continuance of increased sales levels we
      experienced in the third and fourth quarters of 2005 and our move to a new
      office and warehouse location during the first quarter of 2005. The move caused
      us to miss inspection services during the location transition and created
      inspection backlogs as we orientated to our new facilities during 2005. Also,
      our third quarter 2005 price increase carried through all of 2006.





Our
      total
      operating expenses for 2006 were $2,050,272, an increase of $54,588 or 2.7%
      compared to the same period in 2005. Our salary expense increased by $47,168,
      or
      3.9%, and professional fees increased $33,123, or approximately 27.7%, primarily
      due to additional personnel and contracted professionals to support our
      increased revenue levels in 2006. These increases were offset by a decrease
      in
      rent expense for 2006 of $52,500 resulting from the elimination of rent
      associated with our previous office and warehouse facilities in
      2005.





Other
      expense increased $49,029 or 83.0% to $108,116 from $59,087 in 2005 primarily
      as
      a result of a $55,000 lawsuit settlement related to an early termination of
      our
      prior lease commitment.





Net
      income for 2006 was $67,331 or less than $0.01 per share compared to a 2005
      net
      loss of $95,188 or less than $0.01 per share mainly reflecting our 2006 increase
      in revenues while maintaining operating expenses comparable to
      2005.





Results
      of Operations for the Fiscal Year Ended December 31, 2005 as Compared to the
      Fiscal Year Ended December 31, 2004





Our
      revenues for 2005 decreased $166,485 or 8.0% to $1,927,598 from $2,094,083
      in
      2004. This decrease is primarily due to our move to a new office and warehouse
      location during the first quarter that caused us to miss inspection services
      during the location transition and created inspection backlogs as we orientated
      to our new facilities. During the second quarter we saw a temporary decrease
      in
      the overall number of inspection referrals. However, a third quarter price
      increase and increased referrals yielded a 31% increase in comparable sales
      for
      the fourth quarter. In addition, we had $96,412 of use agreement revenues in
      2004 that were not recognized in 2005 due to disagreements with our customer
      over contractual terms.





Our
      total
      operating expenses for 2005 were $1,995,684, a decrease of $32,550 or 1.6%
      compared to the same period in 2004. Our salary expense increased by $59,857,
      or
      5.3%, primarily due to moving certain contracted services in-house during 2005
      as evidenced by the offsetting decrease of $50,677 or 29.7% in professional
      fees. Rent expense for 2005 decreased by $157,500 or 75.0% as a result of the
      elimination of rent associated with our previous office and warehouse facilities
      at the beginning of the second quarter, partially offset by increases in
      depreciation and general and administrative costs associated with our move
      to a
      new location totaling $118,806 or 34.4% compared to same period in
      2004.




14





Interest
      expense for 2005 increased $39,187 or 196.9% to $59,087 from $19,900 in 2004
      mainly due to the new debt associated with the purchase of our new office and
      warehouse facility.





Net
      loss
      for 2005 was $95,188 or $0.00 per share compared to a 2004 net income of $27,777
      or $0.00 mainly reflecting the temporary decline in revenues during the first
      two quarters of 2005, as previously discussed.





Liquidity
      and Capital Resources





During
      2006, our cash increased by $134,900 mainly due to improved operating results
      previously discussed. We believe we have sufficient cash provided by ongoing
      operating activities to meet our on future operating needs.




Investing
      and financing activities for 2006 reflect purchases of equipment totaling
      $29,801 and payments totaling $95,345 on our line of credit, notes payable
      and
      capital lease. We also increased our line of credit to $400,000 during 2006
      with
      all $400,000 available at December 31, 2006.





Impact
      of
      Inflation





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




Other





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.




15




Item
      7.  Financial Statements.




Index
      to
      Financial Statements





Years
      ended December 31, 2006 and 2005


Page
                  NumberReport
                  of Independent Registered Public Accounting Firm
              
              F-2Audited
                  Financial StatementsBalance
                  Sheets
              
              F-3Statements
                  of Operations
              
              F-5Statements
                  of Stockholders’ Equity
              
              F-6Statements
                  of Cash Flows
              
              F-7Notes
                  to Financial Statements
              
              F-8
  F-1





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, 2006 and 2005, 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, 2006 and 2005, 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.







/s/
      Coulter & Justus, P.C.








Knoxville,
      Tennessee


March
      22,
      2007





F-2




Diversified
      Product Inspections, Inc.





Balance
      Sheets





**December
                31****2006**
            
            **2005****Assets**Current
                assets:Cash
            
            **$**
            **331,793**
            
            $
            196,893Accounts
                receivable, net of reserve for doubtful accounts of $50,000 in 2006
                and
                $25,000 in 2005
            
            
            **286,473**
            
            
            279,085Current
                portion of deferred income taxes
            
            
            **70,281**
            
            
            59,433Prepaid
                expenses and other current assets
            
            
            **2,914**
            
            
            940Total
                current assets
            
            
            **691,461**
            
            
            536,351Property
                and equipment:Land
            
            
            **150,000**
            
            
            150,000Building
                and building improvements
            
            
            **735,318**
            
            
            735,318Equipment,
                furniture and fixtures
            
            
            **432,572**
            
            
            402,771Vehicles
            
            
            **71,512**
            
            
            71,512**1,389,402**
            
            
            1,359,601Less
                accumulated depreciation and amortization
            
            
            **400,840**
            
            
            325,108Net
                property and equipment
            
            
            **988,562**
            
            
            1,034,493Other
                assets
            
            
            **5,000**
            
            
            5,000Deferred
                income taxes, less current portion
            
            
            **332,735**
            
            
            405,586Total
                assets
            
            **$**
            **2,017,758**
            
            $
            1,981,430





F-3




**December
                31****2006**
            
            **2005****Liabilities
                and stockholders’ equity**Current
                liabilities:Line
                of credit
            
            **$**
            **-**
            
            $
            52,094Accounts
                payable and accrued expenses
            
            
            **57,793**
            
            
            67,174Accrued
                salaries
            
            
            **21,775**
            
            
            21,103Current
                portion of deferred revenue
            
            
            **133,333**
            
            
            130,000Current
                portion of long-term debt
            
            
            **45,989**
            
            
            42,496Current
                portion of capital lease obligations
            
            
            **3,906**
            
            
            3,094Total
                current liabilities
            
            
            **287,796**
            
            
            315,961Deferred
                revenue, less current portion
            
            
            **25,000**
            
            
            **-**Long-term
                debt, less current portion
            
            
            **719,312**
            
            
            763,097Capital
                lease obligations, less current portion
            
            
            **1,882**
            
            
            5,653Total
                liabilities
            
            
            **1,008,990**
            
            
            1,084,711Stockholders’
                equity:Common
                stock:Par
                value--$0.01 per shareAuthorized
                shares--50,000,000Issued
                and outstanding shares--20,180,867 in 2006 and 19,634,821 in
                2005
            
            
            **201,808**
            
            
            196,348Additional
                paid-in capital
            
            
            **1,997,836**
            
            
            1,958,578Accumulated
                deficit
            
            
            **(1,190,876**
            **)**
            
            (1,258,207
            )Net
                stockholders’ equity
            
            
            **1,008,768**
            
            
            896,719Total
                liabilities and stockholders’ equity
            
            **$**
            **2,017,758**
            
            $
            1,981,430




*See
      accompanying Notes to Financial Statements.*





F-4


Diversified
      Product Inspections, Inc.





Statements
      of Operations




**Year
                ended December 31****2006**
            
            **2005**Revenues:Inspections
            
            **$**
            **1,934,436**
            
            $
            1,672,848Storage
                fees
            
            
            **316,619**
            
            
            254,750Use
                agreement
            
            
            **36,667**
            
            
            -Total
                revenues
            
            
            **2,287,722**
            
            
            1,927,598Operating
                expenses:Salaries
                and related benefits
            
            
            **1,242,986**
            
            
            1,195,818Professional
                fees
            
            
            **152,822**
            
            
            119,699Rent
            
            
            **-**
            
            
            52,500Shipping
                and handling costs
            
            
            **156,194**
            
            
            164,182Depreciation
                and amortization
            
            
            **75,732**
            
            
            70,345Other
                general and administrative
            
            
            **422,538**
            
            
            393,140Total
                operating expenses
            
            
            **2,050,272**
            
            
            1,995,684Operating
                income (loss)
            
            
            **237,450**
            
            
            (68,086
            )Other
                expenses:Interest
                expense
            
            
            **53,116**
            
            
            59,087Settlement
                of lawsuit
            
            
            **55,000**
            
            
            -Total
                other expenses
            
            
            **108,116**
            
            
            59,087Income
                (loss) before income taxes
            
            
            **129,334**
            
            
            (127,173
            )Deferred
                income tax (expense) benefit
            
            
            **(62,003**
            **)**
            
            31,985Net
                income (loss)
            
            **$**
            **67,331**
            
            $
            (95,188
            )Earnings
                (loss) per share:Basic
            
            **$**
            **0.00**
            
            $
            (0.00
            )Diluted
            
            **$**
            **0.00**
            
            $
            (0.00
            )




*See
      accompanying Notes to Financial Statements.*





F-5




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, 2005
            
            
            19,135,314
            
            $
            191,353
            
            $
            1,915,136
            
            $
            (1,163,019
            )
            $
            943,470Stock
                issued for services
            
            
            499,507
            
            
            4,995
            
            
            43,442
            
            
            -
            
            
            48,437Net
                loss for 2005
            
            
            -
            
            
            -
            
            
            -
            
            
            (95,188
            )
            
            (95,188
            )Balance
                at December 31, 2005
            
            
            19,634,821
            
            
            196,348
            
            
            1,958,578
            
            
            (1,258,207
            )
            
            896,719Stock
                issued for services
            
            
            **546,046**
            
            
            **5,460**
            
            
            **39,258**
            
            
            **-**
            
            
            **44,718**Net
                income for 2006
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **67,331**
            
            
            **67,331**Balance
                at December 31, 2006
            
            
            **20,180,867**
            
            **$**
            **201,808**
            
            **$**
            **1,997,836**
            
            **$**
            **(1,190,876**
            **)**
            **$**
            **1,008,768**




*See
      accompanying Notes to Financial Statements.*





F-6


Diversified
      Product Inspections, Inc.





Statements
      of Cash Flows





**Year
                ended December 31****2006**
            
            **2005****Operating
                activities**Net
                income (loss)
            
            **$**
            **67,331**
            
            $
            (95,188
            )Adjustments
                to reconcile net income (loss) to net cashprovided
                by (used in) operating activities:Deferred
                income tax expense (benefit)
            
            
            **62,003**
            
            
            (31,985
            )Provision
                for bad debts
            
            
            **25,000**
            
            
            -Stock
                issued for services
            
            
            **44,718**
            
            
            48,437Depreciation
            
            
            **72,180**
            
            
            68,569Amortization
            
            
            **3,552**
            
            
            1,776Gain
                on sale of vehicles
            
            
            **-**
            
            
            (654
            )Changes
                in operating assets and liabilities:Accounts
                and other receivables
            
            
            **(32,388**
            **)**
            
            (132,813
            )Prepaid
                expenses and other assets
            
            
            **(1,974**
            **)**
            
            7,067Accounts
                payable and accrued expenses
            
            
            **(9,381**
            **)**
            
            23,148Accrued
                salaries
            
            
            **672**
            
            
            (7,916
            )Deferred
                revenue
            
            
            **28,333**
            
            
            50,000Net
                cash provided by (used in) operating activities
            
            
            **260,046**
            
            
            (69,559
            )**Investing
                activities**Proceeds
                from disposal of assets
            
            
            -
            
            
            2,050Purchases
                of property and equipment
            
            
            **(29,801**
            **)**
            
            (90,156
            )Net
                cash used in investing activities
            
            
            **(29,801**
            **)**
            
            (88,106
            )**Financing
                activities**Net
                (payments) proceeds from line of credit
            
            
            **(52,094**
            **)**
            
            52,094Principal
                payments on notes payable and capital lease obligations
            
            
            **(43,251**
            **)**
            
            (25,584
            )Net
                cash (used in) provided by financing activities
            
            
            **(95,345**
            **)**
            
            26,510Net
                increase (decrease) in cash
            
            
            **134,900**
            
            
            (131,155
            )Cash
                at beginning of year
            
            
            **196,893**
            
            
            328,048Cash
                at end of year
            
            **$**
            **331,793**
            
            $
            196,893**Supplemental
                disclosures of cash flow information**Cash
                paid for interest
            
            **$**
            **53,116**
            
            $
            59,087**Supplemental
                disclosures of noncash activity**Equipment
                purchases financed by capital lease
            
            **$**
            **-**
            
            $
            10,655




*See
      accompanying Notes to Financial Statements.*





F-7


Diversified
      Product Inspections, Inc.





Notes
      to
      Financial Statements





December
      31, 2006





**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.




**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 17%, 11% and
      10% in 2006 and approximately 18%, 18% and 10% in 2005 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 $10,381 in 2006 and $9,701 in 2005.




**Accounts
      Receivable**





Two
      customers account for 12% and 11% of total accounts receivable at December
      31,
      2006 and one customer accounted for 22% of total accounts receivable at
      December 31, 2005. 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.




F-8




Diversified
      Product Inspections, Inc.





Notes
      to
      Financial Statements (continued)




**1.**
            **Significant
                Accounting Policies
                (continued)**




**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
                yearsEquipment,
                furniture and fixtures
            
            
            3-7
                yearsVehicles
            
            
            5
                years




**Stock
      Options**





Prior
      to
      January 1, 2006, the Company accounted for its stock options under the
      recognition and measurement provisions of APB Opinion No. 25, *Accounting
      for Stock Issued to Employees* ,
      and
      related Interpretations, as permitted by Financial Accounting Standards Board
      (“FASB”) Statement No. 123, *Accounting
      for Stock-Based Compensation* (“FAS
      123”). Effective January 1, 2006, the Company adopted the fair value
      recognition provisions of FASB Statement No. 123(R *)* , *Share-Based Payment* (“FAS
      123(R)”), using the modified-prospective-transition method. Under that
      transition method, compensation costs recognized effective January 1, 2006
      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). Results for prior periods have not been restated.





As
      a
      result of adopting FAS 123(R) there was no material effect on the Company’s
      income before taxes and net income for the year ended December 31, 2006. Had
      the
      Company elected to adopt the fair value recognition provisions of FAS 123(R)
      at
      January 1, 2005, pro forma net loss and loss per share would be as follows
      for
      the year ended December 31, 2005:





Net
                loss, as reported
            
            **$**
            **(95,188**
            **)**Employee
                compensation, net of tax
            
            
            **25,861**Pro
                forma net loss
            
            **$**
            **(121,049**
            **)**Loss
                per share:Basic,
                as reported
            
            **$**
            **(0.00**
            **)**Diluted,
                as reported
            
            **$**
            **(0.00**
            **)**Basic,
                pro forma
            
            **$**
            **(0.00**
            **)**Diluted,
                pro forma
            
            **$**
            **(0.00**
            **)**




F-9


Diversified
      Product Inspections, Inc.





Notes
      to
      Financial Statements (continued)





**2.**
            **Significant
                Accounting Policies
                (continued)**




**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.





**3.**
            **Line
                of Credit and Long-Term
                Debt**





During
      2006 the Company increased its revolving line of credit agreement with a
      financial institution to $400,000. Under the terms of this agreement, any
      borrowings bear interest at the financial institution’s prime rate (8.25% at
      December 31, 2006) and is secured by the Company’s land and building. This line
      of credit is due on demand. At December 31, 2006, the Company had $400,000
      available under this agreement.





Long-term
      debt is summarized as follows as of December 31:




**2006**
            
            **2005**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
            
            **$**
            **751,055**
            
            $
            785,331Note
                payable, secured by a vehicle, due in monthly installments of $665,
                including interest at 11.21%, through February 2009
            
            
            **14,246**
            
            
            20,262**765,301**
            
            
            805,593Less
                portion classified as current
            
            
            **45,989**
            
            
            42,496Long-term
                portion
            
            **$**
            **719,312**
            
            $
            763,097





Land
      and
      building securing the line of credit and note payable has a carrying amount
      of
      $849,181 and a vehicle securing a note payable has a carrying amount of $12,130
      at December 31, 2006.





Aggregate
      maturities of the Company’s long-term debt as of December 31, 2006, are as
      follows:





2007
            
            **$**
            **45,989**2008
            
            
            **46,861**2009
            
            
            **42,500**2010
            
            
            **629,951****$**
            **765,301**




F-10





Diversified
      Product Inspections, Inc.





Notes
      to
      Financial Statements (continued)





**3.**
            **Lease
                Obligations**





During
      2005, the Company relocated its office and warehouse from a leased facility
      to
      its new facility. The relocation resulted in an early termination of its lease
      agreement. During 2005, the lessor filed a lawsuit against the Company for
      lost
      rent related to the early termination of the lease. During 2006, the Company
      and
      lessor settled the lawsuit for $55,000.





The
      Company leases equipment under an agreement classified as a capital lease.
      Also,
      certain equipment is leased under agreements classified as operating leases.
      Future minimum payments for these leases, by year and in the aggregate, consist
      of the following as of December 31, 2006:





**Capital**
            
            **Operating**2007
            
            **$**
            **4,954**
            
            **$**
            **11,312**2008
            
            
            **2,065**
            
            
            **5,656**Total
                minimum lease payments
            
            
            **7,019**
            
            **$**
            **16,968**Amount
                representing interest
            
            
            **1,231**Present
                value of minimum lease payments(including
                $3,906 classified as current)
            
            **$**
            **5,788**





Property
      and equipment includes the following amounts for capital leases as of December
      31, 2006:





Equipment
            
            **$**
            **10,655**Less
                accumulated depreciation
            
            
            **5,328**Net
                equipment under capital lease
            
            **$**
            **5,327**





Amortization
      of this asset, computed by the straight-line method over the term of the lease,
      is included in depreciation and amortization expense.





**4.**
            **Concentration
                of Risk**





Periodically,
      the Company has cash on deposits 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, 2006, the Company’s balances on hand with financial
      institutions exceed the FDIC coverage by approximately $167,000.





F-11


Diversified
      Product Inspections, Inc.





Notes
      to
      Financial Statements (continued)




**5.**
            **Income
                Taxes**





For
      tax
      purposes the Company has 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****1999**
            
            
            **2019**
            
            **$**
            **44,762****2000**
            
            
            **2020**
            
            
            **108,786****2001**
            
            
            **2021**
            
            
            **88,508****2002**
            
            
            **2022**
            
            
            **114,597****2004**
            
            
            **2024**
            
            
            **53,238****2005**
            
            
            **2025**
            
            
            **89,993****$**
            **499,884**





Deferred
      income taxes reflect the net tax effects of temporary differences between the
      carrying amounts of assets and liabilities for financial reporting purposes
      and
      the amounts used for income tax purposes.





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





**2006**
            
            **2005**Deferred
                tax assets:NOL
                carryovers
            
            **$**
            **169,962**
            
            $
            247,617Deferred
                revenue
            
            
            **60,626**
            
            
            49,777Expenses
                not currently deductible
            
            
            **172,817**
            
            
            172,817Reserve
                for doubtful accounts
            
            
            **19,145**
            
            
            9,573Other
            
            
            **523**
            
            
            523Total
                deferred tax assets
            
            
            **423,073**
            
            
            480,307Deferred
                tax liability - tax over book depreciation
            
            
            **(20,057**
            **)**
            
            (15,288
            )Net
                deferred tax assets (including $70,281 in 2006 and $59,433 in 2005
                classified as current)
            
            **$**
            **403,016**
            
            $
            465,019





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 described. Management
      has
      determined that generation of such income is more likely than not. Accordingly,
      there is no valuation allowance as of December 31, 2006 or 2005.





F-12


Diversified
      Product Inspections, Inc.





Notes
      to
      Financial Statements (continued)




**5.**
            **Income
                Taxes (continued)**





The
      reconciliation of income tax expense (benefit) 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:





**2006**
            
            **2005**Income
                tax expense (benefit) at U.S. statutory rates of 34%
            
            **$**
            **43,974**
            
            $
            (43,239
            )Effect
                of permanent differences
            
            
            **1,832**
            
            
            3,117Other
            
            
            **16,197**
            
            
            8,137**$**
            **62,003**
            
            $
            (31,985
            )





**6.**
            **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 vest at the rate of 20% annually beginning at the grant
      date and expire upon termination of employment. A summary of the Company’s stock
      option activity, and related information for the years ended December 31 is
      as
      follows:




**2006**
            
            **2005****Weighted**
            
            
            
            **Weighted****Average**
            
            
            
            **Average****Exercise**
            
            
            
            **Exercise****Options**
            
            **Price**
            
            **Options**
            
            **Price**Outstanding
                at beginning of year
            
            
            **8,002,000**
            
            **$**
            **0.11**
            
            
            8,015,000
            
            $
            0.11Forfeited
            
            
            **(2,000**
            **)**
            
            -
            
            
            (13,000
            )
            
            -Outstanding
                at end of year
            
            
            **8,000,000**
            
            **$**
            **0.11**
            
            
            8,002,000
            
            $
            0.11Exercisable
                at end of year
            
            
            **8,000,000**
            
            
            
            
            
            6,402,000





The
      exercise price for all options outstanding as of December 31, 2006, is $0.11.
      As
      a result of the employee stock options discussed above, the Company has reserved
      8,000,000 shares of common stock for future issuance.





**7.**
            **Earnings
                Per Share Data**





Basic
      earnings (loss) per share assumes no dilution and is computed by dividing net
      income (loss) available to common stockholders by the weighted average number
      of
      common shares outstanding during each period. Diluted earnings (loss) 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.





F-13


Diversified
      Product Inspections, Inc.





Notes
      to
      Financial Statements (continued)




**7.**
            **Earnings
                Per Share Data (continued)**





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





**2006**
            
            **2005**Basic:Net
                income (loss)
            
            **$**
            **67,331**
            
            $
            (95,188
            )Average
                shares outstanding
            
            
            **19,992,779**
            
            
            19,258,550Basic
                earnings (loss) per share
            
            **$**
            **0.00**
            
            $
            (0.00
            )Diluted:Net
                income (loss)
            
            **$**
            **67,331**
            
            $
            (95,188
            )Average
                shares outstanding
            
            
            **19,992,779**
            
            
            19,258,550Effect
                of dilutive stock options and warrants - based on treasury stock
                method
            
            
            -
            
            
            813,866Diluted
                shares outstanding
            
            
            **19,992,779**
            
            
            20,072,416Diluted
                earnings (loss) per share
            
            **$**
            **0.00**
            
            $
            (0.00
            )





**8.**
            **Commitments
                and Contingencies**





In
      December 2006, a default judgment of $37,500 was entered against the Company
      in
      connection with a lawsuit related to certain investigative reports prepared
      by
      the Company. The Company, upon the advice of legal counsel, plans to appeal
      this
      judgment and believes they have substantial defenses to the default judgment.
      Accordingly, the Company has not recorded a liability related to this matter
      as
      of December 31, 2006.





During
      2006, the Company was also named, along with its three largest shareholders,
      as
      a defendant in a lawsuit from certain related investment companies that are
      also
      shareholders of the Company. The lawsuit alleges, among other things, the
      defendants violated certain securities laws, misrepresented facts and breached
      certain contracts and fiduciary duties. A reasonable estimate of any possible
      future liability related to this lawsuit is not presently determinable, and
      accordingly, the Company has not recorded a liability related to this
      matter.





F-14


Diversified
      Product Inspections, Inc.





Notes
      to
      Financial Statements (continued)




**9.**
            **Use
                Agreement**





In
      2006,
      the Company entered into a use agreement whereby the user is 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 calls 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. The purchaser can terminate
      the agreement with 60 days notice. The Company is bound by the agreement for
      three years, subsequent thereof, the Company may terminate with notice as
      defined in the agreement. During the year ended December 31, 2006, the Company
      had revenues of $36,667 related to this agreement.





**10.**
            **Joint
                Venture**





On
      December 30, 2004, the Company entered into a joint venture agreement with
      two
      other companies to form Vulnerability Assessment Group (“VAG”). The Company has
      a one-third interest in VAG. The purpose of VAG is to provide comprehensive
      assessment plans to individuals, businesses, industries, organizations and
      institutions of their vulnerability to terrorism, external or internal sabotage,
      employee assessment and safety, product safety and chemical and biological
      safety. As of December 31, 2006, VAG had no significant operations and the
      Company had incurred no significant costs related to VAG.





F-15




Item
      8.
      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
      8A.
      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 effective in alerting
      him in a timely manner to information relating to the Company required to be
      disclosed in this report.





Item
      8B.  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
      9.
      Directors and Executive Officers of the Registrant.





(a)
      Identity of our current directors and executive officers.




Name
              
              Age
              
              Positions
                  with the CompanyJohn
                  Van Zyll
              
              66
              
              Chairman
                  of the Board, Chief Executive OfficerMarvin
                  Stacy
              
              73
              
              Chief
                  Operating Officer and DirectorAnn
                  M. Furlong
              
              54
              
              Secretary
                  and DirectorWarren
                  Wankelman
              
              63
              
              DirectorMatt
                  Walters
              
              35
              
              Director


16




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.




17




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.




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, 2006, 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
      a
      review by the Company of Forms 3 and 4 during such fiscal year as furnished
      to
      the Company under Rule 16a-3(d) under the Act, and Forms 5 and amendments
      thereto furnished to the Company with respect to such fiscal year, and any
      representation 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.





Item
      10.
      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, 2005 and December
      31,
      2006. 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 Compensation ($)
            
            Non-Qualified
                Deferred Compensation Earnings ($)
            
            All
                Other Compensation ($)
            
            Total
                ($)John
                VanZyll CEO, CFO and Director
            
            
            12/31/2006
              12/31/2005
            
            
            61,096
              58,614
            
            
            1,581
              0
            
            
            0
              0
            
            
            0
              0
            
            
            0
              0
            
            
            0
              0
            
            
            62,677
              58,614





18





Compensation
      of Directors





During
      the fiscal year ended December 31, 2006, 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
      11.
      Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.





The
      following table sets forth certain information as of March 23, 2007 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.


Name
                  and Address of Beneficial Owner (1)
              
              Number
                  of Shares of Common Stock Beneficially Owned (2)
              
              Percent
                  of Common Stock Beneficially OwnedJan
                  Telander
              
              
              4,724,500
              (3)
              
              23.4
              %John
                  Van Zyll
              
              
              7,654,011
              (4)
              
              33.7
              %EIG
                  Capital, Ltd.
              
              
              4,175,815
              (5)
              
              20.7
              %EIG
                  VentureCapital
                  Ltd.
              
              
              4,042,565
              
              
              20.0
              %Ann
                  M. Furlong
              
              
              4,725,811
              (4)
              
              20.8
              %Marvin
                  Stacy
              
              
              4,619,055
              (4)
              
              20.4
              %Warren
                  Wankelman
              
              
              250,000
              (6)
              
              *Matt
                  Walters
              
              
              255,000
              (6)
              
              *All
                  Executive Officers and
                Directors
                  as a Group (five (5) persons)
              
              
              17,503,877
              (7)
              
              62.1
              %
  *
        Represents less than one percent (1%) of the outstanding shares of our common
        stock.





19




(1)
      Based
      upon 20,180,867 shares of our common stock issued and outstanding as of March
      23, 2007. 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 23, 2007.
      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.




20




Item
      12.
      Certain Relationships and Related Transactions.





Not
      Applicable.




Item
      13.
      Exhibits.


Exhibit
                Number
              
              Description2.1
              
              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
              
              Articles
                  of Incorporation and Amendment to Articles of Incorporation are
                  incorporated herein by reference to the Company's Registration
                  Statement
                  on Form 10-SB filed with the Commission on February 23,
                  1999.3.2
              
              Bylaws
                  of the Company are incorporated herein by reference to the Company's
                  Registration Statement on Form 10-SB filed with the Commission
                  on February
                  23, 1999.3.3
              
              Articles
                  of Incorporation and Amendment to Articles of Incorporation are
                  incorporated herein by reference to the Company's Registration
                  Statement
                  on Form 10-SB filed with the Commission on February 23,
                  1999.3.4
              
              Bylaws
                  of the Company are incorporated herein by reference to the Company's
                  Registration Statement on Form 10-SB filed with the Commission
                  on February
                  23, 1999.10.1
              
              Articles
                  of Merger and Agreement and Plan of Merger are incorporated herein
                  by
                  reference to the Company's Registration Statement on Form 10-SB
                  filed with
                  the Commission on February 23, 1999.10.2
              
              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.10.3
              
              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”).
  21
  10.4
              
              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.10.5
              
              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”).14.1
              
              Code
                  of Ethics. Incorporated by reference to Exhibit 10.5 to the 2005
                  10-KSB31.1
              
              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.





ITEM
      14.
      PRINCIPAL ACCOUNTANT FEES AND SERVICES





The
      following table sets forth the fees billed to us for the fiscal years ended
      December 31, 2006 and December 31, 2005 by Coulter & Justus, P.C.
      (”C&J”):


Fiscal
                  Year Ended December 31, 2006
              
              Fiscal
                  Year Ended December 31, 2005Audit
                  Fees (1)
              
              $
              40,043
              
              $
              32,765Audit
                  Related Fees (2)
              
              $
              0
              
              $
              0Tax
                  Fees (3)
              
              $
              5,400
              
              $
              4,605All
                  Other Fees
              
              $
              295
              (5)
              $
              897
              (4)





(1)
      Consists of fees billed for professional services rendered for the audit of
      the
      financial statements of the Company as of December 31, 2006 and December 31,
      2005 and reviews of the financial statements included in the Company’s Quarterly
      Reports on Form 10-QSB for the quarters during such fiscal years.





22




(2)
      Consists of fees for services relating to accounting consultation related to
      the
      performance of the audit that are not reported as audit fees.





(3)
      Consists of tax filing and tax related compliance and other advisory
      services.





(4)
      Consists of fees for meeting with an investor at request of the Company and
      annual renewal fee for software provided to the Company.




(5)
      Represents the annual renewal fee for fixed asset software package 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 2005 and 2006 were
      pre-approved by the Board of Directors.





23





SIGNATURES





In
      accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized


Dated:
        March 30, 2007


Diversified
                Product Inspections, Inc.By:
            /s/ John
              Van
              ZyllJohn
                Van Zyll
              Chief
                Executive Officer
              (Principal
                Executive Officer and Principal
              Accounting
                Officer)




In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the Registrant and in the capacities and on
      the
      dates indicated.




/s/
                  John Van ZyllJohn
                  Van Zyll
              Chairman
                  of the Board
              March
                  30, 2007/s/
                  Marvin StacyMarvin
                  Stacy
              Chief
                  Operating Officer and Director
              March
                  30, 2007/s/
                  Ann M. FurlongAnn
                  M. Furlong
              Secretary
                  and Director
              March
                  30, 2007/s/
                  Warren WankelmanWarren
                  Wankelman
              Director
              March
                  30, 2007/s/
                  Matt WaltersMatt
                  Walters
              Director
              March
                  30, 2007





24