UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington
D.C. 20549





FORM
10-K


(Mark
One)




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





For the
fiscal year ended: December 31, 2008





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





For the
transition period from _________to__________





Commission
file Number 0-25429





DIVERSIFIED
PRODUCT INSPECTIONS, INC.


(Name of
registrant as specified in its charter)





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





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





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





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





Name
      of exchange onTitle
      of each class
              
              which
      registeredNone
              
              None





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





Common
Stock, $0.01 Par Value


(Title of
Class)




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




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




Indicate
by check mark whether the registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was required to file
such reports), and (2)has been subject to such filing requirements for the past
90 days.




YesxNoo









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





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





State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter.   The aggregate market value of the voting stock held by
non-affiliates of the Company, computed by reference to the closing price of
such stock as of June 30, 2008 ($.026) was approximately $136,352. For purposes
of the computation we consider all directors, management and holders of 10% or
more of our common stock to be affiliates. Therefore, the number of shares of
our common stock held by non-affiliates as of June 30, 2008 was 5,244,293. The registrant has no
outstanding non-voting stock.




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




Large accelerated filer o
            Accelerated filer o
            Non-accelerated filer o(Do not check if a smaller
      reporting company)
            Smaller reporting company x





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





DOCUMENTS
INCORPORATED BY REFERENCE





None.





PART
I





Item 1.
Business.





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





Corporate
Background





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





On
March 6, 2001, we, Diversified Product Investigations, Inc., a Florida
corporation, and the individual holders of the outstanding capital stock of
Diversified Product Investigations, Inc. (the "Holders") consummated a reverse
acquisition (the "Reorganization") pursuant to a certain Share Exchange
Agreement ("Agreement") of such date. Pursuant to the Agreement, the Holders
tendered to us all of the issued and outstanding shares of common stock of
Diversified Product Investigations, Inc. in exchange for 10,332,420 shares of
our common stock. The reorganization was accounted for as a reverse
acquisition.




Simultaneously
with the closing of the Reorganization, the then sole officer and director of
the Company resigned his positions in accordance with the terms of the
Agreement. John Van Zyll, Ann M. Furlong, Marvin Stacy, Dean Madden and David
Dowell were elected to serve on the Board of Directors of the Company (the
"Board"). The Board subsequently appointed John Van Zyll as Chairman of the
Board, President and Chief Executive Officer; Ann M. Furlong as Secretary; Dean
Madden as Chief Financial Officer and Treasurer; and Marvin Stacy as Chief
Operating Officer of the Company. The Board and the shareholders of the Company
also approved and filed an amendment of the Company’s Articles of Incorporation
in order to change the name of the Company from Fairfax Group, Inc. to
Diversified Product Inspections, Inc.





Spin-Off
of Company’s Business





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


2


Sofcon,
Limited, EIG Venture Capital, Limited and EIG Capital Investments, Limited
(collectively the “Plaintiffs’), who are the plaintiffs in a lawsuit against the
Company and Management that will be settled pursuant to the Purchase Agreement,
will purchase from the Management the remaining 3,000,000 shares of Common Stock
held by the Management for $300. EIG Venture Capital, Limited will also receive
$250,000 from the Company at the closing of the Purchase Agreement.




The
assets to be sold to the Buyer shall not
include:





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





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





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





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





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





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





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





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





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





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





Business





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





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


3


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





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





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





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




Marketing





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





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





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





Subrogation
Claims and Other Investigations





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




2008





·
            We
      began an investigation regarding a fire in a $7 million residence in
      Dandridge, Tennessee in which the homeowner suffered head injuries due to
      an explosion. The investigation is currently
  continuing.


·
              We
      conducted product testing for a manufacturer before the product was
      marketed to the public.




4




·
            We
      conducted an air contamination investigation in the home of a well-known
      football player.





2007





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





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





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





2006





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





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





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





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





2005





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





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





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


5


Prior to
2005





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





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





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





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





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





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





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





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





Intellectual
Property





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


6


Recent
Events





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





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





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





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





Employees





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




Transfer
agent





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





Item 1A.
Risk Factors





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





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





Risks
Related to Current Operations of the Company





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




7


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





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





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





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





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





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





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





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





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





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


8


Other
Risks




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





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





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





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





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





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





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





The
application of ‘penny stock rules" could adversely affect the market price of
our common stock.





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


9


Item 1B.
Unresolved Staff Comments.





None.





Item 2.
Properties.





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





Item 3.
Legal Proceedings.





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





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





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





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





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





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





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





PART
II




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





Market
Information


10





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





Common
      StockHigh
      Bid
                    
                    
                    Low
      BidFirst
      Quarter 2008
                    
                    $
                    0.05
                    
                    
                    $
                    0.03Second
      Quarter 2008
                    
                    $
                    0.04
                    
                    
                    $
                    0.041Third
      Quarter 2008
                    
                    $
                    .04
                    
                    
                    $
                    0.035Fourth
      Quarter 2008
                    
                    $
                    0.04
                    
                    
                    $
                    0.032First
      Quarter 2007
                    
                    $
                    0.05
                    
                    
                    $
                    0.03Second
      Quarter 2007
                    
                    $
                    0.09
                    
                    
                    $
                    0.041Third
      Quarter 2007
                    
                    $
                    0.041
                    
                    
                    $
                    0.035Fourth
      Quarter 2007
                    
                    $
                    0.06
                    
                    
                    $
                    0.032




Security
Holders





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





Dividend
Policy





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





Recent
Sales of Unregistered Securities





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





Item 6.
Selected Financial Data.





Not
applicable.




Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operation





General





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


11


Critical
Accounting Policies





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





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





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





·
            Property and Equipment - Our
      property and equipment is recorded at cost and depreciation is computed
      using the straight-line method over the estimated useful lives of the
      assets. We charge repairs and maintenance to expense as it is
      incurred.





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




Results
of Operations for the Fiscal Year Ended December 31, 2008 as Compared to the
Fiscal Year Ended December 31, 2007





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





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





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


12




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





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





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





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





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





Other income and expense variances are
mainly due to a $146,250 gain on the sale of 2.15 acres of vacant land in 2007,
along with the tentative settlement of a lawsuit for $30,000 in 2008 that we
recorded a liability for in 2007. During 2006 we had lawsuit settlement expense
of $55,000 related to an early termination of our prior lease
commitment.




Net income for 2007 was $44,750 or less
than $0.01 per share compared to a 2006 net income of $67,331 or less than $0.01
per share mainly reflecting our 2007 decrease in operating income offset by our
gain on sale of real estate.





Liquidity
and Capital Resources





During 2008, our cash increased by
$43,370, an increase of 9.4% from 2007. We believe we have sufficient cash
provided by ongoing operating activities to meet our on future operating
needs.




Investing and financing activities for
2008 reflect purchases of equipment totaling $34,110, and payments totaling
$55,503 on our long-term debt and capital lease obligations. At December 31,
2008, all $400,000 is available under our line of credit.





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


Impact of
Inflation





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




Other


13


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





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





Not
applicable.





Item 8.
Financial Statements and Supplementary Data.





Index to
Financial Statements





Years
ended December 31, 2008 and 2007





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




14





Report of
Independent Registered Public Accounting Firm




The Board
of Directors and Stockholders


Diversified
Product Inspections, Inc.





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





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





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





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





/s/
Coulter & Justus, P.C.





Knoxville,
Tennessee


March 23,
2009




F-1


Diversified
Product Inspections, Inc.





Balance
Sheets





December 312008
                        
                        
                        2007AssetsCurrent
      assets:Cash
                        
                        $
                        505,812
                        
                        
                        $
                        462,442Accounts
      receivable, net of reserve for doubtful accounts of $30,000 in 2008 and
      $50,000 in 2007
                        
                        
                        225,943
                        
                        
                        
                        276,482Note
      receivable
                        
                        
                        74,885
                        
                        
                        
                        –Current
      portion of deferred income taxes
                        
                        
                        –
                        
                        
                        
                        79,343Prepaid
      expenses and other current assets
                        
                        
                        27,615
                        
                        
                        
                        18,655Total
      current assets
                        
                        
                        834,255
                        
                        
                        
                        836,922Property
      and equipment:Land
                        
                        
                        96,250
                        
                        
                        
                        96,250Building
      and building improvements
                        
                        
                        757,645
                        
                        
                        
                        735,318Equipment,
      furniture and fixtures
                        
                        
                        359,940
                        
                        
                        
                        402,058Vehicles
                        
                        
                        132,949
                        
                        
                        
                        132,9491,346,784
                        
                        
                        
                        1,366,575Less
      accumulated depreciation and amortization
                        
                        
                        430,437
                        
                        
                        
                        409,700Net
      property and equipment
                        
                        
                        916,347
                        
                        
                        
                        956,875Other
      assets
                        
                        
                        5,000
                        
                        
                        
                        5,000Deferred
      income taxes, less current portion
                        
                        
                        –
                        
                        
                        
                        289,667Total
      assets
                        
                        $
                        1,755,602
                        
                        
                        $
                        2,088,464





F-2




December 312008
                        
                        
                        2007Liabilities
      and stockholders’ equityCurrent
      liabilities:Accounts
      payable and accrued expenses
                        
                        $
                        56,285
                        
                        
                        $
                        74,682Accrued
      salaries
                        
                        
                        27,631
                        
                        
                        
                        28,783Accrued
      income taxes
                        
                        
                        3,741
                        
                        
                        
                        3,741Accrual
      for settlement of lawsuit
                        
                        
                        250,000
                        
                        
                        
                        30,000Deferred
      revenue
                        
                        
                        130,000
                        
                        
                        
                        127,000Current
      portion of long-term debt
                        
                        
                        51,490
                        
                        
                        
                        52,626Current
      portion of capital lease obligations
                        
                        
                        –
                        
                        
                        
                        1,933Total
      current liabilities
                        
                        
                        519,147
                        
                        
                        
                        318,765Long-term
      debt, less current portion
                        
                        
                        663,747
                        
                        
                        
                        716,181Total
      liabilities
                        
                        
                        1,182,894
                        
                        
                        
                        1,034,946Stockholders’
      equity:Common
      stock:
                          Par
      value—$0.01 per share
                          Authorized
      shares—50,000,000Issued
      and outstanding shares—20,105,867 in 2008 and 2007
                        
                        
                        201,058
                        
                        
                        
                        201,058Additional
      paid-in capital
                        
                        
                        1,998,586
                        
                        
                        
                        1,998,586Accumulated
      deficit
                        
                        
                        (1,626,936
                        )
                        
                        
                        (1,146,126
                        )Net
      stockholders’ equity
                        
                        
                        572,708
                        
                        
                        
                        1,053,518Total
      liabilities and stockholders’ equity
                        
                        $
                        1,755,602
                        
                        
                        $
                        2,088,464




See
accompanying Notes to Financial Statements.





F-3


Diversified
Product Inspections, Inc.





Statements
of Operations





Year ended December 312008
                    
                    
                    2007Revenues:Inspections
                    
                    $
                    2,383,029
                    
                    
                    $
                    2,147,771Storage
      fees
                    
                    
                    299,611
                    
                    
                    
                    291,463Use
      agreement
                    
                    
                    –
                    
                    
                    
                    82,167Total
      revenues
                    
                    
                    2,682,640
                    
                    
                    
                    2,521,401Operating
      expenses:Salaries
      and related benefits
                    
                    
                    1,607,200
                    
                    
                    
                    1,545,390Professional
      fees
                    
                    
                    255,815
                    
                    
                    
                    261,356Shipping
      and handling costs
                    
                    
                    168,105
                    
                    
                    
                    158,714Depreciation
      and amortization
                    
                    
                    74,638
                    
                    
                    
                    73,143Other
      general and administrative
                    
                    
                    413,251
                    
                    
                    
                    474,107Total
      operating expenses
                    
                    
                    2,519,009
                    
                    
                    
                    2,512,710Operating
      income
                    
                    
                    163,631
                    
                    
                    
                    8,691Other
      income (expense):Interest
      expense
                    
                    
                    (47,931
                    )
                    
                    
                    (49,944
                    )Rent
      income
                    
                    
                    22,500
                    
                    
                    
                    7,500Gain
      on sale of land
                    
                    
                    –
                    
                    
                    
                    146,250Settlement
      of lawsuit
                    
                    
                    (250,000
                    )
                    
                    
                    (30,000
                    )Net
      other (expenses) income
                    
                    
                    (275,431
                    )
                    
                    
                    73,806(Loss)
      income before income taxes
                    
                    
                    (111,800
                    )
                    
                    
                    82,497Income
      tax expense:Current
      state income taxes
                    
                    
                    –
                    
                    
                    
                    3,741Deferred
      income taxes
                    
                    
                    369,010
                    
                    
                    
                    34,006Total
      income tax expense
                    
                    
                    369,010
                    
                    
                    
                    37,747Net
      (loss) income
                    
                    $
                    (480,810
                    )
                    
                    $
                    44,750(Loss)
      earnings per share:Basic
                    
                    $
                    (0.02
                    )
                    
                    $
                    0.00Diluted
                    
                    $
                    (0.02
                    )
                    
                    $
                    0.00





See
accompanying Notes to Financial Statements.


F-4


Diversified
Product Inspections, Inc.





Statements
of Stockholders’ Equity





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





See
accompanying Notes to Financial Statements.


F-5




Diversified
Product Inspections, Inc.
 
 Statements
of Cash Flows
 
 Year ended December 312008
                                
                                
                                2007Operating
      activitiesNet
      (loss) income
                                
                                $
                                (480,810
                                )
                                
                                $
                                44,750Adjustments
      to reconcile net (loss) income to net cashprovided
      by operating activities:Deferred
      income tax expense
                                
                                
                                369,010
                                
                                
                                
                                34,006Change
      in provision for bad debts
                                
                                
                                (20,000
                                )
                                
                                
                                –Depreciation
                                
                                
                                72,862
                                
                                
                                
                                69,591Amortization
                                
                                
                                1,776
                                
                                
                                
                                3,552Gain
      on sale of land
                                
                                
                                –
                                
                                
                                
                                (146,250
                                )Changes
      in operating assets and liabilities:Accounts
      receivable
                                
                                
                                70,539
                                
                                
                                
                                9,991Note
      receivable
                                
                                
                                (74,885
                                )
                                
                                
                                –Prepaid
      expenses and other assets
                                
                                
                                (8,960
                                )
                                
                                
                                (15,741
                                )Accounts
      payable and accrued expenses
                                
                                
                                (18,397
                                )
                                
                                
                                16,889Accrued
      salaries
                                
                                
                                (1,152
                                )
                                
                                
                                7,008Accrued
      income taxes
                                
                                
                                –
                                
                                
                                
                                3,741Accrual
      for settlement of lawsuit
                                
                                
                                220,000
                                
                                
                                
                                30,000Deferred
      revenue
                                
                                
                                3,000
                                
                                
                                
                                (31,333
                                )Net
      cash provided by operating activities
                                
                                
                                132,983
                                
                                
                                
                                26,204Investing
      activitiesProceeds
      from sale of land
                                
                                
                                –
                                
                                
                                
                                200,000Purchases
      of property and equipment
                                
                                
                                (34,110
                                )
                                
                                
                                (95,206
                                )Net
      cash (used in) provided by investing activities
                                
                                
                                (34,110
                                )
                                
                                
                                104,794Financing
      activitiesProceeds
      from long-term debt
                                
                                
                                –
                                
                                
                                
                                56,513Principal
      payments on long-term debt and capital lease obligations
                                
                                
                                (55,503
                                )
                                
                                
                                (56,862
                                )Net
      cash used in financing activities
                                
                                
                                (55,503
                                )
                                
                                
                                (349
                                )Net
      increase in cash
                                
                                
                                43,370
                                
                                
                                
                                130,649Cash
      at beginning of year
                                
                                
                                462,442
                                
                                
                                
                                331,793Cash
      at end of year
                                
                                $
                                505,812
                                
                                
                                $
                                462,442Supplemental
      disclosures of cash flow informationCash
      paid for interest
                                
                                $
                                47,931
                                
                                
                                $
                                49,944
 
 See
accompanying Notes to Financial Statements.
  F-6
  Diversified
Product Inspections, Inc.
 
 Notes to
Financial Statements
 
 December
31, 2008
 
 1.
              Significant
      Accounting Policies
 
 Description
of Business
 
 Diversified
Product Inspections, Inc. (the “Company”) specializes in conducting
investigations and laboratory analysis of a wide variety of products to
determine the “cause and origin” of product failures.  The Company’s
primary customers consist of national insurance companies that are interested in
subrogating claims to recover losses.  Subrogation is a legal
principle which provides that, to the extent an insurer has paid for a loss, the
insurer receives the policyholder’s right to recover from any third party that
caused the loss.  The Company has accumulated a large database of
known defective products that includes photos and other documentation that are
used in their investigations.  After an investigation is complete, the
Company issues an inspection report related to the product
failure.  The Company also provides storage of the evidence collected
during the investigation, until it is requested by the customer to be
disposed.
 
 Reincorporation
 
 On
December 11, 2008, the Company merged into a newly formed Delaware corporation,
Diversified Product Inspections, Inc. (“DPI”), which was formed exclusively for
the purpose of merging with the Company. The merger changed the state of
incorporation for the Company from Florida to Delaware through the execution of
the Agreement and Plan of Merger (the “Merger Agreement”). Under the Merger
Agreement, DPI assumed all of the Company’s assets and liabilities, including
obligations under the Company’s outstanding indebtedness and contracts, and the
Florida company ceased to exist as a corporate entity.
 
 At the
effective time of the reincorporation, each outstanding share of the Company’s
common stock, $0.01 par value automatically converted into one share of common
stock of DPI, $0.01 par value. Stockholders did not have to exchange their
existing stock certificates for stock certificates of DPI.
 
 Stockholders
whose shares of common stock were freely tradable before the reincorporation own
shares of DPI that are freely tradable after the reincorporation. Similarly, any
stockholders holding securities with transfer restrictions before the
reincorporation hold shares of DPI that have the same transfer restrictions
after the reincorporation.
  After the
reincorporation, DPI continues to be a publicly held corporation, with its
common stock trading on the Over-the-Counter Bulletin Board. The trading symbol
remained the same. DPI will also file with the SEC and provide to its
stockholders the same information that was previously filed and provided. DPI
will be referred to in the subsequent notes as the “Company”.
 
 F-7
  Diversified
Product Inspections, Inc.
 
 Notes to
Financial Statements (continued)
 
 1.
              Significant
      Accounting Policies (continued)
 
 Major
Customers and Credit Concentration
 
 The
Company’s largest customers are national insurance
customers.  Revenues from the Company’s largest individual customers
accounted for approximately 23%, 13% and 10% in 2008 and approximately 17% and
14% in 2007 of total revenues.
 
 Revenue
Recognition
 
 The
Company recognizes inspection report revenue when the earnings process is
complete, which is typically after an investigation has been completed and the
final written report has been reviewed and approved by management and submitted
to the customer.  Once the final report has been approved by
management and submitted to the customer, the Company has no further obligation
to the customer in regards to this matter.
 
 The
Company recognizes storage fee revenue on a pro-rata basis as
earned.
 
 Advertising
Costs
 
 Advertising
costs are expensed as incurred and totaled $3,350 in 2008 and $16,697 in
2007.
 
 Legal
Costs
 
 Legal
costs associated with loss contingencies are expensed as incurred.
 
 Accounts
Receivable
 
 Two
customers account for 25% and 11% each of total accounts receivable at December
31, 2008 and three customers accounted for 13% each of total accounts receivable
at December 31, 2007.  The Company performs ongoing credit evaluations
of its customers’ financial condition, but does not require collateral to
support customer receivables.  The Company charges accounts to bad
debt expense as they are determined to be uncollectible based upon a review of
aging and collections.  Credit losses, when realized, have been within
the range of the Company’s expectations and, historically, have not been
significant.
 
 Property
and Equipment
 
 Property
and equipment is carried at cost.  Repairs and maintenance are charged
to expense as incurred.  Depreciation is computed using the
straight-line method over the estimated useful lives of the assets as
follows:
 
 Building
                39
      yearsBuilding
      improvements
                20-39
      yearsEquipment,
      furniture and fixtures
                3-7
      yearsVehicles
                5
      years
  F-8
  Diversified
Product Inspections, Inc.
 
 Notes to
Financial Statements (continued)
 
 1.
              Significant
      Accounting Policies (continued)
 
 Stock
Options
 
 The
Company accounts for its stock options under the fair value recognition
provisions of Financial Accounting Standards Board (“FASB”) Statement No.
123(R),Share-Based Payment(“FAS
123(R)”), using the modified-prospective-transition method.  Under
that transition method, compensation costs recognized include:  (a)
compensation cost for all share-based payments granted prior to, but not yet
vested as of January 1, 2006, based on the grant date fair value estimated in
accordance with the original provisions of FASB Statement No. 123, and (b)
compensation cost for all share-based payments granted subsequent to January 1,
2006, based on the grant-date fair value estimated in accordance with the
provisions of FAS 123(R).
 
 The
Company had no compensation costs related to stock options for either 2008 or
2007.
 
 Income
Taxes
 
 The
Company files federal and state income tax
returns.  The Company’s major tax jurisdictions in which it files
income tax returns include federal (United States of America) and the state of
Tennessee. The tax years that remain subject to examination for the Company’s
major tax jurisdictions at December 31, 2008 include 2005 through
2008.  The Company’s policy is to classify penalties and interest
associated with uncertain tax positions, if required, as a component of its
income tax provision.
 
 Fair
Value of Financial Instruments
 
 The fair
value of the Company’s financial instruments approximates their carrying value
based upon the type and nature of the financial instruments.
 
 Estimates
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect certain reported amounts and
disclosures.  Accordingly, actual results could differ from those
estimates.
 
 2.
              Note
      Receivable
 
 During
December 2008, the Company entered into an unsecured promissory note with a
customer for payment of services rendered. The terms call for the customer to
pay the full sum owned after settlement of the insurance claims. The note bears
interest at an annual rate of 2%. Management of the Company anticipates this
note receivable will be fully collected during 2009. Accordingly, the amount has
been classified as current in the accompanying December 31, 2008 balance sheet
and no reserve for doubtful accounts has been established related to this
receivable.
  F-9
  Diversified
Product Inspections, Inc.
 
 Notes to
Financial Statements (continued)
 
 3.
              Line
      of Credit and Long-Term Debt
 
 Under the
terms of the Company’s $400,000 line of credit agreement with a financial
institution, any borrowings bear interest at the financial institution’s prime
rate (3.25% at December
31, 2008) and are secured by the Company’s land and building.  This
line of credit is due on demand.  At December 31, 2008, the Company
had $400,000 available under this agreement.
 
 Long-term
debt is summarized as follows as of December 31:
 2008
                        
                        
                        2007Note
      payable, secured by land and a building, due in monthly installments of
      $6,751 through May 2010, including interest at 6%, with the remaining
      balance due June 2010
                        
                        $
                        670,871
                        
                        
                        $
                        714,639Note
      payable, secured by a vehicle, due in monthly installments of $1,142,
      including interest at 7.75%, through September 2012
                        
                        
                        44,366
                        
                        
                        
                        54,168715,237
                        
                        
                        
                        768,807Less
      portion classified as current
                        
                        
                        51,490
                        
                        
                        
                        52,626Long-term
      portion
                        
                        $
                        663,747
                        
                        
                        $
                        716,181
 
 Land and
building securing the line of credit and note payable has a carrying amount of
$780,049 and a vehicle securing a note payable has a carrying amount of $46,142
at December
31, 2008.
 
 Aggregate
maturities of the Company’s long-term debt as of December 31, 2008, are as
follows:
 
 2009
                      
                      $
                      51,4902010
                      
                      
                      641,4072011
                      
                      
                      12,3902012
                      
                      
                      9,950$
                      715,237
 
 4.  Lease
 
 The
Company leased certain office space at its main office to a tenant who also
serves as the Company’s general counsel.  The lease agreement was
mutually terminated during 2008.  Rental income under this agreement
was $22,500 in 2008 and $7,500 in 2007.
 
 F-10
 
  Diversified
Product Inspections, Inc.
 
 Notes to
Financial Statements (continued)
 
 5.      Concentration
of Risk
 
 Periodically,
the Company has cash on deposit with financial institutions which exceed Federal
Deposit Insurance Corporation (“FDIC”) limits.  Balances in excess of
the insurance limits are subject to the risk the financial institution will not
pay upon demand.  At December 31, 2008, the Company’s balances on hand
with financial institutions exceed the FDIC coverage by approximately
$111,000.
 
 6.  Use
Agreement
 
 In 2006,
the Company entered into a use agreement whereby the user was allowed exclusive
use of certain research data of the Company on product failure or failure
patterns and quarterly updates of such data.  The use agreement called
for an initial payment of $50,000 and monthly payments of $5,000 beginning
September 1, 2006, and continuing over the term of the agreement. In August
2007, the user terminated the use agreement within the terms of the agreement.
As a result of the termination, the Company recognized an additional $22,482 of
use agreement revenue in 2007.  The Company had revenues totaling
$82,167 in 2007 related to this agreement.
 
 7.      Income
Taxes
 
 For tax
purposes the Company has federal net operating loss (“NOL”) carryovers which are
available to offset future taxable income.  These NOL carryovers
expire as follows:
 
 Year
                        
                        Year
      of
                        
                        NOLGenerated
                        
                        Expiration
                        
                        Carryover2000
                        
                        2020
                        
                        $
                        12,6962001
                        
                        2021
                        
                        
                        88,5082002
                        
                        2022
                        
                        
                        114,5972004
                        
                        2024
                        
                        
                        53,2382005
                        
                        2025
                        
                        
                        89,993$
                        359,032
 
 Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes.
 
 F-11
  Diversified
Product Inspections, Inc.
 
 Notes to
Financial Statements (continued)
 
 7.      Income
Taxes (continued)
 
 Significant
components of the Company’s deferred tax assets and liabilities are as follows
as of December 31:
 
 2008
                    
                    
                    2007Deferred
      tax assets:NOL
      carryovers
                    
                    $
                    122,071
                    
                    
                    $
                    167,122Deferred
      revenue
                    
                    
                    49,777
                    
                    
                    
                    48,628Expenses
      not currently deductible
                    
                    
                    138,966
                    
                    
                    
                    138,966Accrued
      legal settlement
                    
                    
                    95,725
                    
                    
                    
                    11,487Reserve
      for doubtful accounts
                    
                    
                    11,487
                    
                    
                    
                    19,145Other
                    
                    
                    523
                    
                    
                    
                    523Total
      deferred tax assets
                    
                    
                    418,549
                    
                    
                    
                    385,871Valuation
      allowance
                    
                    
                    (382,503
                    )
                    
                    
                    –Net
      deferred tax assets
                    
                    
                    36,046
                    
                    
                    
                    385,871Deferred
      tax liability – tax over book depreciation
                    
                    
                    (36,046
                    )
                    
                    
                    (16,861
                    )Net
      deferred tax assets (including $79,343 in 2007 classified as
      current)
                    
                    $
                    –
                    
                    
                    $
                    369,010
 
 FASB
Statement No. 109, Accounting
for Income Taxes, requires the Company to periodically assess whether it
is more likely than not that it will generate sufficient taxable income to
realize the deferred income tax assets.  The ultimate realization of
these assets is dependent upon the generation of future taxable income
sufficient to offset the related deductions and NOL carryovers within the
applicable carryover periods as previously discussed.  As more fully
described in Note 11, during 2008, the Company signed a Settlement Agreement and
Asset Purchase Agreement providing for the Company to transfer all of its
assets, except $250,000, to a Tennessee limited liability company which will
also assume all of the Company’s liabilities, on a future closing
date.  As such, management cannot presently determine when the Company
will be able to generate sufficient taxable income to realize the deferred tax
assets.  Accordingly, the valuation allowance was increased to
$382,503 in 2008.
 
 The
reconciliation of income tax expense attributable to continuing operations
computed at the U.S. federal statutory tax rates to the income tax benefit
recorded is as follows for the years ended December 31:
 
 2008
                    
                    
                    2007Income
      tax at U.S. statutory rates of 34%
                    
                    $
                    (38,012
                    )
                    
                    $
                    28,049Effect
      of permanent differences
                    
                    
                    1,259
                    
                    
                    
                    3,630State
      income taxes
                    
                    
                    –
                    
                    
                    
                    3,741Increase
      in valuation allowance
                    
                    
                    382,503
                    
                    
                    
                    –Other
                    
                    
                    23,260
                    
                    
                    
                    2,327$
                    369,010
                    
                    
                    $
                    37,747
  F-12
  Diversified
Product Inspections, Inc.
 
 Notes to
Financial Statements (continued)
  8.      Employee Stock
Options
 
 The
Company has no formal stock option plan. However, in November 2002, the Company
issued to employees options to acquire 8,028,000 shares of the Company’s common
stock (8,000,000 of which were issued to five employees who are also board
members).  These options vested at the rate of 20% annually beginning
at the grant date and expire upon termination of employment.  As of
December 31, 2008 and 2007 the Company has issued options to purchase 8,000,000
shares of the Company’s common stock which are outstanding and exercisable at an
exercise price of $0.11 per share. As a result, the Company has reserved
8,000,000 shares of common stock for future issuance.
 
 As more
fully described in Note 11, during 2008, the Company signed a Settlement
Agreement and Asset Purchase Agreement providing for, among other things, the
cancellation of the above options, on a future closing date.
 
 9.      (Loss)
Earnings Per Share Data
 
 Basic
(loss) earnings per share assumes no dilution and is computed by dividing net
income available to common stockholders by the weighted average number of common
shares outstanding during each period.  Diluted (loss) earnings per
share reflect, in periods in which they have a dilutive effect, the effect of
common shares issuable upon the exercise of stock options and warrants, using
the treasury stock method of computing such effects.
 
 The
following table sets forth the computation of basic and diluted (loss) earnings
per share for the years ended December 31:
 
 2008
                        
                        
                        2007Basic
      and diluted:Net
      (loss) income
                        
                        $
                        (480,810
                        )
                        
                        $
                        44,750Average
      shares outstanding
                        
                        
                        20,105,867
                        
                        
                        
                        20,157,790Basic
      and diluted (loss) earnings per share
                        
                        $
                        (0.02
                        )
                        
                        $
                        0.00
 
 10.      Commitments
and Contingencies
 
 During
March 2008, the Company reached a tentative settlement on an outstanding lawsuit
related to certain investigative reports prepared by the Company for
$30,000.  Accordingly, the Company has recorded a liability related to
this matter as of December 31, 2007.  The Company’s 2008 proposed
settlement of another lawsuit is discussed in Note 11.
 
 F-13
  Diversified
Product Inspections, Inc.
 
 Notes to
Financial Statements (continued)
 
 11.       Proposed
Settlement
 
 During
2006, the Company was named, along with its three largest stockholders, as a
defendant in a lawsuit by certain related investment companies that are also
stockholders of the Company. The lawsuit alleges, among other things, the
defendants violated certain securities laws, misrepresented facts and breached
certain contracts and fiduciary duties.
 
 On
September 29, 2008, the Company signed a Settlement Agreement and Asset Purchase
Agreement (the “Agreement”) with the plaintiffs providing for DPI to transfer
all of its assets, except $250,000 (the “Excluded Amount”), to a Tennessee
limited liability company (the “Tennessee Company”) which will also assume all
of the Company’s liabilities. The effective date of the Agreement is expected to
be March 31, 2009.
 
 The
Tennessee Company will be owned by three of the Company’s current directors. As
part of the settlement, the pending litigation against the Company and its
directors discussed above will be dismissed and the Company’s management will
cancel 6,459,877 shares of common stock of the Company and sell to the
plaintiffs 3,000,000 shares of common stock for nominal consideration. Under the
Agreement, the Company will pay the entire $250,000 Excluded Amount to one of
the plaintiffs.  Accordingly, the Company has recorded a liability and
expense of $250,000 related to this matter as of December 31,
2008.  Following the closing contemplated by the Agreement, the
Company will have no assets and no liabilities and will have 13,645,990 shares
of common stock outstanding in contrast to 20,105,867 outstanding as of March
23, 2009.  The plaintiffs in the litigation will designate the
Company’s new officers and directors and will have majority control of the
Company.
 
 F-14
  Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.
 
 There were no changes in or
disagreements with accountants on accounting and financial disclosure for the
period covered by this report.
 
 Item 9A.
Controls and Procedures.
 
 We maintain disclosure controls and
procedures that are designed to ensure that information required to be disclosed
in our Exchange Act reports is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms, and that such
information is accumulated and communicated to our management to allow timely
decisions regarding required disclosure. Management necessarily applied its
judgment in assessing the costs and benefits of such controls and procedures,
which, by their nature, can provide only reasonable assurance regarding
management's control objectives.
 
 In
connection with this report, John Van Zyll, our Chief Executive Officer and
Chief Financial Officer, evaluated the effectiveness of the design and operation
of our disclosure controls and procedures. Based upon that evaluation he
concluded that our disclosure controls and procedures were not effective in
alerting him in a timely manner to information relating to the Company required
to be disclosed in this report. In the future, the Company intends to more
frequently engage external assistance, implement additional control procedures
and as finances allow, hire sufficient accounting staff.
 
 Management’s Report on
Internal Control Over Financial Reporting
 
 Our management is responsible for
establishing and maintaining adequate internal control over financial reporting
as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal
control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles. Our internal control over financial reporting includes
those policies and procedures that:
 
 (1)
pertain to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of our assets;
  (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with U.S. GAAP, and
that our receipts and expenditures are being made only in accordance with the
authorization of our management and directors; and
  (3)
provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a
material effect on the financial statements.
  Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
  Management assessed the effectiveness
of our internal control over financial reporting as of December 31, 2008.
In making this assessment, management used the framework set forth in the report
entitled Internal
Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission, or COSO. The COSO framework summarizes
each of the components of a company’s internal control system, including
(i) the control environment, (ii) risk assessment, (iii) control
activities, (iv) information and communication, and
(v) monitoring.
  15
  Based on
its evaluation of our disclosure controls and procedures, our management has
concluded that during the period covered by this report, such disclosure
controls and procedures were not effective and there is a material weakness in
our internal control over financial reporting. A material weakness is a
deficiency, or a combination of control deficiencies, in internal control over
financial reporting such that there is a reasonable possibility that a material
misstatement of the Company’s annual or interim financial statements will not be
prevented or detected on a timely basis.
 
 The
material weakness mainly relates to the lack of accounting staff that results in
a lack of segregation of duties and the absence of accounting technical
expertise necessary to maintain an effective internal control over financial
reporting including preparation of financial statements, footnotes and financial
data provided to the Company’s registered public accounting firm in connection
with the annual audit, and we do not have an audit committee.
 
 In order to mitigate this material
weakness to the fullest extent possible, the Company currently engages external
assistance in the recording of certain transactions and the preparation of all
financial reports included in our quarterly and annual financial statements. As
more fully described in this annual report, the Company signed a Settlement
Agreement and Asset Purchase Agreement with an expected closing date of March
31, 2009.  Upon consummation of the agreement, the Company will be left
with no assets or liabilities and no employees.  However, if the agreement
is not consummated ,in the
future, the Company intends to more frequently engage external assistance,
implement additional control procedures and as finances allow, hire sufficient
accounting staff. Management believes these actions, once fully implemented,
will remediate the material weakness by focusing additional attention and
resources in our internal accounting functions. However, the material weakness
will not be considered remediated until the applicable remedial controls operate
for a sufficient period of time and management has concluded, through testing,
that these controls are operating effectively.
 
 This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permits us to provide only management's report in this annual
report.
 
 Item
9B. Other
Information
  Reports
on Form 8-K.
  During
the period commencing the last quarter of the period covered by this Report
until the date of filing of this Report, the Company was not required to, and
did not, file any Current Reports on Form 8-K.
  PART
III
 
 Item 10.
Directors and Executive Officers of the Registrant.
 
 (a)
Identity of our current directors and executive officers.
  16
  Name
                    
                    Age
                    
                    Positions
      with the CompanyJohn
      Van Zyll
                    
                    68
                    
                    Chairman
      of the Board, Chief Executive OfficerMarvin
      Stacy
                    
                    75
                    
                    Chief
      Operating Officer and DirectorAnn
      M. Furlong
                    
                    56
                    
                    Secretary
      and DirectorWarren
      Wankelman
                    
                    65
                    
                    Director
      and Vice President of MarketingMatt
      Walters
                    
                    37
                    
                    Director
      and Chief Information
Officer
  John Van Zyll currently serves as the
Chairman of the Board and Chief Executive Officer. Mr. Van Zyll has served in
this capacity since March 2001 and previously served in similar capacities with
Diversified Product Investigations, Inc., the Company's subsidiary since its
formation in 1991. Mr. Van Zyll has over 10 years of construction and
investigation experience. He is a member of the Southern Building Code Congress
International and the National Fire Protection Association and is a licensed
Private Investigator. He holds certificates from the National Association of
Investigative Specialists with specialties in Insurance Claim Investigation and
Advanced Fire Investigation Techniques. Mr. Van Zyll is considered an expert in
the field of investigation and subrogation by the insurance industry and has
conducted over 100 training seminars and trained over 1900 insurance
adjusters.
 
 Marvin Stacy currently serves as a
Director and the Company's Chief Operating Officer. Mr. Stacy has served in
these capacities since March 2001 and previously served in similar capacities
with Diversified Product Investigations, Inc., the Company's subsidiary since
1991. Mr. Stacy has over 40 years of experience in all aspects of electrical and
mechanical engineering and design. As a licensed private investigator he assists
with the operation of the laboratory and has designed custom testing equipment.
Mr. Stacy assists Engineers with design solutions for manufacturers. Mr. Stacy
is a member of IAMPO, the International Association of Mechanical and Plumbing
Officials. Mr. Stacy assists in the Human Resource Dept., with regards to hiring
qualified-professional personnel.
 
 Ann M. Furlong currently serves as a
Director and the Company's Secretary. Ms. Furlong has served in these capacities
since March 2001 and previously served in similar capacities with Diversified
Product Investigations, Inc., the Company's subsidiary since 1991. With over
29-years of management experience Ms. Furlong has provided administrative and
organizations expertise. As a licensed private investigator she assists with
research projects. She has traveled to assist with stock promotional shows for
the Company along with seminar presentations to the Insurance Industry. Ms.
Furlong focuses on special projects and assists in the operations of the
Company.
  Warren Wankelman currently serves as a
Director and as the Vice President of Marketing for the Company. Mr. Wankelman
has served in these capacities since March 2001 and previously served in similar
capacities with Diversified Product Investigations, Inc., the Company's
subsidiary since 2001. Mr. Wankelman has over 25 years of experience in
Sales/Marketing and Operations Management. A graduate of Northwestern
University, Mr. Wankelman has consistently demonstrated effective marketing and
management ability in a career of leadership positions, including Executive Vice
President of Punta Gorda Isles, Inc., President and owner of Wankelman- Swen
& Associates, Inc. and Director of Marketing for Saddlebrook, Inc. of
Knoxville, Tennessee.
 
 Matt Walters currently serves as a
Director and Chief Information Officer of the Company. Mr. Walters has served in
this capacity since May 2001. Mr. Walters has over 10 years experience in IT
(Information Technology) and Facilities Management. He is a graduate of Tusculum
College with a BS in Organizational Management and has attended New Horizons
Computer Learning Center. As a Microsoft Certified Professional, his client list
includes TVA, SAIC, Lockheed-Martin, Pfizer Pharmaceuticals, Philips Magnavox,
and BellSouth.Net.
  17
  Mr.
Walters has implemented various IT quality controls and security measures for
the Company and is responsible for implementation of a new Company service, the
HomeCheckSafety.com. He also assisted with designing a custom database and
instituting digital photography and he has enhanced the Company's investigation
reports.
 
 Executive
Officers
 
 All of
our executive officers also serve as our directors. The executive officers serve
at the pleasure of our board of directors and our chief executive
officer.
  Section
16 Reporting
 
 No person who, during the year ended
December 31, 2008, was a director, officer or beneficial owner of more than ten
percent of the Company's Common Stock (which is the only class of securities of
the Company registered under Section 12 of the Securities Exchange Act of 1934
(the "Act") (a "Reporting Person") failed to file on a timely basis, reports
required by Section 16 of the Act during the most recent fiscal year or prior
years. The foregoing is based solely upon representations received by the
Company from any reporting person that no Form 5 is required.
 
 Code of
Ethics
 
 In April
2005 the Company adopted a Code of Ethics applying to its executive officers.
Such Code of Ethics was filed as Exhibit 14.1 to the Company’s Annual Report on
Form 10-KSB for the year ended December 31, 2005.
 
 Board
Committees
 
 The
Company does not have a separate Compensation Committee, Audit Committee or
Nominating Committee. These functions are done by the Board of Directors meeting
as a whole. The Company is under no legal obligation to establish an audit
committee and has elected not to do so at this time so as to avoid the time and
expense of identifying independent directors willing to serve on the audit
committee. The Company
may establish an audit committee in the future if the Board determines it to be
advisable or we are otherwise required to do so by applicable law, rule or
regulation.
  Item 11.
Executive Compensation.
 
 The following Summary Compensation
Table sets forth summary information as to compensation received by the
Company's Chief Executive Officer for his services to the Company during the
fiscal years ended December 31, 2008 and December 31, 2007. No executive officer
of the Company or any other person received total compensation from the Company
of $100,000 or more during such fiscal years.
  Name
      andPrincipalPosition
                  
                  Year
      Ended
                  
                  Salary($)
                  
                  Bonus($)
                  
                  StockAwards
                  
                  Non-EquityIncentivePlanCompensation
      ($)
                  
                  Change
      inPension Valueand
      Non-QualifiedDeferredCompensationEarnings
    ($)
                  
                  All
      OtherCompensation($)
                  
                  Total($)John
      VanZyll CEO, CFO and Director
                  
                  
                  12/31/2008
                    12/31/2007
                  
                  69,108
                    71,435
                  
                  
                  0
                    15,000
                  
                  0
                    0
                  
                  
                  0
                    0
                  
                  0
                    0
                  
                  
                  0
                    0
                  
                  69,108
                    84,435
  18
  Compensation
of Directors
 
 During
the fiscal year ended December 31, 2008, no officer or director received any
type of compensation from our Company for serving as a director. No arrangements
are presently in place regarding compensation to directors for their services as
directors or for committee participation or special assignments.
 
 Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
 
 The
following table sets forth certain information as of March 13, 2009 regarding
the beneficial ownership of our common stock held by each of our executive
officers and directors, individually and as a group and by each person known to
us which beneficially owns in excess of five percent of the common stock. Unless
otherwise indicated, each of the persons listed has sole voting and dispositive
power with respect to the shares shown as beneficially owned.
 
 Number ofShares of
                                
                                Percent ofCommonStock
                                
                                CommonStockName and Address
                                
                                Beneficially
                                
                                Beneficiallyof Beneficial Owner (1)
                                
                                Owned (2)
                                
                                OwnedJan
      Telander
                                
                                
                                4,724,500(3
                                )
                                23.5
                                %John
      Van Zyll
                                
                                
                                7,664,011(4
                                )
                                33.9
                                %EIG
      Capital, Ltd.
                                
                                
                                4,175,815(5
                                )
                                20.8
                                %EIG
      VentureCapital
      Ltd.
                                
                                
                                4,042,565
                                
                                20.1
                                %Ann
      M. Furlong
                                
                                
                                4,725,811(4
                                )
                                20.9
                                %Marvin
      Stacy
                                
                                
                                4,629,055(4
                                )
                                20.5
                                %Warren
      Wankelman
                                
                                
                                250,000(6
                                )
                                *Matt
      Walters
                                
                                
                                255,000(6
                                )
                                *All
      Executive Officers andDirectors
      as a Group(five
      (5) persons)
                                
                                
                                17,523,877(7
                                )
                                62.3
                                %
  
 *
Represents less than one percent (1%) of the outstanding shares of our common
stock.
  19
  (1)
Based upon 20,105,867 shares of our common stock issued and outstanding as of
March 13, 2009. The number of shares of common stock beneficially owned by each
person or entity is determined under the rules promulgated by the SEC. Under
such rules, beneficial ownership includes any shares as to which the person or
entity has sole or shared voting power or investment power and shares which such
person or entity has the right to acquire within sixty days after March 14,
2008. The inclusion herein of any shares deemed beneficially owned does not
constitute an admission by such person of beneficial ownership of such
shares.
 
 (2) The
business address of each of Jan Telander, EIG Capital, Ltd., EIG Venture
Capital, Ltd. and Sofcon, Ltd. is 60 Market Square, Belize City, Belize. The
business address of each of the other person listed in the table is 1059 East
Tri-County Blvd., Oliver Springs, Tennessee 37840.
 
 (3)
Includes all shares beneficially owned by EIG Capital Investments, Ltd., EIG
Venture Capital, Ltd. and Sofcon, Ltd. Mr. Telander is President and a director
of each of EIG Capital Investments, Ltd., EIG Venture Capital, Ltd. and Sofcon,
Ltd.
 
 (4)
Includes options to purchase 2,500,000 shares of common stock currently
exercisable at $.108 per share.
 
 (5)
Includes an aggregate of 133,250 shares owned directly by EIG Capital
Investments Ltd. and an aggregate of 4,042,565 shares beneficially owned by EIG
Venture Capital Ltd. EIG Capital Ltd. owns all of the outstanding capital stock
of each of such entities.
  (6)
Includes options to purchase 250,000 shares of our common stock currently
exercisable at $.108 per share.
 
 (7)
Includes options to purchase an aggregate of 8,000,000 shares of our common
stock currently exercisable at $.108 per share.
  Item 13.
Certain Relationships and Related Transactions, and Director
Independence.
 
 All five
of our directors are employees of the Company and none is independent, as such
term is defined by a national securities exchange or an inter-dealer quotation
system.
 
 Item 14.
Principal Accountant Fees and Services.
 
 The
following table sets forth the fees billed to us for the fiscal years ended
December 31, 2008 and December 31, 2007 by Coulter & Justus, P.C.
(”C&J”):
 
 Fiscal Year
                    
                    
                    Fiscal YearEnded
                    
                    
                    EndedDecember31, 2008
                    
                    
                    December31, 2007Audit
      Fees (1)
                    
                    $
                    66,824
                    
                    
                    $
                    47,073Audit
      Related Fees
                    
                    $
                    –
                    
                    
                    $
                    –Tax
      Fees (2)
                    
                    $
                    4,074
                    
                    
                    $
                    4,363All
      Other Fees (3)
                    
                    $
                    –
                    
                    
                    $
                    322
  (1)
Consists of fees billed for professional services rendered for the audit of the
financial statements of the Company as of December 31, 2008 and December 31,
2007 and reviews of the financial statements included in the Company’s Quarterly
Reports on Form 10-QSB or Form 10-Q for the quarters during such fiscal
years.
  20
  (2)
Consists of tax filing and tax related compliance and other advisory
services.
 
 (3)
Consists of annual renewal fee for software provided to the
Company.
 
 Our Board
of Directors determined that the provision of the above non-audit services was
compatible with C&J maintaining its independence.
 
 Pre-Approval
of Services by the Independent Auditor
 
 The Board
of Directors has established policies and procedures for the approval and
pre-approval of audit services and permitted non-audit services. The Board has
the responsibility to engage and terminate the Company’s independent registered
public accountants, to pre-approve their performance of audit services and
permitted non-audit services and to review with the Company’s independent
registered public accountants their fees and plans for all auditing services.
All services provided by and fees paid to C&J in 2008 and 2007 were
pre-approved by the Board of Directors.
 
 Item 15.
Exhibits and Financial Statement Schedules.
 
 (a)  Exhibits
 
 ExhibitNumber
                    
                    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
                    
                    Certificate
      of Incorporation of the Company.*.3.2
                    
                    Bylaws
      of the Company. *3.3
                    
                    Agreement
      and Plan of Merger between the Company and Diversified Product
      Inspections, Inc., a Florida corporation.*3.4
                    
                    Certificate
      of Merger of Diversified Product Inspections, Inc., a Florida corporation
      filed into the Company filed with the Florida Secretary of
      State.*.3.5
                    
                    Certificate
      of Merger of Diversified Product Inspections, Inc., a Florida corporation
      filed into the Company filed with the Delaware Secretary of
      State.*10.1
                    
                    Diversified
      Product Inspections, Inc. Year 2001 Employee/Consultant Stock Compensation
      Plan filed as an Exhibit to the Company's registration statement on Form
      S-8 filed with the Commission on March 6, 2001 and incorporated herein by
      reference.
  21
  10.2
                  
                  Purchase
      and Sale Agreement and Escrow Instructions dated as of December 21, 2004
      between TN-801 Tri-County, LLC and the Company. Incorporated by reference
      to Exhibit 10.3 to the Company’s Annual Report on Form 10-KSB for the
      fiscal year ended December 31, 2004 (the “2004
10-KSB”).10.3
                  
                  Note
      for Business and Commercial Loans (Non-Revolving) in the principal amount
      of $800,000 dated December 21, 2004 from the Company to AmSouth Bank.
      Incorporated by reference to Exhibit 10.4 to the 2004
    10-KSB.10.4
                  
                  Note
      for Business and Commercial Loans (Revolving), dated April 22, 2005 in the
      principal amount of $100,000 from the Company to AmSouth Bank.
      Incorporated by reference to Exhibit 10.5 to the Company’s Annual Report
      on Form 10-KSB for the fiscal year ended December 31, 2005 (the “2005
      10-KSB”).10.5
                  
                  Settlement
      Agreement and Asset Purchase Agreement dated as of September 30, 2008
      among Diversified Product Inspections, LLC, a Tennessee limited liability
      company, the Company, John Van Zyll, Ann Furlong, and Marvin Stacy,
      Sofcon, Limited, EIG Venture Capital, Limited, and EIG Capital Investments
      Limited. Incorporated by reference to Annex A to the Company’s definitive
      proxy statement for its special meeting of shareholders held on March 26,
      2009, filed on  February 13, 2009.14.1
                  
                  Code
      of Ethics. Incorporated by reference to Exhibit 10.5 to the 2005 10-
      KSB.31.1
                  
                  Certification
      of Principal Executive Officer and Principal Financial Officer Pursuant to
      Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.*32.1
                  
                  Certification
      of Principal Executive Officer and Principal Financial Officer Pursuant to
      18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002.*
  *Filed
herewith.
 
 (b)
Financial Statement Schedules
 
 None.
  22
  SIGNATURES
 
 Pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
 
 Diversified
      Product Inspections, Inc.Dated:
      March 31,
      2009
                    By:
                    /s/ John
      Van ZyllJohn
      Van ZyllChief
      Executive Officer
                      (Principal
      Executive Officer and PrincipalAccounting
  Officer)
  Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Company and in the
capacities and on the dates indicated.
  /s/
      John Van ZyllJohn
      Van Zyll
                                  
                                  Chairman
      of the Board
                                  
                                  March
      31, 2009/s/
      Marvin StacyMarvin
      Stacy
                                  
                                  Chief
      Operating Officer and Director
                                  
                                  March
      31, 2009/s/
      Ann M. FurlongAnn
      M. Furlong
                                  
                                  Secretary
      and Director
                                  
                                  March
      31, 2009/s/
      Warren WankelmanWarren
      Wankelman
                                  
                                  Director
                                  
                                  March
      31, 2009/s/
      Matt WaltersMatt
      Walters
                                  
                                  Director
                                  
                                  March
      31,
2009




23