-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AeGr7QR2ypvzHuSdyUpJneVWD0RpdPhzX1MBPi9wyha/Yd8EYE0ANe1qimcuUvf0 Kcv0kKWCwmAtaDfkeAkUpg== /in/edgar/work/0001077357-00-000420/0001077357-00-000420.txt : 20001123 0001077357-00-000420.hdr.sgml : 20001123 ACCESSION NUMBER: 0001077357-00-000420 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001122 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIVERSIFIED PRODUCT INSPECTIONS INC /TN/ CENTRAL INDEX KEY: 0001075445 STANDARD INDUSTRIAL CLASSIFICATION: [6770 ] IRS NUMBER: 650877741 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: SEC FILE NUMBER: 000-25657 FILM NUMBER: 775347 BUSINESS ADDRESS: STREET 1: 3 MAIN STREET CITY: OAKRIDGE STATE: TN ZIP: 37830 BUSINESS PHONE: 4234828480 MAIL ADDRESS: STREET 1: 3 MAIN STREET CITY: OAKRIDGE STATE: TN ZIP: 37830 FORMER COMPANY: FORMER CONFORMED NAME: SHOE KRAZY INC DATE OF NAME CHANGE: 19990122 10QSB/A 1 0001.txt AMENDED QUARTERLY REPORT U.S. Securities and Exchange Commission Washington, D.C. 20549 Amendment #1 to Form 10-QSB QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended: September 30, 2000 Commission file no.: 0-25657 DIVERSIFIED PRODUCT INSPECTIONS, INC. ------------------------------------------------------------ (Name of Small Business Issuer in its Charter) Florida 65-0877741 - ------------------------------------ ----------------------- (State or other jurisdiction of (I.R.S.Employer incorporation or organization) Identification No.) 3 Main Street Oak Ridge, TN 37830 - ------------------------------------------ ----------------------- (Address of principal executive offices) (Zip Code) Issuer's telephone number: (865) 482-8480 Securities to be registered under Section 12(b) of the Act: Title of each class Name of each exchange on which registered None None - ----------------------------------- ----------------------------- Securities to be registered under Section 12(g) of the Act: Common Stock, $.0001 par value per share -------------------------------------------------------- (Title of class) Copies of Communications Sent to: Donald F. Mintmire Mintmire & Associates 265 Sunrise Avenue, Suite 204 Palm Beach, FL 33480 Tel: (561) 832-5696 - Fax: (561) 659-5371 Indicate by Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No As of September 30, 2000, there were 11,141,900 shares of the Common Stock of the registrant issued and outstanding. There were also 5,520 shares to be issued pursuant to the Company's ongoing offering and 75,000 shares to be issued to Dean Madden pursuant to an employment contract. 362,992 shares are also to be issued to three (3) of the Company's officers and directors for accrued unpaid salaries. The purpose for this amendment to Form 10QSB for the quarter ended September 30, 2000 is to include an exhibit, which was inadvertently left out of the previously filed document. Additionally, the amendment corrects a typographical error located in the above paragraph with regard to the number of shares to be issued pursuant to the Company's ongoing offering, which was correctly reported in the section below entitled "Item 2 - Management's Plan of Operation - General." Lastly, this amendment contains additional disclosure in the preceding paragraph regarding the shares to be issued to management, which was also correctly disclosed in the section below entitled "Item 2 - Management's Plan of Operation - General." PART I Item 1. Financial Statements INDEX TO FINANCIAL STATEMENTS Consolidated Balance Sheets..................................................F-2 Consolidated Statements of Operations........................................F-3 Consolidated Statements of Stockholders' Equity (Deficiency).................F-4 Consolidated Statements of Cash Flows........................................F-5 Notes to Consolidated Financial Statements...................................F-6 F-1 Diversified Product Inspections, Inc. Consolidated Balance Sheets
September 30, December 31, 2000 1999 ------------------- ------------------- (unaudited) ASSETS CURRENT ASSETS Cash and equivalents $ 62,909 $53,335 Accounts receivable 95,220 69,226 Deferred tax assets 22,556 22,556 ------------------- ------------------- Total current assets 180,685 145,117 ------------------- ------------------- PROPERTY AND EQUIPMENT Equipment 104,316 56,639 Vehicles 45,886 45,886 Less accumulated depreciation (52,858) (32,722) ------------------- ------------------- Net property and equipment 97,344 69,803 ------------------- ------------------- OTHER ASSETS Other assets 4,400 0 Deposit on real property 372,125 0 ------------------- ------------------- Total other assets 376,525 0 ------------------- ------------------- Total Assets $ 654,554 $214,920 =================== =================== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) CURRENT LIABILITIES Accounts payable $ 326,594 $15,935 Accrued expenses Income taxes 14,779 11,401 Salaries 362,932 298,275 Current portion of long-term debt 18,546 10,551 Line of credit payable 24,790 21,585 ------------------- ------------------- Total current liabilities 747,641 357,747 ------------------- ------------------- LONG-TERM DEBT Deferred taxes 5,178 5,178 Notes payable, net of current portion 57,305 31,915 Loan from shareholder 4,025 4,025 ------------------- ------------------- Total long-term debt 66,508 41,118 ------------------- ------------------- Total Liabilities 814,149 398,865 ------------------- ------------------- STOCKHOLDERS' EQUITY (DEFICIENCY) Common stock, $0.0001 and $1.00 par value, authorized 50,000,000 and 10,000,000 shares; 11,160,200 and 9,000,000 issued and outstanding shares 1,116 9,000,000 Additional paid-in capital 818,047 (8,639,900) Accumulated deficit (978,758) (544,045) ------------------- ------------------- Total stockholders' equity (deficiency) (159,595) (183,945) ------------------- ------------------- Total Liabilities and Stockholders' Equity (Deficiency) $ 654,554 $214,920 =================== ===================
The accompanying notes are an integral part of the financial statements F-2 Diversified Product Inspections, Inc. Consolidated Statements of Operations (unaudited)
Three Months Ended Nine Months Ended September 30, September 30, -------------------------------- ---------------------------------- 2000 1999 2000 1999 -------------- -------------- -------------- ---------------- REVENUES $ 274,638 $ 208,572 $ 753,235 $ 503,647 OPERATING EXPENSES Compensation: Officers 45,000 45,000 135,000 135,000 Others 117,343 29,224 303,221 94,404 Depreciation 6,712 2,216 20,136 9,594 General and administrative 300,694 50,540 720,325 313,285 -------------- -------------- -------------- ---------------- Total operating expenses 469,749 126,980 1,178,682 552,283 -------------- -------------- -------------- ---------------- Operating Income (Loss) (195,111) 81,592 (425,447) (48,636) -------------- -------------- -------------- ---------------- OTHER INCOME (EXPENSE) Interest expense (3,825) (837) (9,266) (2,360) -------------- -------------- -------------- ---------------- Total other income (expense) (3,825) (837) (9,266) (2,360) -------------- -------------- -------------- ---------------- Net income (loss) before income tax (198,936) 80,755 (434,713) (50,996) Income tax expense (benefit) 0 0 0 0 -------------- -------------- -------------- ---------------- Net income (loss) $ (198,936) $ 80,755 $ (434,713) ($50,996) ============== ============== ============== ================ Net income (loss) per common share $ (0.02) $ 0.01 $ (0.04) $ (0.01) ============== ============== ============== ================ Weighted average number of common shares outstanding 11,138,550 9,000,000 11,084,441 9,000,000 ============== ============== ============== ================
The accompanying notes are an integral part of the financial statements F-3 Diversified Product Inspections, Inc. Consolidated Statements of Stockholders' Equity (Deficiency)
Total Additional Stockholders' Number of Common Paid-in Equity Shares Stock Capital Deficit (Deficiency) ------------ ------------- -------------- ------------ --------------- BEGINNING BALANCE, December 31, 1998 9,000,000 $ 9,000,000 $ (8,639,900) $ (530,576) $(170,476) Year ended December 31, 1999: Net loss 0 0 0 (13,469) (13,469) ------------ ------------- -------------- ------------ --------------- BALANCE, December 31, 1999 9,000,000 9,000,000 (8,639,900) (544,045) (183,945) Nine months ended September 30, 2000: - ------------------------------------- (unaudited) 1st qtr. shares issued for cash 241,900 241,900 123,760 0 365,660 Reverse merger 1,875,000 (9,240,788) 9,240,941 0 153 3rd qtr. shares issued for cash 43,300 4 93,246 0 93,250 Net income (loss) 0 0 0 (434,713) (434,713) ------------ ------------- -------------- ------------ --------------- ENDING BALANCE, September 30, 2000 (unaudited) 11,160,200 $1,116 $818,047 $(978,758) $(159,595) ============ ============= ============== ============ ===============
The accompanying notes are an integral part of the financial statements F-4 Diversified Product Inspections, Inc. Consolidated Statements of Cash Flows Nine Months Ended September 30, (unaudited)
2000 1999 ------------------ ------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (434,713) $(50,996) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation 20,136 9,594 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable (25,994) (19,719) Increase (decrease) in accounts payable 174,034 41,387 Accrued income taxes 3,378 0 Increase (decrease) accrued salaries 64,657 64,309 ------------------ ------------------- Net cash provided (used) by operating activities (198,502) 44,575 ------------------ ------------------- CASH FLOW FROM INVESTING ACTIVITIES: Purchase of property and equipment (47,677) (37,886) Other assets (4,400) 0 Deposit on real property (235,500) 0 ------------------ ------------------- Net cash provided (used) by investing activities (287,577) (37,886) ------------------ ------------------- CASH FLOW FROM FINANCING ACTIVITIES: Shareholder advances 0 0 Shareholder advance repayments 0 (13,500) Common stock sold for cash, net 458,910 0 Proceeds of long-term debt 45,599 32,272 Debt payments (8,856) (4,008) ------------------ ------------------- Net cash provided by financing activities 495,653 14,764 ------------------ ------------------- Net increase (decrease) in cash and equivalents 9,574 21,453 CASH and equivalents, beginning of period 53,335 20,700 ------------------ ------------------- CASH and equivalents, end of period $62,909 $42,153 ================== =================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid in cash $9,266 $2,360 ================== =================== Non-Cash Investing Activity: Rent payable added to deposit on real property $ 136,625 $ 0 ================== ===================
The accompanying notes are an integral part of the financial statements F-5 Diversified Product Inspections, Inc. Notes to Consolidated Financial Statements (Information with regard to the nine months ended September 30, 2000 and 1999 is unaudited) (1) Summary of Significant Accounting Principles TheCompany Diversified Product Inspections, Inc., (the "Company"), is a Florida chartered corporation which conducts business from its offices in Oak Ridge, Tennessee. The Company was incorporated on September 30, 1991. The Company is engaged primarily in the inspection and investigation of product liability claims. All investigators are licensed in the state where they practice. The following summarize the more significant accounting and reporting policies and practices of the Company: a) Use of estimates In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition, and revenues and expenses for the year then ended. Actual results may differ significantly from those estimates. b) Net income (loss) per common share Basic net income (loss) per weighted average common share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the period. c) Property and equipment All property and equipment is recorded at cost and depreciated over their estimated useful lives, generally 3, 5 or 7 years, using the straight-line method. Upon sale or retirement, the costs and related accumulated depreciation are eliminated from their respective accounts, and the resulting gain or loss is included in the results of operations. Repairs and maintenance charges which do not increase the useful lives of the assets are charged to operations as incurred. Depreciation expense was $20,136 and $9,594 for the nine months ended September 30, 2000 and 1999, respectively. d) Cash and equivalents The Company considers investments with an initial maturity of three months or less as cash equivalents. e) Principles of consolidation The consolidated financial statements include the accounts of Diversified Product Inspections, Inc. and its wholly owned subsidiary. Inter-company balances and transactions have been eliminated. f) Significant acquisition In March 2000, Shoe Krazy, Inc. issued 9,241,900 shares of common stock to acquire all the issued and outstanding shares of the common stock of Diversified Product Inspections, Inc., a Florida corporation, in a reverse merger, which was accounted for as a reorganization of Diversified Product Inspections, Inc. g) Interim financial information The financial statements for the nine months ended September 30, 2000 and 1999 are unaudited and include all adjustments which in the opinion of management are necessary for fair presentation, and such adjustments are of a normal and recurring nature. The results for the nine months are not indicative of a full year's results. (2) Stockholders' Equity The Company has authorized 10,000,000 shares of $1.00 par value common stock. The Company has 9,000,000 and 11,160,200 shares of common stock issued and outstanding at December 31, 1999 and September 30, 2000. F-6 Diversified Product Inspections, Inc. Notes to Consolidated Financial Statements (2) Stockholders' Equity (Continued) In September 1991, the Company issued 9,000,000 shares to its founder for cash of $100. Through September 1996, the three principal officers and founders of the Company contributed their services to the Company, in the amount of $24,000 each per year, totaling $72,000 per year and $360,000 for the five years. The Company recorded contributed capital and expense for each of those years. In January and February 2000, the Company sold 241,900 shares of common stock for $440,660 cash, net of offering costs, under a Regulation D Rule 504 private placement. This offering was completed through a registered broker/dealer. In the third quarter, the Company sold 43,300 shares of common stock for $93,250 cash. (3) Income Taxes Deferred income taxes (benefits) are provided for certain income and expenses which are recognized in different periods for tax and financial reporting purposes. The Company had a net deferred income tax asset of $22,556 at December 31, 1999 and September 30, 2000. The deferred tax asset is composed of accruals not currently deductible, net of valuation allowance. (4) Going Concern As shown in the accompanying financial statements, the Company incurred a net loss totaling $435,000 for the nine months ended September 30, 2000, and reflects stockholders' deficit of approximately $83,000 as of September 30, 2000. The Company has entered into a conditional contract to purchase certain real estate at a price of $1,800,000. These conditions raise substantial doubt as to the ability of the Company to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon increasing sales and obtaining additional capital and financing. The Company has retained a registered broker/dealer to raise additional funds for the Company. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. (5) Long-Term Debt The Company is committed to two auto loans with remaining balances of $3,900 and $17,000 at September 30, 2000. The Company makes monthly loan payments of $200 and $600 on those loans. (6) Commitments The Company leased two facilities in Florida and North Carolina. In addition, the Company leases warehouse storage space in Florida and Tennessee. The Florida office lease is a month-to-month lease at $920 per month. The Company is responsible for insuring the premises. The North Carolina office lease was $900 per month and expired May 1, 2000. The lease is now on a month-to-month basis. The warehouse storage lease is also month to month, and the storage facility bills the Company monthly for space utilized. The Company is obligated under three capitalized equipment leases with remaining balances of $8,500, $4,300 and $34,900 at September 30, 2000. Under those leases, the Company is obligated to payments totaling $10,000, $16,000 and $22,400 for the twelve months ending June 30, 2001, 2002 and 2003, respectively, and none thereafter. In February, the Company entered into a lease on a building in Tennessee comprised with a floor area of approximately 30,000 square feet. The lease expires December 20, 2000 and the fixed minimum rent is $30,000 per month (based on $12.00 per square foot per annum). The lessee has also entered into an agreement to purchase the facility. Lessee and lessor agree that portions of the fixed minimum payments shall be applied to the purchase price under the agreement of sale that follows. F-7 Diversified Product Inspections, Inc. Notes to Consolidated Financial Statements (6) Commitments (Continued) If the closing and the settlement date is set for any date within the specified periods: (a) December 20, 1999 and March 31, 2000, then 100%, or (b) April 1, 2000 and June 30, 2000, then 85%, or (c) July 1, 2000 and September 3, 2000, then 75%, or (d) October 1, 2000 and December 31, 2000, then 50% of all fixed minimum rent payments paid prior to closing shall be applied toward the purchase price. The Company is responsible for taxes, maintenance and insurance of the premises under the terms of the lease. (7) Subsequent Events a) Commitments - related party Effective October 1, 2000, the Company and its CFO entered into a one-year employment contract. Under this contract, the CFO earns 6,250 shares of common stock in lieu of cash payment for each month of service provided to the Company. The 75,000 shares of common stock underlying this contract have been issued and are held in escrow by the Company's counsel. b) Accrued salaries payable On November 14, 2000, the Board of Directors approved the payment of the accrued salaries payable by issuing approximately 363,000 shares of common stock. F-8 Item 2. Management's Plan of Operation General Diversified Products Inspections, Inc., a Florida corporation of which Diversified Product Investigations, a Florida corporation is a wholly owned subsidiary, (the "Company") relied upon Section 4(2) of the Securities Act of 1933, as amended (the "Act") and Rule 506 of Regulation D promulgated thereunder ("Rule 506") for several transactions. The facts relied upon the by the Company to make the federal exemption available include the following: (i) the aggregate offering price for the offering of the shares of Common Stock did not exceed $5,000,000, less the aggregate offering price for all securities sold within the twelve months before the start of and during the offering of the shares in reliance on any exemption under Section 3(b) of, or in violation of Section 5(a) of the Act; (ii) no general solicitation or advertising was conducted by the Company in connection with the offering of any of the shares; (iii) there were no more than 35 purchasers from the Issuer in the offering; (iv) the purchasers were all accredited investors and the books and records of the Company were available and reviewed by each investor; and, (v) the required number of manually executed originals and true copies of Form D were duly and timely filed with the U.S. Securities and Exchange Commission. In July 2000, the Company sold 25,000 shares of its Common Stock to one (1) investor for $50,000. The Company actually received $45,000, as $5,000 was deducted as an agent fee. The Company also issued warrants to purchase an additional 12,500 shares exercisable at a price of $0.01 per share for a period of three (3) years in connection with such sale. Both the shares and the shares underlying the warrants carry mandatory registration rights. For such offering, the Company relied upon Section 4(2) of the Act and Rule 506. No state exemption was necessary, as the purchaser is located in Canada. In August 2000, the Company initiated an offering of its restricted Common Stock at a price of $2.50 per share. Since that time, 5,520 shares have been sold to ten (10) investors for a total of $13,800. The shares have yet to be issued. The offering is ongoing. For such offering, the Company relied upon Section 4(2) of the Act, Rule 506, Section 25102.1 of the California Code, Section 517.061(11) of the Florida Code and Section 48-2-125 of the Tennessee Code. The facts relied upon to make the California Exemption include the following: (i) the Company filed a completed SEC Form D with the California Department of Corporations; (ii) the Company executed a Form U-2 consent to service of process in the state of California; (iii) the Forms were filed not later than 15 days after the first sale of the securities in California; and (v) the Company paid an appropriate filing fee. The facts relied upon to make the Florida exemption available are: (i) sales of the shares of Common Stock were not made to more than 35 persons; (ii) neither the offer nor the sale of any of the shares was accomplished by the publication of any advertisement; (iii) all purchasers either had a preexisting personal or business relationship with one or more of the executive officers of the 1 Company or, by reason of their business or financial experience, could be reasonably assumed to have the capacity to protect their own interests in connection with the transaction; (iv) each purchaser represented that he was purchasing for his own account and not with a view to or for sale in connection with any distribution of the shares; and (v) prior to sale, each purchaser had reasonable access to or was furnished all material books and records of the Company, all material contracts and documents relating to the proposed transaction, and had an opportunity to question the executive officers of the Company. Pursuant to Rule 3E-500.005, in offerings made under Section 517.061(11) of the Florida Statutes, an offering memorandum is not required; however each purchaser (or his representative) must be provided with or given reasonable access to full and fair disclosure of material information. An issuer is deemed to be satisfied if such purchaser or his representative has been given access to all material books and records of the issuer; all material contracts and documents relating to the proposed transaction; and an opportunity to question the appropriate executive officer. The facts relied upon to make the Tennessee Exemption include the following: (i) the Company filed a completed SEC Form D with the Tennessee Division of Securities; (ii) the Form was filed not later than 15 days after the first sale; (iii) the Company provided the Tennessee Division of Securities a copy of the information furnished by the Company to the offerees, (iv) the Company executed a Form U-2 consent to service of process; and (v) the Company paid an appropriate filing fee. In September 2000, the Company entered into an employment agreement with Dean Madden to be the Chief Financial Officer of the Company. The agreement is for a period of one (1) year. Compensation is in the form of shares of the Company's restricted Common Stock. Mr. Madden earns 6,250 shares of stock each month, however the stock is subject to an escrow agreement which provides for its release in October 2001. The stock has not yet been issued. For such offering, the Company relied upon Section 4(2) of the Act, Rule 506 and Section 48-2-125 of the Tennessee Code. The facts relied upon to make the Tennessee Exemption include the following: (i) the Company filed a completed SEC Form D with the Tennessee Division of Securities; (ii) the Form was filed not later than 15 days after the first sale; (iii) the Company provided the Tennessee Division of Securities a copy of the information furnished by the Company to the offerees, (iv) the Company executed a Form U-2 consent to service of process; and (v) the Company paid an appropriate filing fee. In October 2000, the Board of Directors elected to extend termination of the Company's ongoing private offering, which was to terminate on or before October 31, 2000 to December 31, 2000. In November 2000 the Board of Directors elected to convert a total of $362,932 in accrued unpaid salaries to 362,992 shares of the Company's restricted Common Stock. The individuals owed such salaries agreed to such shares of stock in lieu of such salary. Marvin Stacy, the current Vice- President of the Company received 120,997 of such shares. John VanZyll, the President received 120,997 of such shares. Ann Furlong, the Company's current Secretary, received 120,998 of such shares. The shares have yet to be issued. For such offering, the Company relied upon Section 4(2) of the Act, Rule 506 and Section 517.061(11) of the Florida Code and Section 48-2-125 , as interpreted by Rule 0780-4-2-.11 of the Tennessee Securities Act of 1980. The facts relied upon to make the Florida exemption available are: (i) sales of the shares of Common Stock were not made to more than 35 persons; (ii) neither the offer nor the sale of any of the shares was accomplished by the publication of any advertisement; (iii) all purchasers either had a preexisting personal or business relationship with one or more of the executive officers of the Company or, by reason of their business or financial experience, could be reasonably assumed to have the capacity to protect their own interests in connection with the transaction; (iv) each purchaser represented that he was purchasing for his own account and not with a view to or for sale in connection with any distribution of the shares; and (v) prior to sale, each purchaser had reasonable access to or was furnished all material books and records of the Company, all material contracts and documents relating to the proposed transaction, and had an opportunity to question the executive officers of the Company. Pursuant to Rule 3E-500.005, in offerings made under Section 517.061(11) of the Florida Statutes, an offering memorandum is not required; however each purchaser (or his representative) must be provided with or given reasonable access to full and fair disclosure of material information. An issuer is deemed to be satisfied if such purchaser or his representative has been given access to all material books and records of the issuer; all material contracts and documents relating to the proposed transaction; and an opportunity to question the appropriate executive officer. The facts relied upon to make the Tennessee Exemption include the following: (i) the Company filed a completed SEC Form D with the Tennessee Division of Securities; (ii) the Form was filed not later than 15 days after the first sale; (iii) the Company provided the Tennessee Division of Securities a copy of the information furnished by the Company to the offerees, (iv) the Company executed a Form U-2 consent to service of process; and (v) the Company paid an appropriate filing fee. Plan of Operation The Company was initially a development stage company with limited assets or capital, with significant initial operations but no operations or income since approximately 1995 when it acquired its subsidiary in March 2000. In the coming months, the Company will focus its efforts on marketing its newly acquired primary business, subrogation recovery. This business entails the determination of the "Origin and Cause" of property damages and the identification of the defective product which caused such loss. The Company's proprietary Origin and Cause data on over 300,000 products enables it to quickly identify a manufacturer of a defective product which it can sell to market participants in the Insurance Industry at cost-effective levels. Results of Operations for the Six Months Ended September 30, 2000 and 1999 Financial Condition, Capital Resources and Liquidity At September 30, 2000, the Company had assets totaling $654,554 and $814,149 in liabilities. The Company has $62,909 in working capital on hand in cash and cash equivalents as of September 30, 2000. A discussion of the Company's financial condition, capital resources and liquidity as of September 30, 1999 would not be material due to its developmental stage status and recent reorganization. It is the Company's intention to raise up to $2,000,000 in cash through the sale of additional equity capital pursuant to an ongoing Regulation D, 506 Private Placement Offering, however, the can be no assurance that they will be successful in their efforts. The ability of the Company to continue as a going concern is dependent upon the availability of obtaining additional capital. Net Operating Losses The Company has incurred a net operating loss of $198,936 for the three months ended September 30, 2000. Forward-Looking Statements This Form 10-QSB includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included or incorporated by reference in this Form 10-QSB which address activities, events or developments which the Company expects or anticipates will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof), finding suitable merger or acquisition candidates, expansion and growth of the Company's business and operations, and other such matters are forward-looking statements. These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances. However, whether actual results or developments will conform with the Company's expectations and predictions is subject to a number of risks and uncertainties, general economic market and business conditions; the business opportunities (or lack thereof) that may be presented to and pursued by the Company; changes in laws or regulation; and other factors, most of which are beyond the control of the Company. Consequently, all of the forward-looking statements made in this Form 10-QSB are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. PART II Item 1. Legal Proceedings. 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 2. Changes in Securities and Use of Proceeds None Item 3. Defaults in Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) The exhibits required to be filed herewith by Item 601 of Regulation S-B, as described in the following index of exhibits, are incorporated herein by reference, as follows:
Exhibit No. Description - ---------------------------------------------------------------------- 3(i).1 [1] Articles of Incorporation filed October 17, 1994 3(i).2 [1] Articles of Amendment filed December 15, 1998. 3(i).3 [3] Articles of Amendment changing the Company name from Shoe Crazy, Inc. to Diversified Product Inspections, Inc. filed May 19, 2000. 3(i).4 [3] Articles of Amendment changing the name of the Company's subsidiary from Diversified Product Inspections, Inc. to Diversified Product Investigations, Inc. filed May 19, 2000. 3(ii).1 [1] By-laws. 4.1 [2] Share Exchange Agreement between the Company, Diversified Product Inspections, Inc. and the holders of 100% of the Common Stock of Diversified Product Inspections, Inc. dated March 13, 2000.
4.2 [4] Common Stock Purchase Agreement with Thomson Kernaghan & Co., Ltd., as Agent dated July 2000. 4.3 [4] Registration Rights Agreement with Thomson Kernaghan & Co., Ltd. dated July 2000. 4.4 [4] Agent's Warrant in favor of Thomson Kernaghan & Co., Ltd. dated July 2000. 4.5 [4] Purchaser's Warrant in favor of Thomson Kernaghan & Co., Ltd. dated July 2000. 4.6 * Form of Private Placement offering dated August 1, 2000. 10.1 [4] Employment Agreement between the Company and Dean Madden dated September 23, 2000. 10.2 [4] Conversion by John Van Zyll of unpaid salary to shares of the Company's Common Stock. 10.3 [4] Conversion by Marvin Stacy of unpaid salary to shares of the Company's Common Stock. 10.4 [4] Conversion by Ann Furlong of unpaid salary to shares of the Company's Common Stock. 27.1 * Financial Data Schedule. - ----------------------------------------- [1] Incorporated herein by reference to the Company's Registration Statement on Form 10-SB filed March 29, 1999. [2] Incorporated herein by reference to the Company's Current Report on Form 8K filed March 21, 2000. [3] Incorporated herein by reference to the Company's Quarterly Report for the quarter ended March 30, 2000 on Form 10 QSB filed May 22, 2000. [4] Incorporated herin by reference to the Company's Quarterly Report for the quarter ended September 30, 2000 on Form 10QSB filed November 20, 2000. * Filed herewith (b) The Company filed a report on Form 8K on March 21, 2000 in connection with the Company's acquisition of Diversified Product Inspections, Inc., a Florida corporation. The Company filed a report on Form 8K on May 22, 2000 with the required financial statements pursuant to its first report on Form 8K filed March 21, 2000 and also changed its fiscal year to that of its subsidiary, December 31. The Company filed two (2) reports on Form 8KA on May 26, 2000.
SIGNATURES ---------- In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DIVERSIFIED PRODUCT INSPECTIONS, INC. (Registrant) Date: November 21, 2000 BY: /s/ John Van Zyll -------------------------------- John Van Zyll, Chairman, President and Chief Executive Officer BY: /s/ Marvin Stacy -------------------------------- Marvin Stacy, Chief Operating Officer and Director BY: /s/ Ann Furlong -------------------------------- Ann Furlong, Secretary and Director BY: /s/ Dean Madden -------------------------------- Dean Madden, Chief Financial Officer, Treasurer and Director BY: /s/ David Dowell -------------------------------- David Dowell, Director EX-4.6 2 0002.txt OFFERING MEMORANDUM EXHIBIT 4.6 DIVERSIFIED PRODUCT INSPECTIONS, INC. (Incorporated in the State of Florida) Offing of No More than 800,000 Shares of Common Stock Until October 31, 2000 Offering Price: $2.50 per Share Minimum Subscription: 20,000 Shares ($50,000) THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. PROSPECTIVE PURCHASERS SHOULD BE PREPARED TO SUSTAIN A LOSS OF THEIR ENTIRE INVESTMENT. Reference is made to the information contained under the caption ARisk Factors@ in this Memorandum. The Company does not guarantee or imply that there is, or that there will be a market for the resale of these shares. In addition, investors in the Common Stock must be willing and able to accept the lack of liquidity inherent in an investment in high-risk securities. THIS IS A "NO MINIMUM" STOCK OFFERING AND SHARES WILL BE ISSUED TO PURCHASERS UPON ACCEPTANCE BY THE COMPANY OF EACH INDIVIDUAL SUBSCRIPTION The Company is offering 800,000 Shares of its Common Stock at $2.50 per share to qualified investors pursuant to an exemption from registration under the Securities Act of 1933. Each purchaser will be required to buy a minimum of twenty thousand (20,000) Shares, for a minimum consideration of fifty thousand dollars ($50,000). However, the Company reserves the right, in its sole discretion, to sell less than the minimum subscription. (1)
Price to Public (2) Discounts and Proceeds to the Commissions (3) Issuer (4) - ----------------------------------- ----------------------------- ----------------------------- ------------------------- Per Share $2.50 $0.25 $2.25 - ----------------------------------- ----------------------------- ----------------------------- ------------------------- Per Minimum $50,000 $5,000 $45,000 Subscription - ----------------------------------- ----------------------------- ----------------------------- ------------------------- Total Maximum Offering $2,000,000 $200,000 $1,800,000 - ----------------------------------- ----------------------------- ----------------------------- -------------------------
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE ACCURACY OR ADEQUACY OF THIS OFFERING MEMORANDUM BEEN CONSIDERED OR PASSED UPON BY ANY REGULATORY AUTHORITY. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. (1) This offering is made by the Company on a "best efforts" basis, for a period of 180 days from the date of this Memorandum and may be extended, at the option of the Company for an additional period or periods not exceeding an additional 180 days in the aggregate. (2) No commissions will be paid in connection with sales which are made directly by the management of the Company. (3) Before deducting certain other consulting, organization and preoperating cost(s) payable by the Company including legal and accounting expenses. The date of this Memorandum is August 1, 2000. TABLE OF CONTENTS Page No. Summary of Offering...........................................................11 Risk Factors..................................................................12 Dilution......................................................................13 Capitalization................................................................13 Use of Proceeds...............................................................13 Business......................................................................13 Management....................................................................13 Principal Shareholders........................................................14 Description of the Securities.................................................15 Plan of Distribution..........................................................15 EXHIBITS Business Plan (Attached).......................................................A Financial Projections (Attached)...............................................B SEC 15c-211 (Separate Cover) ..................................................C 10QSB Filing of Financials for Period Ending June 30, 2000 (Separate Cover) ...D TO BE COMPLETED AND RETURNED BY INVESTOR SUBSCRIPTION DOCUMENTS (Separate Cover) ......................................E INVESTOR SUITABILITY QUESTIONAIRE (Separate Cover) ............................F THE UNITS ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), AND WILL NOT BE REGISTERED UNDER THE 1933 ACT, OR QUALIFIED UNDER THE SECURITIES LAW OF ANY STATE AND THEREFORE CANNOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF SUCH REGISTRATION AND QUALIFICATION, OR THE AVAILABILITY OF AN EXEMPTION THEREFROM. THERE IS NO PUBLIC OR OTHER MARKET FOR SUCH UNITS. THE UNITS OFFERED HEREBY INVOLVE RISK AND SHOULD NOT BE PURCHASED BY ANYONE WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. (SEE "RISK FACTORS.") EACH RECIPIENT MUST RELY UPON HIS OR HER OWN REPRESENTATIVE AS TO LEGAL, TAX AND RELATED MATTERS. THE COMPANY INTENDS TO CONDUCT THE OFFERING THROUGH THE COMPANY IN SUCH A MANNER THAT THE SHARES WILL BE SOLD ONLY TO "ACCREDITED INVESTORS" AS THAT TERM IS DEFINED IN REGULATION D UNDER THE SECURITIES ACT OF 1933. THE REPRESENTATIONS OF EACH INVESTOR WILL BE REVIEWED TO DETERMINE THE SUITABILITY OF PROSPECTIVE INVESTORS (PARTICULARLY NONACCREDITED INVESTORS), AND THE COMPANY WILL HAVE THE RIGHT TO REFUSE A SUBSCRIPTION FOR SHARES IF IN ITS SOLE DISCRETION THE COMPANY BELIEVES THAT THE PROSPECTIVE INVESTOR DOES NOT MEET THE APPLICABLE SUITABILITY REQUIREMENT OR THAT THE SHARES ARE OTHERWISE AN UNSUITABLE INVESTMENT FOR THE PROSPECTIVE INVESTOR. THE COMPANY SHALL PRIOR TO THE SALE OF ANY SECURITIES ALLOW EACH INVESTOR OR HIS AGENT THE OPPORTUNITY TO ASK QUESTIONS OF AND RECEIVE ANSWERS FROM ANY PERSON AUTHORIZED TO ACT ON BEHALF OF THE COMPANY CONCERNING ANY ASPECT OF THE INVESTMENT AND TO OBTAIN ANY ADDITIONAL INFORMATION (TO THE EXTENT THE COMPANY POSSESSES SUCH INFORMATION) NECESSARY TO VERIFY THE ACCURACY OF THE INFORMATION CONTAINED IN THIS OFFERING MEMORANDUM. INVESTORS OR THEIR REPRESENTATIVES HAVING QUESTIONS OR DESIRING ADDITIONAL INFORMATION SHOULD CONTACT MR. JOHN VAN ZYLL (865) 482-8480. 5 NOTICES TO RESIDENTS OF CERTAIN STATES NOTICE TO ALABAMA RESIDENTS THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER THE ALABAMA SECURITIES ACT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS NOT BEEN FILED WITH THE ALABAMA SECURITIES COMMISSION. THE COMMISSION DOES NOT RECOMMEND OR ENDORSE THE PURCHASE OF ANY SECURITIES, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF THIS OFFERING MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ANYTHING TO THE CONTRARY HEREIN NOTWITHSTANDING, THE INVESTMENT OF AN ALABAMA PURCHASER WHO IS NOT AN ACCREDITED INVESTOR MAY NOT EXCEED TWENTY (20%) PERCENT OF SUCH PURCHASER'S NET WORTH, EXCLUSIVE OF PRINCIPAL RESIDENCE, FURNISHINGS AND AUTOMOBILES. NOTICE TO ALASKA RESIDENTS THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE ALASKA SECURITIES ACT AND MAY NOT BE SOLD WITHOUT REGISTRATION UNDER THAT ACT OR EXEMPTION THEREFROM. NOTICE TO ARIZONA RESIDENTS THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE ARIZONA SECURITIES ACT AND ARE BEING SOLD IN RELIANCE UPON THE EXEMPTION CONTAINED IN SECTION 44-1844(1) OF SUCH ACT. THESE SECURITIES MAY NOT BE SOLD WITHOUT REGISTRATION UNDER SUCH ACT OR EXEMPTION THEREFROM. ARIZONA RESIDENTS MUST HAVE EITHER (i) A MINIMUM NET WORTH OF AT LEAST SEVENTY- FIVE THOUSAND ($75,000) DOLLARS [EXCLUDING HOME, HOME FURNISHINGS AND AUTOMOBILES] AND A MINIMUM ANNUAL GROSS INCOME OF SEVENTY-FIVE THOUSAND ($75,000) DOLLARS; OR (ii) A NET WORTH OF AT LEAST TWO HUNDRED TWENTY-FIVE THOUSAND ($225,000) DOLLARS [AS COMPUTED ABOVE]. NOTICE TO ARKANSAS RESIDENTS THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER SECTION 14(b)(14) OF THE ARKANSAS SECURITIES ACT AND SECTION 4(2) OF THE SECURITIES ACT OF 1933. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS NOT BEEN FILED WITH THE ARKANSAS SECURITIES DEPARTMENT OR WITH THE SECURITIES AND EXCHANGE COMMISSION. NEITHER THE DEPARTMENT NOR THE COMMISSION HAS PASSED UPON THE VALUE OF THESE SECURITIES, MADE ANY RECOMMENDATIONS AS TO THEIR PURCHASE, APPROVED OR DISAPPROVED THE OFFERING, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS OFFERING MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. 6 NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, AN INVESTMENT BY A NON- ACCREDITED INVESTOR MAY NOT EXCEED TWENTY (20%) PERCENT OF THE INVESTOR'S NET WORTH AT THE TIME OF PURCHASE, ALONE OR JOINTLY WITH SPOUSE. NOTICE TO CALIFORNIA RESIDENTS IF THE COMPANY ELECTS TO SELL SHARES IN THE STATE OF CALIFORNIA, IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THE SHARES, OR OTHER Unit THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFORE WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES. NOTICE TO CONNECTICUT RESIDENTS THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE CONNECTICUT SECURITIES ACT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT REGISTRATION OR EXEMPTION THEREFROM. NOTICE TO DELAWARE RESIDENTS THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE DELAWARE SECURITIES ACT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT REGISTRATION OR EXEMPTION THEREFROM. NOTICE TO FLORIDA RESIDENTS THE SHARES REFERRED TO HEREIN WILL BE SOLD TO, AND ACQUIRED BY, THE HOLDER IN A TRANSACTION EXEMPT UNDER SECTION 517.061 OF THE FLORIDA SECURITIES ACT. THE SHARES HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA. IN ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF VOIDING THE PURCHASE WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE ISSUER, AN AGENT OF THE ISSUER, OR AN ESCROW AGENT OR WITHIN THREE (3) DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER. NOTICE TO GEORGIA RESIDENTS THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE GEORGIA SECURITIES ACT OF 1973, AS AMENDED, IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION SET FORTH IN SECTION 9(m) OF SUCH ACT AND THE SECURITIES CANNOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR IN A TRANSACTION WHICH IS OTHERWISE IN COMPLIANCE WITH SAID ACT. NOTICE TO IDAHO RESIDENTS THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE IDAHO SECURITIES ACT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT REGISTRATION OR EXEMPTION THEREFROM. ANYTHING TO THE CONTRARY NOTWITHSTANDING, THE INVESTMENT BY AN NON- ACCREDITED INVESTOR MAY NOT EXCEED TEN (10%) PERCENT OF THE INVESTOR'S NET WORTH. 7 NOTICE TO INDIANA RESIDENTS EACH INVESTOR PURCHASING SHARES MUST WARRANT THAT HE HAS EITHER (i) A NET WORTH (EXCLUSIVE OF HOME, HOME FURNISHINGS AND AUTOMOBILES) EQUAL TO AT LEAST THREE (3) TIMES THE AMOUNT OF HIS INVESTMENT BUT IN NO EVENT LESS THAN SEVENTY-FIVE THOUSAND ($75,000) DOLLARS OR (ii) A NET WORTH (EXCLUSIVE OF HOME, HOME FURNISHINGS AND AUTOMOBILES OF TWO (2) TIMES HIS INVESTMENT BUT IN NO EVENT LESS THAN THIRTY THOUSAND ($30,000) DOLLARS AND A GROSS INCOME OF THIRTY THOUSAND ($30,000) DOLLARS. NOTICE TO IOWA RESIDENTS IOWA RESIDENTS MUST HAVE EITHER (i) A NET WORTH OF AT LEAST FORTY THOUSAND ($40,000) DOLLARS [EXCLUDING HOME, HOME FURNISHINGS AND AUTOMOBILES] AND A MINIMUM ANNUAL GROSS INCOME OF FORTY THOUSAND ($40,000) DOLLARS, OR (ii) A NET WORTH OF AT LEAST ONE HUNDRED TWENTY-FIVE THOUSAND ($125,000) DOLLARS AS COMPUTED ABOVE. NOTICE TO KANSAS RESIDENTS AN INVESTMENT BY AN NON-ACCREDITED INVESTOR SHALL NOT EXCEED TWENTY (20%) PERCENT OF THE INVESTOR'S NET WORTH; EXCLUDING PRINCIPAL RESIDENCE, FURNISHINGS THEREIN AND PERSONAL AUTOMOBILES. NOTICE TO KENTUCKY RESIDENTS THESE SECURITIES REPRESENTED BY THIS CERTIFICATE (OR OTHER DOCUMENT), HAVE BEEN ISSUED PURSUANT TO A CLAIM OF EXEMPTION FROM THE REGISTRATION OR QUALIFICATION PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREIN. ANYTHING TO THE CONTRARY HEREIN NOTWITHSTANDING, THE INVESTMENT BY A NON- ACCREDITED INVESTOR MAY NOT EXCEED TEN (10%) PERCENT OF THE INVESTOR'S NET WORTH. NOTICE TO MAINE RESIDENTS THESE SECURITIES ARE BEING SOLD PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE BANK SUPERINTENDENT OF THE STATE OF MAINE UNDER SECTION 10520(2)(R) OF TITLE 32 OF THE MAINE REVISED STATUTES. THESE SECURITIES MAY BE DEEMED RESTRICTED SECURITIES AND AS SUCH THE HOLDER MAY NOT BE ABLE TO RESELL THE SECURITIES UNLESS PURSUANT TO REGISTRATION UNDER STATE OR FEDERAL SECURITIES LAWS OR UNLESS AN EXEMPTION UNDER SUCH LAWS EXIST. NOTICE TO MARYLAND RESIDENTS THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE MARYLAND SECURITIES ACT IN RELIANCE UPON THE EXEMPTION FROM REGISTRATION SET FORTH IN SECTION 11-602(9) OF SUCH ACT. UNLESS THESE SECURITIES ARE REGISTERED, THEY MAY NOT BE REOFFERED FOR SALE OR RESOLD IN THE STATE OF MARYLAND, EXCEPT AS A SECURITY, OR IN A TRANSACTION EXEMPT UNDER SUCH ACT. 8 NOTICE TO MASSACHUSETTS RESIDENTS MASSACHUSETTS RESIDENTS MUST HAVE HAD EITHER (i) A MINIMUM NET WORTH OF AT LEAST FIFTY THOUSAND ($50,000) DOLLARS [EXCLUDING HOME, HOME FURNISHINGS AND AUTOMOBILES] AND HAD DURING THE LAST YEAR, OR IT IS ESTIMATED THAT THE SUBSCRIBER WILL HAVE DURING THE CURRENT TAX YEAR, TAXABLE INCOME OF FIFTY THOUSAND ($50,000) DOLLARS OR (ii) A NET WORTH OF AT LEAST ONE HUNDRED FIFTY THOUSAND ($150,000) DOLLARS [AS COMPUTED ABOVE]. NOTICE TO MICHIGAN RESIDENTS THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE MICHIGAN SECURITIES ACT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT REGISTRATION UNDER THAT ACT OR EXEMPTION THEREFROM. THE COMPANY SHALL PROVIDE ALL MICHIGAN INVESTORS WITH A DETAILED WRITTEN STATEMENT OF THE APPLICATION OF THE PROCEEDS OF THE OFFERING WITHIN SIX (6) MONTHS AFTER COMMENCEMENT OF THE OFFERING OR UPON COMPLETION, WHICHEVER OCCURS FIRST, AND WITH ANNUAL CURRENT BALANCE SHEETS AND INCOME STATEMENTS THEREAFTER. NOTICE TO MINNESOTA RESIDENTS THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER CHAPTER 80 OF THE MINNESOTA SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED FOR VALUE EXCEPT PURSUANT TO REGISTRATION OR OPERATION OF LAW. NOTICE TO MISSISSIPPI RESIDENTS THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER THE MISSISSIPPI SECURITIES ACT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS NOT BEEN FILED WITH THE MISSISSIPPI SECRETARY OF STATE OR WITH THE SECURITIES AND EXCHANGE COMMISSION, NEITHER THE SECRETARY OF STATE NOR THE COMMISSION HAS PASSED UPON THE VALUE OF THESE SECURITIES, NOR HAS APPROVED OR DISAPPROVED THE OFFERING. THE SECRETARY OF STATE DOES NOT RECOMMEND THE PURCHASE OF THESE OR ANY OTHER SECURITIES. THERE IS NO ESTABLISHED MARKET FOR THESE SECURITIES AND THERE MAY NOT BE ANY MARKET FOR THESE SECURITIES IN THE FUTURE. THE SUBSCRIPTION PRICE OF THESE SECURITIES HAS BEEN ARBITRARILY DETERMINED BY THE ISSUER AND IS NOT AN INDICATION OF THE ACTUAL VALUE OF THESE SECURITIES. THE PURCHASER OF THESE SECURITIES MUST BEEN CERTAIN SUITABILITY STANDARDS AND MUST BE ABLE TO BEAR THE ENTIRE LOSS OF HIS INVESTMENT. ADDITIONALLY, ALL PURCHASERS WHO ARE NOT ACCREDITED INVESTORS MUST HAVE A NET WORTH OF AT LEAST THIRTY THOUSAND ($30,000) DOLLARS AND INCOME OF THIRTY THOUSAND ($30,000) DOLLARS OR A NET WORTH OF SEVENTY FIVE THOUSAND ($75,000) DOLLARS. THESE SECURITIES MAY NOT BE TRANSFERRED FOR A PERIOD OF ONE (1) YEAR EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER THE MISSISSIPPI SECURITIES ACT OR IN A TRANSACTION IN COMPLIANCE WITH THE MISSISSIPPI SECURITIES ACT. 9 NOTICE TO MISSOURI RESIDENTS THESE SECURITIES ARE SOLD TO, AND BEING ACQUIRED BY, THE HOLDER IN A TRANSACTION EXEMPTED UNDER SECTION 10, SUBSECTION 409.402(B), MISSOURI UNIFORM SECURITIES ACT (RMSO 1969). THE SHARES HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF MISSOURI. UNLESS THE SHARES ARE REGISTERED, THEY MAY NOT BE REOFFERED OR RESOLD IN THE STATE OF MISSOURI, EXCEPT AS A SECURITY, OR IN A TRANSACTION EXEMPT UNDER SAID ACT. ANYTHING TO THE CONTRARY NOTWITHSTANDING, AN INVESTOR MUST HAVE A MINIMUM ANNUAL INCOME OF THIRTY THOUSAND ($30,000) DOLLARS AND A NET WORTH OF AT LEAST THIRTY THOUSAND ($30,000) DOLLARS (EXCLUSIVE OF HOME, FURNISHINGS AND AUTOMOBILES) OR A NET WORTH OF SEVENTY FIVE THOUSAND ($75,000) DOLLARS EXCLUSIVE OF HOME, FURNISHINGS AND AUTOMOBILES. AN INVESTMENT BY A NON-ACCREDITED INVESTOR SHALL NOT EXCEED TWENTY (20%) PERCENT OF THE INVESTOR'S NET WORTH. NOTICE TO MONTANA RESIDENTS EACH MONTANA RESIDENT WHO SUBSCRIBES FOR THE SECURITIES BEING OFFERED HEREBY AGREES NOT TO SELL THESE SECURITIES FOR A PERIOD OF TWELVE (12) MONTHS AFTER DATE OF PURCHASE. ANYTHING TO THE CONTRARY NOTWITHSTANDING, THE INVESTMENT BY A NON-ACCREDITED INVESTOR MAY NOT EXCEED TWENTY (20%) PERCENT OF THE INVESTORS NET WORTH. NOTICE TO NEBRASKA RESIDENTS THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE NEBRASKA SECURITIES ACT AND MAY NOT BE SOLD WITHOUT REGISTRATION UNDER THAT ACT OR EXEMPTION THEREFROM. NOTICE TO NEW HAMPSHIRE RESIDENTS EACH NEW HAMPSHIRE INVESTOR PURCHASING SHARES MUST WARRANT THAT HE HAS EITHER (i) A NET WORTH (EXCLUSIVE OF HOME, FURNISHINGS AND AUTOMOBILES) OF TWO HUNDRED FIFTY THOUSAND ($250,000) DOLLARS OR (ii) A NET WORTH (EXCLUSIVE OF HOME, FURNISHING AND AUTOMOBILES) OF ONE HUNDRED TWENTY FIVE THOUSAND ($125,000) DOLLARS AND FIFTY THOUSAND ($50,000) DOLLARS ANNUAL INCOME. NOTICE TO NEW JERSEY RESIDENTS THE ATTORNEY GENERAL OF THE STATE HAS NOT PASSED OR ENDORSED THE MERITS OF THIS OFFERING. THE FILING OF THE WITHIN OFFERING DOES NOT CONSTITUTE APPROVAL OF THE ISSUE OR THE SALE THEREOF BY THE BUREAU OF SECURITIES OR THE DEPARTMENT OF LAW AND PUBLIC SAFETY OF THE STATE OF NEW JERSEY. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. NOTICE TO NORTH DAKOTA RESIDENTS THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES COMMISSIONER OF THE STATE OF NORTH DAKOTA NOR HAS THE COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. 10 NOTICE TO NEW YORK RESIDENTS THIS OFFERING MEMORANDUM HAS NOT YET BEEN REVIEWED BY THE ATTORNEY GENERAL PRIOR TO ISSUANCE AND USE. THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. THIS OFFERING MEMORANDUM DOES NOT CONTAIN AN UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS MADE IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THAT WERE MADE, NOT MISLEADING. IT CONTAINS A FAIR SUMMARY OF THE MATERIAL TERMS AND DOCUMENTS PURPORTED TO BE SUMMARIZED HEREIN. NOTICE TO NORTH CAROLINA RESIDENTS THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER THE NORTH CAROLINA SECURITIES ACT. THE NORTH CAROLINA SECURITIES ADMINISTRATION NEITHER RECOMMENDS NOR ENDORSES THE PURCHASE OF ANY SECURITY, NOR HAS THE ADMINISTRATOR PASSED ON THE ACCURACY OR ADEQUACY OF THE INFORMATION PROVIDED HEREIN. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. NOTICE TO OKLAHOMA RESIDENTS THE SECURITIES RENDERED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE OKLAHOMA SECURITIES ACT. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED FOR VALUE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OF THEM UNDER THE SECURITIES ACT OF 1933 AND/OR THE OKLAHOMA SECURITIES ACT OF AN OPINION OF COUNSEL TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR ACTS. ANYTHING TO THE CONTRARY NOTWITHSTANDING, AN INVESTMENT BY A NON-ACCREDITED INVESTOR SHALL NOT EXCEED TEN (10%) PERCENT OF THE INVESTORS NET WORTH. NOTICE TO OREGON RESIDENTS THE SECURITIES OFFERED HAVE NOT BEEN REGISTERED WITH THE DIRECTOR OF THE STATE OF OREGON UNDER THE PROVISIONS OF OAR 441-65-240. THE INVESTOR IS ADVISED THAT THE DIRECTOR HAS MADE ONLY A CURSORY REVIEW OF THE REGISTRATION STATEMENT AND HAS NOT REVIEWED THIS DOCUMENT SINCE THIS DOCUMENT IS NOT REQUIRED TO BE FILED WITH THE DIRECTOR. THE INVESTOR MUST RELY ON THE INVESTOR'S OWN EXAMINATION OF THE COMPANY CREATING THE SECURITIES, AND THE TERMS OF THE OFFERING INCLUDING THE MERITS AND RISKS INVOLVED IN MAKING AN INVESTMENT DECISION ON THESE SECURITIES. NOTICE TO PENNSYLVANIA RESIDENTS 11 ANY PERSON WHO ACCEPTS AN OFFER TO PURCHASE THE SECURITIES IN COMMONWEALTH OF PENNSYLVANIA IS ADVISED, THAT PURSUANT TO SECTION 207(m) OF THE PENNSYLVANIA SECURITIES ACT, HE SHALL HAVE THE RIGHT TO WITHDRAW HIS ACCEPTANCE, AND RECEIVE A FULL REFUND OF ANY CONSIDERATION PAID, WITHOUT INCURRING ANY LIABILITY, WITHIN TWO (2) BUSINESS DAYS FROM THE TIME THAT HE RECEIVES NOTICE OF THIS WITHDRAWAL RIGHT AND RECEIVES THE PLACEMENT OFFERING MEMORANDUM. ANY PERSON WHO WISHES TO EXERCISE SUCH RIGHT OF WITHDRAWAL IS ADVISED TO GIVE NOTICE BY LETTER OR TELEGRAM SENT AND POSTMARKED BEFORE THE END OF THE SECOND BUSINESS DAY AFTER EXECUTION. IF THE REQUEST FOR WITHDRAWAL IS TRANSMITTED ORALLY, WRITTEN CONFIRMATION MUST BE GIVEN. ANY PERSON WHO PURCHASES UNITS WHO IS A PENNSYLVANIA RESIDENT WILL NOT SELL SUCH Units FOR A PERIOD OF TWELVE (12) MONTHS BEGINNING WITH THE CLOSING DATE. PENNSYLVANIA RESIDENTS MUST HAVE EITHER (i) A MINIMUM NET WORTH OF THIRTY THOUSAND ($30,000) DOLLARS [EXCLUDING HOME, HOME FURNISHINGS AND AUTOMOBILES] AND A MINIMUM ANNUAL GROSS INCOME OF THIRTY THOUSAND ($30,000) DOLLARS, OR (ii) A NET WORTH OF AT LEAST SEVENTY-FIVE THOUSAND ($75,000) DOLLARS [AS COMPUTED ABOVE], AND MAY NOT INVEST MORE THAN TEN (10%) PERCENT OF THEIR NET WORTH [EXCLUSIVE OF THE SUBSCRIBER'S HOME, HOME FURNISHINGS AND AUTOMOBILES]. NOTICE TO SOUTH CAROLINA RESIDENTS THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER THE SOUTH CAROLINA UNIFORM SECURITIES ACT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS NOT BEEN FILED WITH THE SOUTH CAROLINA SECURITIES COMMISSIONER. THE COMMISSIONER DOES NOT RECOMMEND OR ENDORSE THE PURCHASE OF ANY SECURITIES, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF THIS OFFERING MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. NOTICE TO SOUTH DAKOTA RESIDENTS THE SHARES HAVE NOT BEEN REGISTERED UNDER CHAPTER 47-31 OF THE SOUTH DAKOTA SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DEPOSED OF FOR VALUE EXCEPT PURSUANT TO REGISTRATION, EXEMPTION THEREFROM OR OPERATION OF LAW. SOUTH DAKOTA RESIDENTS MUST HAVE EITHER (i) A MINIMUM NET WORTH OF AT LEAST SIXTY THOUSAND ($60,000) DOLLARS [EXCLUDING HOME, HOME FURNISHINGS AND AUTOMOBILES] AND A MINIMUM GROSS INCOME OF SIXTY THOUSAND ($60,000) DOLLARS, OR (ii) A NET WORTH OF AT LEAST TWO HUNDRED TWENTY-FIVE THOUSAND ($225,000) DOLLARS [AS COMPUTED ABOVE]. NOTICE TO TENNESSEE RESIDENTS ANYTHING TO THE CONTRARY NOTWITHSTANDING, AN INVESTMENT BY ANY INVESTOR SHALL NOT EXCEED TEN (10%) PERCENT OF THE INVESTOR'S NET WORTH. NOTICE TO TEXAS RESIDENTS THIS OFFERING MEMORANDUM IS FOR THE INVESTOR'S CONFIDENTIAL USE AND MAY NOT BE REPRODUCED. ANY ACTION CONTRARY TO THESE RESTRICTIONS MAY PLACE SUCH INVESTOR AND THE ISSUER IN VIOLATION OF THE TEXAS SECURITIES ACT. 12 ANYTHING TO THE CONTRARY NOTWITHSTANDING, AN INVESTMENT BY ANY INVESTOR SHALL NOT EXCEED TEN (10%) PERCENT OF THE INVESTOR'S NET WORTH. NOTICE TO UTAH RESIDENTS THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THAT ACT OR EXEMPTION THEREFROM. NOTICE TO WASHINGTON RESIDENTS THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE WASHINGTON SECURITIES ACT AND THE ADMINISTRATOR OF SECURITIES OF THE STATE OF WASHINGTON HAS NOT BEEN REVIEWED THE OFFERING OR OFFERING MEMORANDUM. THESE SECURITIES MAY NOT BE SOLD WITHOUT REGISTRATION UNDER THE ACT OR EXEMPTION THEREFROM. IT IS THE RESPONSIBILITY OF ANY INVESTOR PURCHASING SHARES TO SATISFY ITSELF AS TO FULLY OBSERVANCE OF THE LAWS OF ANY RELEVANT TERRITORY OUTSIDE THE UNITED STATES IN CONNECTION WITH ANY SUCH PURCHASE, INCLUDING OBTAINING ANY REQUIRED GOVERNMENTAL OR OTHER CONSENTS OR OBSERVING ANY OTHER APPLICABLE REQUIREMENTS. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OF ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS, ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE SECURITIES ARE OFFERED BY THE COMPANY SUBJECT TO PRIOR SALE, ACCEPTANCE OR AN OFFER TO PURCHASE, WITHDRAWAL, CANCELLATION OR MODIFICATION OF THE OFFER, WITHOUT NOTICE. THE COMPANY RESERVES THE RIGHT TO REJECT ANY ORDER, IN WHOLE OR IN PART, FOR THE PURCHASE OF ANY OF THE SECURITIES OFFERED HEREBY. 13 SUMMARY OF OFFERING The Offering The Company is offering 800,000 Shares of its Common Stock at $2.50 per share to qualified investors pursuant to an exemption from registration under the Securities Act of 1933. Each purchaser will be required to buy a minimum of twenty thousand (20,000) Shares, for a minimum consideration of fifty thousand dollars ($50,000). However, the Company reserves the right, in its sole discretion, to sell less than the minimum subscription. This Offering is being conducted pursuant to Section 4(2) of the Securities Act of 1933, as amended (Athe Act@), and Rule 506 of Regulation D promulgated thereunder ("Rule 506") or other applicable provisions. The shares shall be Rule 144 Restricted shares. In addition, at any time that the Company proposes to file a Company registration statement on Form S-1 under the Act, each share investor will have piggyback registration rights if approved by the Underwriter. The Offering Type of security offered.............................................................Common Stock Offering price per Share ...........................................................................$2.50 Minimum Purchase (20,000 shares).........................................$50,000 Maximum Number of Shares Offered.........................................800,000 Common Stock Outstanding Prior to the Offering........................................11,341,900 After the Maximum Offering..................................12,141,900* *Prior to the exercise of any Warrant offered The Company The Officers and Directors of the Company are specifically set forth in the Business Plan of the Company attached hereto dated December 20, 1999. The executive office of Diversified Product Inspections, Inc. is as follows: 3 Main Street Oakridge, TN 37830 Phone: (865) 482-8480 Fax: (865) 482-8477 Selected Financial Information The financial data, if any, is specifically set forth in the Business Plan of the Company attached hereto dated December 20, 1999. 14 RISK FACTORS The purchase of Units offered hereby involves a high degree of risk. These securities should only be purchased by persons who can afford the risk of loss of their entire investment. Prior to the purchasing of shares, prospective investors should carefully consider the following risk factors: 1. The securities market is extremely risky and there are an unlimited number of opportunities. There can be no assurance that the Company will be able to identify or invest in a group of profitable securities or develop suitable investment opportunities. If the Company does identify such opportunities, the Company may not have sufficient capital to effectively invest in or otherwise manage such opportunities. 2. To date the Company has minimal revenues from operations and only nominal assets. See "Financial Statements." The Company faces all the risks inherent in a new business and there can be no assurance that any of the Company's planned future activities will be successful. Since the Company was recently organized, it cannot provide historical information and financial data upon which a prospective investor can make an informed judgment as to the future prospects of the Company. The purchase of the securities offered hereby must therefore be regarded as the placing of funds at a high risk in a new or "start- up" venture with all the unforeseen costs, expenses, problems and difficulties to which such ventures are subject. See "Use of Proceeds" and "Business." 3. Without the proceeds of this Offering the Company will have only minimal capital and will be limited in its operations. If the Offering does not raise a substantial amount of funds, the Company's capital may prove to be insufficient to permit substantial operations to commence, other than to a very limited extent. The Company may receive from this offering maximum net proceeds of $1,800,000, which management believes will be sufficient to continue the Company's plan of operation. Less than the maximum amount may be obtained. If less than the maximum financing offering is not available to the Company, its activities may be materially and adversely affected. 4. Management may be required to hire additional personnel or obtain independent outside professionals to evaluate certain aspects of its business operations. No arrangements have been made in this regard. It is difficult to forecast the amount of time that the Manager will devote to Company business subsequent to commencing active operations. 5. None of the outstanding Units of the Company currently outstanding have been registered under the Securities Act of 1933, as amended (the "Act"). The Units are offered herein pursuant to Regulation D, and as such are "restricted" under the Securities Act of 1933. Local jurisdictions will also require the placement of transfer restrictions on such Units. 6. The Company has broad discretion to invest the funds of the company. DILUTION If all of the Units offered hereby are sold, the Share holders will own 14.5% of the Common stock of the Company, for which they will have paid a minimum of $2,000,000.00 or $2.50 per Share. Based on existing issued and outstanding shares, existing shareholders (prior to exercise of warrants) and after sale of Units will own 84.5% of the issued and outstanding stock of the Company. (See "Use of Proceeds"). CAPITALIZATION USE OF PROCEEDS The net proceeds to be realized from this offering will approximate $1,800,000 if the maximum offering is sold; however, it is likely that less than the full amount of this offering will be obtained. Management anticipates the net proceeds less initial expenses payable will be applied to the business of the Company, providing capital for marketing and expansion and working capital. No escrow is required and no minimum sale of Units is required before the Company may commence use of the funds of investors. BUSINESS The Officers and Directors of the Company are specifically set forth in the Business Plan of the Company attached hereto dated August 1, 2000 B Exhibit A. The executive office of Diversified Product Inspections, Inc. is as follows: 3 Main Street Oakridge, TN 37830 Phone: (865) 482-8480 Fax: (865) 482-8477 Exhibit A Diversified Product Inspections, Inc. [GRAPHIC OMITTED] An Independent Product Testing Service Specializing in Product Failures, Air Contamination and Fire Investigations Investor Relations Contact: Corporate Contact: Global Development Advisors Diversified Products Inspectors Noreen Wilson/Joseph Griffin John VanZyll 4718 Lillian Ave President & CEO Palm Beach Gardens, FL 33418 3 Main Street Phone: 561-694-9425 Oak Ridge, TN 37830 Fax: 561-624-1171 Phone: (865) 482-8480 E-mail: info@gdadvisors.com Fax: (865) 482-8477 Website: www.gdadvisors.com E-mail: info@dpi-inc.com Website: www.dpi-inc.com Revision Date: August 15, 2000 i Confidential CORPORATE PROFILE DISCLOSURE STATEMENT: This CORPORATE PROFILE is being submitted by Diversified Product Inspections, Inc. ("DPI" or the "Company") on a confidential basis for use solely by prospective investors. Its use for any other purpose is not authorized. It may not be reproduced or redistributed, in whole or in part, nor may its contents be disclosed to any other person. The CORPORATE PROFILE should be read in conjunction with the appendices which constitute a part hereof. Except as expressly provided herein. No person is authorized to make any representations or give any information not contained in this CORPORATE PROFILE or the appendices hereto and no such representations or information may be relied upon by prospective investors. Each recipient of this CORPORATE PROFILE agrees to hold the contents of the CORPORATE PROFILE and all related documents in the strictest confidence and that they will not utilize such information for any competitive purpose or in any manner detrimental to the interests of the Company. Furthermore, the recipient agrees to return the CORPORATE PROFILE and all other documents received if such recipient does not participate in any contemplated transactions with DPI or at DPI's request. This CORPORATE PROFILE does not constitute an offer or solicitation in any state or other jurisdiction in which such offer or solicitation is not authorized. Prospective investors are not to construe the contents of this CORPORATE PROFILE as legal, business or tax advice. Each prospective investor should consult his/her own attorney, business advisor and tax advisor as to legal, business, tax and related matters concerning any contemplated transaction with the Company. Any estimates or forecasts as to events that may occur in the future (including forecasts of revenue, expenses, net income or other operating measures) are based upon the best judgment of the Company's management as of the date of this CORPORATE PROFILE. The Company or its accountants have not compiled or examined the forecasts or audited the financial statements included herein. Whether or not such estimates or forecasts may be achieved will depend upon the Company achieving its overall business objectives and the availability of funds. There is no guarantee that any of these forecasts will be attained. Actual results may vary from the forecasts and such variations may be material. Neither the delivery of the CORPORATE PROFILE at any time nor any transaction made pursuant hereto shall imply that information contained herein is correct as of any time subsequent to the date set forth on the cover hereof. All of the information contained herein, including, without limitation, statements, estimates, and projections as to future operations, revenue and net income of the Company and adjustments to historical financial data, has been based on material furnished by the Company. Each investor should make HIS/HER own independent evaluation of the information contained in this CORPORATE PROFILE which has been included herein in reliance on the Company as to the accuracy or completeness of any information contained herein. Furthermore, this CORPORATE PROFILE contains summaries, believed by the Company to be accurate, or certain terms of certain documents, but reference is made to the actual documents, copies of which may accompany this CORPORATE PROFILE. All such summaries are qualified in their entirety by this reference. The Company reserves the right to supplement or amend this CORPORATE PROFILE, in whole or in part, without notice, for any reason whatsoever. This CORPORATE PROFILE does not purport to be all-inclusive or contain all the information, which a prospective investor may desire. By acceptance of this CORPORATE PROFILE, prospective investors recognize the need to conduct their own thorough investigation and due diligence before considering an investment in the Company. The Company will make available to any qualified prospective investor, the opportunity to ask questions of and to receive answers from the Company concerning the terms and conditions of any contemplated transaction, the Company or any other relevant matters, and to obtain any additional information to the extent the Company possesses such information or can obtain it without unreasonable effort or expense. SAFE HARBOR ACT NOTICE: The statements in this CORPORATE PROFILE regarding future results of operations are forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although the Company believes the expectations reflected in such forward-looking statements are based on reliable assumptions, it can give no assurance that its expectations will be obtained. Factors that could cause actual results to differ materially from the Company's expectations include industry conditions, acceptance and demand for the Company's products and success of the Company's marketing efforts. These forward-looking statements speak only as of the date hereof. The Company disclaims any intent or obligation to update these forward-looking statements. DISCLAIMER: This CORPORATE PROFILE was compiled by Global Development Advisors, Inc. All of the information, data, and forward looking statements contained herein are compiled from and based upon information and data provided by Diversified Product Inspections, Inc. to Global Development Advisors. This document has been reviewed and approved by the management Diversified Product Inspections, Inc. Global Development cannot and does not make any claims, assertions or guarantees as to the accuracy of the representations of the Company contained herein. Compiled by Global Development Advisors 1999-2000 Page i Table of Contents Executive Summary..............................................................2 Products and Services..........................................................5 Overview.......................................................................5 Products and Services for the Insurance Industry...............................5 Investigations and Inspections.................................................6 On-Site Investigations......................................................6 Mail-In Program.............................................................6 Indoor Air Quality Testing..................................................7 Secure Storage and "Chain of Custody".......................................8 Expert Testimony............................................................8 Outsource Program..............................................................9 Structure Evaluations and Consumer Product Evaluation..........................9 Additional Services............................................................9 Website and E-commerce........................................................10 Manufacturer Defective Product Notifications..................................10 Business Plan.................................................................11 Marketing Plan................................................................11 Competitive Advantage.........................................................11 Client List...................................................................13 Expansion Plan................................................................14 New Headquarters and Laboratory...............................................14 Outsource Program.............................................................14 Compiled by Global Development Advisors 1999-2000 Page i Table of Contents Projected Revenues............................................................14 Success Stories...............................................................15 Board of Directors and Officers...............................................17 Professional Organizations and Associations...................................18 Recent News...................................................................19 Compiled by Global Development Advisors 1999-2000 Page ii Diversified Product Inspections, Inc. Executive Summary This Executive Summary is provided to illustrate Diversified Product Inspection, Inc.'s viability as an attractive public company investment to prospective institutional and individual stock market investors. Diversified Products Inspection, Inc. (DPI) was incorporated in the State of Florida on September 30, 1991. Diversified Product Inspections, Inc. has merged into a fully reporting company. The Company plans to file an application with NASD and hopes to begin trading in the next 60 days under the symbol DPIX . DPI is located at 3 Main Street, Oak Ridge, Tennessee 37830. Telephone: (865) 482-8480. Fax: (865) 482-8477. The Company maintains a web page at: http://www.dpi-inc.com. Diversified Product Inspection, Inc. specializes in conducting investigations and laboratory analysis of a wide variety of products to determine the "cause and origin" of failures. The Company's primary customers are insurance companies that are interested in subrogating claims to recover losses. The insurance industry is one of the largest business enterprises in the United States. Insurance claims paid by the industry in 1998 were approximately $150 billion and estimated to be $180 billion in 1999. In 1998, depending upon the insurance company, only 1% to 5% of claims were subrogated. It is estimated that the subrogation potential could be $10-15 billion annually, based on the industry internal goals of 7-10%. DPI's clients have been able to subrogate as high as 68% of submitted claims. Diversified Product Inspections, Inc. is the inspiration of entrepreneur John VanZyll. After many years of experience in home construction, and employment as a Customer Service Manager for several large developers and homebuilders, Mr. VanZyll recognized the opportunity and need for a service that would help protect consumers and assist them in making informed decisions regarding home or appliance purchases. During the course of home investigations, the Company noted a large number of defective products not necessarily related to home construction. Because the home inspection industry is saturated and highly competitive, DPI sought to differentiate itself from its competitors by adding product failure investigations, as an additional service. The Company quickly realized that there was tremendous demand for this type of service by the insurance industry and has since been able to establish itself as a specialist in this rapidly growing field. DPI has developed a sustainable competitive advantage in this lucrative niche market through the creation of a proprietary database. DPI began to accumulate a database of known defective products, and in 1994 began concentrating, almost exclusively, on defective product investigations for the insurance subrogation field. DPI now has a computerized database with key identifiers of over 300,000 products, a library of over 100,000 photos and documentation, plus hundreds of videos. To the Company's knowledge, there is no other company in the US that possesses such an extensive database, or is capable of providing the cost-effective range of services and experience that DPI can offer its clients. Compiled by Global Development Advisors 1999 Page 1 Diversified Product Inspections, Inc. DPI has enjoyed steady growth in customer base over its nine-year history. The Company currently provides investigative services for over 1,900 insurance adjusters in more than 40 states. The Company employs eight state-licensed Private Investigators who are trained and certified as "Cause and Origin" investigators, and six lab technicians. DPI also offers pre-failure evaluations of structures, building materials and appliances. Since its formation, DPI has also experienced steady growth in revenues and profits. Since 1996, the Company has increased gross sales from $188,780 to $329,547 in 1998 and $677,078 in 1999. Gross revenues from services for 2000 are $478,594 for the first six-month period January thru June and are projected at $ $960,340 for the year. This growth has been realized with minimal outside funding and only a limited marketing campaign. The Company primarily provides services to the Insurance Industry through a rapidly growing Mail-in Inspection Program, an On-Site Investigation Program, Indoor Air Quality Analysis and Secure Storage. In addition, the Company has launched an Outsource Investigative Program (DPI Partners Program), which will extend DPI's services throughout the country. Until December 1999, the Company was expanding using its own resources. In June 1999, the Company established a satellite office in Salisbury, North Carolina and has since outsourced this service to an independent licensed inspector in Raleigh, North Carolina. In August 1999, the Company signed a lease for land and building for a new headquarters and laboratory to be located in Oak Ridge, TN. DPI's client list includes most of the major insurance companies including Allstate Insurance Co., Hartford Insurance Co., Prudential Insurance Co., C.N.A. Insurance Co., and Safeco Insurance Co., State Farm Insurance Co., Bankers Insurance Co., and First Floridian Insurance Co., (Travelers Insurance Co. in Florida). The Company's success rate and reputation has lead to increased demand for the DPI's services, such that the Company must expand to meet current and future client needs. DPI's plans an expansion in three phases: Phase I expansion calls for $2,000,000 for a ne headquarters and Laboratory/Storage facility, located in Oak Ridge, TN, capable of handling a broad range of product investigations, as well as expanded space for secure evidence storage. An aggressive marketing campaign will include expansion of the seminar/training programs currently being offered to the insurance industry. Phase II expansion calls for $5,000,000 for the opening of Laboratory/Storage facilities located in Stockton, CA and San Bernadino, CA to service the West Coast, expansion of the DPI Partners Outsource Program and expansion of the On-Site Investigation Program. Compiled by Global Development Advisors 1999 Page 2 Diversified Product Inspections, Inc. Phase III expansion calls for $5,000,000 for th opening of Laboratory/Storage facilities located in Binghamton, NY and Austin, TX., and further expansion the DPI Partners Outsource Program and expansion of the On-Site Investigation Program. All phases include the expansion of outsource offices through the recruiting and training of DPI certified inspectors. DPI will utilize the existing established home inspection. The Company also has a training program to certify "outsourced" personal to properly handle and ship evidence to the various Laboratory/Storage Facilities. The Company will gradually phase out the operation of its Deltona, FL and Salisbury, NC office laboratories as the company outsources the functions to trained existing home-inspection businesses. The goal of the multi-phase expansion is to expand DPI's service area to include the entire continental United States within the next three years. Based on the expansion program, revenues for Year 2001 are projected at $5.7 million. Operating profit is projected at $4.5 million and net profit before taxes at approximately $2.65 million. In December 1999, the company raised $483,800 through a Reg. 504 private placement of 241,600 shares of the company's Common Stock subject to Rule 144. The proceeds from this sale were used to finance the relocation of the headquarters, purchase additional lab equipment and hire additional employees. Diversified Product Inspections, Inc. is seeking $15,000,000 to finance the expansion to meet their growing business needs. Compiled by Global Development Advisors 1999 Page 3 Diversified Product Inspections, Inc. Products and Services Overview Insurance claims in the United States are hundreds of millions of dollars every year. A vast majority of these claims are the result of product failures caused by defective products. Until DPI entered this market, depending upon the insurance company, only 1% to 5% of claims were successfully subrogated. Through the use of DPI's proprietary database, the Company is able to investigate the "cause and origin" of losses and provide their clients with information enabling them to cost-effectively subrogate almost 70% of their claims. 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. Until recently, Insurance companies have not aggressively pursued subrogation. There are many reasons for this lack of effort in this area. Liability can be difficult to prove. Product failure investigations can be expensive, especially if conducted by an engineering lab. Proximate cause must be demonstrated through a preponderance of the evidence. The product and its manufacturer must be positively identified. Because of the high cost and other factors, many insurance companies only pursue subrogation claims over a certain amount. Competitive Advantage: DPI provides the Insurance Industry with the industry's first cost- effective investigative service. DPI has a staff of professional investigators and laboratory analysts, who are supported by an extensive proprietary product database. DPI's database is unique to the industry and enables DPI to quickly identify the manufacturer of a defective product and offer its investigative services at cost-effective levels. DPI enjoys a clear and sustainable competitive advantage as a result of this proprietary database. Proprietary Database: The Company's Proprietary Database contains an extensive listing of product identifiers, and known defects and failures. This computerized database contains key identifiers of over 300,000 products. In addition, DPI possesses a library of over 100,000 photos and documentation, plus hundreds of videos. This database is the result of 9 years of research and is frequently updated. Any competitor entering the field would have to create its own database from scratch, an undertaking of great time and cost. Compiled by Global Development Advisors 1999 Page 4 Diversified Product Inspections, Inc. Products and Services for the Insurance Industry The primary business of DPI is the determination of the "Cause and Origin" of property damages and the identification of the defective product that caused the loss. DPI finds itself in a unique position of being a pioneer in what is a growing and increasingly important field - Subrogation Recovery. Demand for these services should grow as the percentage of successfully subrogated claims increases. Currently, the insurance industry's internal goals are to successfully subrogate 7% of claims1. Product identification after a failure (especially fire) has been one of the main reasons for the lack of successful subrogation. DPI's laboratory has a 97% success rate in product identification. Product identification and establishing the "origin and cause" are the key elements to successful claim subrogation. This is an improvement of 66% over the industry average and at a fraction of the cost of conventional engineering firms. After the deduction of DPI's reasonable fees, these subrogation recoveries are pure profit to the insurance company. Investigations and Inspections On-Site Investigations DPI performs professional forensic investigations to identify the products and materials involved in a claim loss and determine the cause of the failure. DPI employs state-licensed Private Investigators who have been certified in "Cause and Origin" analysis. It is the determination of "Cause and Origin" that is the basis for successful subrogation of a claim. DPI investigators are also trained to conduct fire and arson investigations. On-Site investigations are conducted for a flat fee plus log hours within a 100-mile radius of the following areas: Oak Ridge, Tennessee; Raleigh, North Carolina; and Maitland, Florida. Areas outside these perimeters are charged a mileage fee of .40 cents per mile. Where warranted for large losses, DPI will fly an investigator to any of the 48 continental states. The company is in the process of recruiting DPI Outsource Partners to conduct On-Site Investigations. This program is designed to fill the demand for losses where the items are too large for the Mail-In Program and the loss to small to fly in a DPI investigator. (See Outsource Program) Mail-In Program Many items are small enough to ship directly to the lab. This is a DPI innovation that has greatly reduced the cost to the insurance companies. DPI supplies the insurance adjuster with evidence collection kits. Items are placed in the pre-addressed, pre-paid UPS and Fed- Ex box or envelope and submitted to DPI for identification and analysis. DPI performs this task at their lab and submits a report to the insurance adjuster. The item is retained in secure storage as evidence until the claim is closed. The insurance adjuster receives a report which: (1) Allstate Insurance Company Compiled by Global Development Advisors 1999 Page 5 Diversified Product Inspections, Inc. Identifies the item (99% success rate with identification) Determines whether the item was the "origin and cause" of the loss Determines whether the item was defective Determines whether subrogation is an option (67%) The "Mail-In Program" is a benchmark result of the great success that DPI has been able to achieve in the state of California. In just one Allstate Insurance Company claims offices near Bakersfield, the client was able to successfully recover over $4 million in subrogated claims. As a result of this overwhelming success, Allstate Insurance Company has instructed all its adjusters in Northern California to submit all of their defective products to DPI. In November 1999, State Farm invited DPI to attend the National Association of Subrogation Professionals (NASP) convention in Las Vegas. DPI was introduced as an investigative specialist in the field. State Farm Insurance has recommended DPI be used by its insurance adjusters. The following table is a partial listing of items that can be mailed in using the Item Mail-in Program:
Check Valves Copper Pipe CPVC Pipe Freeze Proof Toilet Tanks Faucets Hose Bibs - ------------------- ------------------ ------------------ ------------------ ------------------ ------------------- Garbage Polybutelene Pressure Release Sump Pumps Toilet Valves Surge Protectors Disposals Valves - ------------------- ------------------ ------------------ ------------------ ------------------ ------------------- Under Counter Washer Hoses Water Control Water Filters Water Level Water Softeners Water Heaters Solenoids Switches - ------------------- ------------------ ------------------ ------------------ ------------------ ------------------- Water Supply Hair Dryers Toasters Curling Irons Clock Radios Lines - ------------------- ------------------ ------------------ ------------------ ------------------ -------------------
The minimum fee for these services is $255.00. Fire damaged items (accounting for 30-40% of the items submitted) incur a minimum additional charge of 1 log hour @ $75.00 per hour. Currently, DPI is receiving approximately 90 items per week at an average of $300 for each item submitted. Compiled by Global Development Advisors 1999 Page 6 Diversified Product Inspections, Inc. Indoor Air Quality Testing DPI provides in-depth indoor air quality analysis and is a pioneer in identifying airborne contamination and determining the causes of "sick" buildings. DPI has designed proprietary measuring instruments capable of detecting airborne chemical contaminants in structures. DPI also utilizes state laboratories to supplement their own lab. These contaminations are not controlled by state boundaries or by any particular types of construction. The contaminations can result from chemicals used in construction materials, chemicals used in everyday cleaning products, or could be the result of appliances leaking chemicals such as Freon. DPI is one of a handful of companies in the country that is capable of identifying the contaminants involved and the cause and origin within the structure. The most dangerous and most common cause of indoor air contamination comes from leaking refrigerants contacting a heat source that can convert the freon into deadly phosgene gas (mustard gas). Carbon sooting frequently evidences the presence of this reaction. Almost all air conditioners and many refrigerators leak freon. There are many sources of heat in the home (heat strips, pilot lights, electric range and oven, toasters, etc.), which are capable of converting the freon into phosgene gas. DPI has conducted a nationwide study on the prevalence of contamination in the home. Due to the high frequency and potentially deadly effects of phosgene, DPI has developed a device that neutralizes the freon before it can be converted to phosgene. This device can be installed as an inexpensive retrofit to existing systems and is seeking an appropriate licensing agreement There are two types of Air Tests that DPI offers: Air Scan - a on-site test performed indoors to determine the presence of contaminants in the building or structure by comparing indoor air to outdoor air. This test does not identify the contaminants. The current price of this test is $1,100. Total Air Analysis - this is a 24 hour test of indoor air with samples taken for in- depth laboratory analysis. This test identifies the type of contaminants that are present in the indoor air. The current price of the Total Air Analysis is $5,000. DPI has investigated in excess of 10,000 of these types of contaminations in a large number of states. Extending from New York to California and from Florida to Michigan. Depending on the conditions within the home, these contaminations can damage the contents and can also impact the health of the residents living within this home. DPI has a large database of information in regards to these types of contaminations and potential damages caused by them. Compiled by Global Development Advisors 1999 Page 7 Diversified Product Inspections, Inc. At a recent training seminar, DPI was advised of a growing concern in the Insurance industry in regards to mold and air contamination. DPI is developing a booklet to provide direction and guidance in dealing with these types of contaminations. This would include an appropriate course of action to protect the health of the adjuster who is conducting an investigation into this type of claim. Secure Storage and "Chain of Custody" Crucial to the legal process of subrogation is maintenance of the "chain of custody." DPI maintains secure facilities and has personnel who are trained in the procedures for properly handling, storing and cataloging of evidence. The statute of limitations for filing litigation is 3 years. Due to the crowded court dockets, the average item remains in storage for 2 years. Storage is an additional revenue stream for DPI as the Company can perform this service more securely and efficiently than the insurance companies can themselves. Currently, DPI has over 9,000 items in secure storage at an average rate of $35.00 per annum. Expert Testimony DPI investigators are recognized as experts in their field and are capable of testifying as such in court. The standard fee for such court appearances is $5,000 per day. DPI has testified in such hi-profile cases as the Masonite Siding Class Action Suit and the Louisiana Pacific Class Action Suit. Outsource Program The Company has launched a DPI Partnership Program where DPI recruits and trains outsource personnel to service any location where the insurance industry needs the service and is capable of generating a minimum of 10 inspection/evidence collections per week. The Company is targeting the Home Inspection industry for these partnerships. DPI handles the training, administration and storage. The location partner receives 60% of the inspection fee and log hours billed. The Company has established one Outsource location in Orlando, Florida which is already performing 10 inspections per week. The Business Plan calls for 3 additional locations the first year and then 6 locations per year thereafter. Compiled by Global Development Advisors 1999 Page 8 Diversified Product Inspections, Inc. Structure Evaluations and Consumer Product Evaluations Home Evaluations and Consumer Product are not to be confused with a home inspection. Home inspections are typically performed as a pre-purchase inspection that concentrates on the current functionality of items in the home. The Consumer Product and Home Evaluation reports on the failure rates and recalls of the products used in the home. The difference is significant. Structure Evaluations are performed on-site by a qualified DPI investigator. In addition to reporting on the current functionality of the structure and appliances (roof, siding, heating and cooling system, etc), DPI goes further and identifies the manufacturers of the various building materials and appliances. The client is also informed of known failure rates, defects and hazards, recalls and current or pending legal proceedings. As an example, a home inspection would report that the siding on the home is in good condition if it is painted and shows no obvious signs of decay. DPI's inspection would report on the type of siding and whether or not that siding was the subject of high rates of failure, or the subject of a recall. DPI would also report to the client whether the siding was the subject of a class action settlement and the procedures for making a claim. (i.e. Louisiana Pacific siding case) Additional Services Full Engineering Services - DPI is abl to provide clients with full engineering services including mechanical and electrical engineering Metallurgist Services - the DPI lab is equipped to perform a full range of metallurgical services capable of analyzing submitted items for design load, metal fatigue, hairline cracking, etc. Training Seminars - DPI investigators are also trained as instructors and are licensed in most states due to reciprocity agreements. DPI has been approached by the state of Texas, to conduct licensing seminars for insurance adjusters. Website and E-commerce Consumer Product Evaluations - A surve of common items in the home for the purpose of identifying products that are the subject of a recall or are known to have a history of failure. DPI's evaluation informs the consumer of current working status of the product, the risks and failure rates of various products, recalls, current legal proceeding and remedies. DPI is planning to offer the Consumer Products Evaluation, on the Company website. Consumers will be offered an opportunity to evaluate a single product or an entire household. Package deals will be available which will include a 1-year subscription to the company newsletter, the "Investigator." The "Investigator" keeps consumers informed of current product recalls and safety tips for the home. The Company intends to provide this services for a nominal fee or no-charge. The Company believes that revenue can be derived from the database that is being accumulated under this program. Compiled by Global Development Advisors 1999 Page 9 Diversified Product Inspections, Inc. Database Marketability - The Consumer Product Evaluation database may be marketable to several different clients. The database will include consumer buying habits, which is of value to manufactures and retailers. The database will also contain the location of products that may present potential liability for manufacturers, which is valuable to manufacturers and insurance companies. Manufacturer Defective Product Notifications DPI provides manufacturers with a service that assists those companies in locating products that are subject to recall. It is inevitable that a certain number of defective products will slip through the manufacturer's quality control inspections and make their way into the marketplace. These defective products, once identified, are a source of potential liability for the manufacturer. Manufactures are often eager to locate and replace defective products before the product fails and causes high damages. If the average damages are relatively high, the manufacture, in many cases, is willing to pay a reward or bounty for information that will assist them in locating the product prior to failure. This is where DPI's database of consumer profiles will come into play. (See: Consumer Product Evaluations). DPI plans to maintain a website where consumers can receive a home evaluation online. The consumer may pay a nominal fee to enter all household appliances, mechanical devices, lawn equipment and materials of and around the house into the computer. The computer will then compare the profile to the database of known defective products. DPI will then inform the consumer and the manufacturer of the location of the product so that a replacement can be scheduled. Compiled by Global Development Advisors 1999 Page 10 Diversified Product Inspections, Inc. Business Plan Marketing Plan DPI is marketing its services through Company sponsored seminars delivered to the major insurance companies. DPI is rapidly becoming a recognized leader in the field of subrogation recovery. The Company has also presented seminars, on request, to the Air Conditioning Contractors Association of Central Florida, Fire Departments and Civic Clubs (American Legion, Knights of Columbus, Kiwanis, etc.). The training seminars have been instrumental in demonstrating DPI's services, fees and success to the insurance industry. DPI's marketing strategy is based on its highly successful training programs and seminars that the Company puts on for the Insurance Industry. The Company has put on over 125 seminars to date, and has trained over 1,900 insurance adjusters, many of whom have become steady DPI clients. Competitive Advantage DPI's sustainable competitive advantage is derived from the Company's proprietary database of defective products. This database is the result of over 9 years of investigations, analysis and information gathering. The database is an ongoing work with new data being added daily. DPI has identified and cataloged unique characteristics of hundreds of thousands of products. This combination of database and laboratory allows DPI to economically identify a product make and model on relatively few clues. This is crucial to subrogating a claim, where the plaintiff must be able to positively identify the manufacturer and establish the Cause and Origin. To the Company's knowledge there is no other company or agency with a database to match DPI's. Prior to the establishment of DPI "Diversified Product Inspections" there was no real economical way to receive an unbiased and independent assessment of product failure by scientifically identifying the product's manufacturer. Now there is! Because of DPI's database of products and the ability to identify those defective products in the laboratory, its has become cost effective to pursue all insurance claim losses. There is no need to hire expensive engineering firms to try and perform this service. There is no longer a need to suffer the following often received complaints: NEVER AGAIN . . . . Be frustrated by products that fail time and time again and cost the insurance industry millions of dollars in claims without recourse. Pay hundreds and even thousands of dollars for faulty / incomplete testing. Have products disappear mysteriously after bein sent in for testing. Compiled by Global Development Advisors 1999 Page 11 Diversified Product Inspections, Inc. Wait for weeks and even months for reports to b sent back. Find a place to store the items of evidence, or have items misplaced in storage. DPI has been successful in assisting the insurance industry recover losses that before were not cost effective or where the industry was unable to pursue the defective product's manufacturer due to their inability to identify the maker. DPI has a 95% success rate in identifying these products. If DPI is able to identify product failure but cannot identify the manufacturer, there will be no charge for the company's services, and the product will be returned to the client. DPI is differentiated from Consumer Reports and Underwriter's Laboratories. Consumer Reports compares retail products for features and performance and surveys customers for product problems. Underwriter's Laboratories is paid by the manufacturer to test selected components of a product. (The manufacturer may ask that only the power cord of a clock radio be tested. If the cord passes the test, the clock radio will proudly display a UL listing.) DPI investigates products that have failed in use. The Company reports on the cause of failure and recommends to the manufacturer a means to prevent future failures. The Insurance Industry benefits from the cost-recovery of the claims paid out on a defective product. The manufacturer is encouraged to produce products with lower failure rates. The consumer benefits from recovery of their insurance deductible and from better-manufactured products. Compiled by Global Development Advisors 1999 Page 12 Diversified Product Inspections, Inc. Client List DPI's primary clients are insurance companies, including: Allstate Insurance Amica Insurance Appalachian Claim Services Bankers Insurance Bankers Security Bausley & Associates C.J.W. Associates Claim Solutions Services, Inc. C.N.A. Insurance C.S.A.A Crawford and Company Curley & Associates Elliot Claims Service, Inc. Farmers Insurance Fire & Arson Investigation Consultants, Inc. Fire Service Restoration Fireman's Fund Insurant First Floridian (Travelers) Florida Farm Bureau Frontier Adjusters Grotefeld & Denenberg, L.L.C. Hartford Insurance Langham & Associates Kentucky National Insurance McDonald, Tinker, Skaer Liberty Mutual Nationwide Insurance Morrison, Mahoney & Miller Northfield Associates Nationwide Mutual Professional Public Adjuster, Inc. Post & Schell, P.C. Prudential Insurance Property JUA Services Reliance Insurance Purofirst Midsouth Insurance Residential Warranty Rebublic Insurance Safeco Insurance Rimkus Consulting Scottsdale Insurance Schaeffer Engineering Selective Insurance SCS & Associates Shepard, Filburn & Goodblatt, PA Servpro, Inc. State Farm Insurance Southern Family Insurance The Johnson Group T.I.G. Insurance Travelers Insurance Totura & Company USAA Insurance United Pacific Insurance Zurich American Westfield Companies Compiled by Global Development Advisors 1999 Page 13 Diversified Product Inspections, Inc. Expansion Plan DPI recently relocated its headquarters to Oak Ridge, TN from Deltona, Florida. DPI had satellite offices in Salisbury, North Carolina and Maitland, Florida, which provided services to Alabama, Florida, Georgia, Kentucky, North Carolina, South Carolina, and Tennessee. With the exception of Florida, the other States are currently serviced out of the Oak Ridge facility . The Company's "Mail-in Program" provides service throughout the US. Large items are currently shipped at customer expense to Oak Ridge Tennessee. New Headquarters and Laboratory The Phase I Expansion Plan is the relocation to a larger facility in Oak Ridge, Tennessee. This location was selected because it offers a central location for the East and Central United States. Oak Ridge is located near a major airport and trucking center, has a well-educated and available workforce and economic incentives from the city and county for opening a business in the area. Outsource Program DPI Partnership program yields substantial revenue with minimal overhead. DPI will handle the recruiting, training and administration. The "Use of Funds" will be primarily for the marketing of the program to the Home Inspection Industry. Projections are based on a modest expansion of only 6 locations per year. Projected Revenues (See Exhibit B - Financial Projections) Compiled by Global Development Advisors 1999 Page 14 Diversified Product Inspections, Inc. Success Stories The below examples are actual cases where DPI's investigations have enabled the client to successfully subrogate the claim: Masonite Siding Class Action lawsuit. DPI was key expert witness in this lawsuit. DPI 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 regardin defective siding. DPI inspected 2,000 homes in 19 states. It was the defense's contention that the siding could not be positively identified once installed. DPI 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) Battery charger in California caused a fire in strip mall causing heavy damage. DPI is able to positively identify the origin, cause and manufacturer. Reliance Insurance is able to subrogate a $1,000,000 claim. Ply-Gen (Hoover) vs. Pulte Home. Defective siding was installed on over 13,000 homes in Florida. DPI's investigations and lab analysis resulted in a $23.3 million settlement to the homeowners. (1997) GE Dishwasher. A GE dishwasher caused $80,000 in flood damage in a Heathrow, Florida home. This was an ongoing problem with this particular model that DPI had informed the manufacturer of 3 years prior. GE sent their own technicians to the home to determine the cause of the problem. DPI was finally called in and showed GE the cause - an insecure float mechanism; and a remedy - installation of a small stainless steel clip to hold the float mechanism in place. GE has since incorporated this fix in future models. The insurance company was able to successfully subrogate the claim. 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 DPI to inspect the brakes. DPI's 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", saving her from points on her license and an increase in her insurance premium. In addition, she was refunded her deductible. Lamborghini Automobile in Orlando burns because of a failure of the rubber fuel lines. DPI's 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 Compiled by Global Development Advisors 1999 Page 15 Diversified Product Inspections, Inc. of the fuel line manufacturer's recommendations. It was determined that the owner was at fault. Home is Kissimmee, Florida was being consumed b mold. The builder and several engineering firms had been unable to determine the cause. Upon inspecting the home, Mr. VanZyll immediately determined that there was a hidden water leak in the walls. The builder insisted that this was impossible, as the water to the home was turned off at the main. DPI technicians quickly located the leak using ultrasonic equipment. The plumbing contractor had installed an unused icemaker line on the city side of the meter. This line was slightly pierced by a nail during drywall installation, causing saturation inside the walls and the mold growth throughout the home. It was determined that the plumbing contractor was at fault. Chevy Silverado burns in Orlando. DPI was able to determine that the Cause and Origin was a defect in the design of the dipstick for the transmission. The dipstick would eject under pressure, allowing transmission fluid to spray on the exhaust and cause fires. The insurance company was able to successfully subrogate the claim and GM has since corrected the problem. Compiled by Global Development Advisors 1999 Page 16 Diversified Product Inspections, Inc. Board of Directors and Officers The DPI Board of Directors and Key Management are made up of a broad spectrum of professionals with extensive experience in their respective fields of business management, marketing, finance and law. The Key Management personnel are all members of the Board of Directors. John VanZyll, Chairman of the Board and Chief Executive Officer. Entrepreneur and founder of Diversified Product Inspections, Mr. VanZyll 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. VanZyll 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. Ann M. Furlong, Secretary and Director. Ms. Furlong has over 29 years of experience as a professional manager and the owner and founder of several successful businesses. Ms. Furlong has provided the administrative and organizational expertise that has greatly contributed to DPI's success since its founding in 1991, including the compilation of the company's proprietary database. Dean Madden, Chief Financial Officer, Treasurer and Director. Mr. Madden is serving as the Company's interim CFO. Mr. Madden has over 33 years of experience in all aspects of accounting. Mr. Madden served as CFO and Director of GMAC of Canada from 1983 - 1988. Mr. Madden has worked in various accounting positions throughout his career, specializing in auditing, taxes, and preparation of financial statements. Marvin Stacy, Director, Chief Operating Officer Mr. Stacy has over 40 years of experience in all aspects of electrical and mechanical engineering and design. Mr. Stacy is also gifted as an investigator and is responsible for the operation of the laboratory. He has designed custom testing equipment and designs solutions for manufacturers to correct design flaws and shortcomings. David Dowell, Esquire, Director. Mr. Dowell wa awarded a B.S. degree in Business from Indiana University in 1985 and a degree in Juris Prudence from Indiana University School of Law in 1988. Upon graduation, Mr. Dowell was admitted to the Indiana Bar and was retained by Coopers and Lybrand as a tax associate. He moved to Florida in 1990 and became law clerk for the Fifth Circuit Court in Lake County. In 1992, Mr. Dowell opened a private practice and specializes in Corporate Law and Bankruptcy. Compiled by Global Development Advisors 1999 Page 17 Diversified Product Inspections, Inc. Professional Organizations and Associations Air Conditioning Contractors Association Dun & Bradstreet Corporation Foundation Busines Education Services International Association of Plumbing and Mechanical Officials National Association of Investigative Specialists Sources of Information Techniques Advanced Fire Investigation Techniques Insurance Claims Investigation National Association of Subrogation Professionals National Fire Protection Association Private Protective Services Board - North Carolina Southern Building Code Congress international Compiled by Global Development Advisors 1999 Page 18 Diversified Product Inspections, Inc. Recent News 1999 Jul DPI opens satellite office in Salisbury, North Carolina Aug DPI signs long term lease for what wil become the company's new headquarters Nov DPI relocates from Deltona, FL to Oak Ridge, TN. Dec DPI raises $483,800 through a Reg 504 private placement sale of the company's Common Stock, subject to Rule 144. 2000 Jan-Mar Small Item Mail-in Program grows from 100 items per month to over 300 items per month. Jan-Mar In-door Air Testing - 6 test conducted this year ranging from $800 to $5,000 per test. Fees for deposition and court testimony could add $900 to $5,000 per day for each full day of testimony Jan-Mar Seminars - 12 seminars with approximately 120 attendees. Seminars are a major marketing tool and source of increased utilization of the Small Item Mail-in Program. Apr DPI files first 10QSB and 10K (Quarterly and Annual Reports) with the SEC Apr Negotiations where initiated by a majo insurance company for DPI to become that company's records depository. May Consolidated audits performed to enabl the company to list with NASD as a free-trading OTC Bulletin Board stock. July DPI Filed SEC Form 15c-211 with NASD t become free-trading company July DPI Completes promotional video August DPI implements bar coding for all evidence and files, which enables tracking of evidence throughout the facility and further strengthens the chain of custody August DPI implements a new accounting package Aug DPI files 10Q-SB (Quarterly Report) with the SEC Aug DPI has received a request from the Consumer Product Safety Commission (CPSC) to assist them with providing information in regards to failures in electric baseboard heaters. Compiled by Global Development Advisors 1999 Page 19 Diversified Product Inspections, Inc. Other Developments Hotel/Motel/Apartment Program - currently being developed are a number of program services that would help recover losses for self-insured or high-deductible damage claims. The program would work on a 35% - 40% contingency fee. Salvage Program - currently being developed is program for the acquisition and sale of salvage materials WebSite / Pass Program - information and evaluations regarding safe environments (may be of special interest to the Military). Compiled by Global Development Advisors 1999 Page 20 Diversified Product Inspections, Inc. Exhibit C ISSUER INFORMATION FILE PURSUANT TO SECURITIES AND EXCHANGE COMMISSION RULE 15c2-11 July 15, 2000 Diversified Product Inspections, Inc. formerly known as Shoe Krazy, Inc. TAX ID NUMBER: CUSIP NUMBER: 65-0877741 255322 10 9 Employees: shareholders: July 15, 2000 - 21 - Approx. 38 ISSUER'S EQUITY SECURITIES Common Voting Stock AUTHORIZED: ISSUED AND OUTSTANDING: 11,116,900 50,000,000 Common ($.0001 par value) TRANSFER AGENT: Diversified Product Inspections, Inc. The Company currently serves as its own Transfer Agent. The address for the Transfer Agent is 265 Sunrise Avenue, Suite 204, Palm Beach, FL 33480. Telephone number is (561) 832-5696 and facsimile number is (561) 659-5371. (905) 948-9600 Voice (905) 948-8377 Fax Diversified Product Inspections, Inc. Diversified Product Inspections, Inc. CUSIP NO. 255322 10 9 ISSUER INFORMATION FILE AS OF July 15, 2000 THE INFORMATION FURNISHED HEREIN HAS BEEN PREPARED FROM THE BOOKS AND RECORDS OF THE ISSUER BY ITS OFFICERS AND DIRECTORS IN ACCORDANCE WITH THE SECURITIES AND EXCHANGE COMMISSION RULE 15c2-11 AS AMENDED, AND IS INTENDED ONLY AS A SECURITIES DEALER INFORMATION FILE; AND NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION, OR TO MAKE ANY REPRESENTATIONS, NOT CONTAINED HEREIN IN CONNECTION WITH THE ISSUER, SUCH INFORMATION OR REPRESENTATIONS, IF MADE, MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE ISSUER; AND DELIVERY OF THIS INFORMATION FILE DOES NOT AT ANY TIME IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE FIRST WRITTEN ABOVE. SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS: This Issuer Information File in accordance with SEC Rule 15c2-11, may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Diversified Product Inspections, Inc. Such statements refer to events that could occur in the future or may be identified by the use of words such as "intend," "plan," "believe," "anticipate," correlative words, and other expressions indicating that future events are contemplated. Such statements are subject to inherent risks and uncertainties, and actual results could differ materially from those projected in the forward-looking statements as a result of certain of the risk factors set forth following and elsewhere in this Issuer Information File. Diversified Product Inspections, Inc. ISSUER INFORMATION FILE The information contained in this Issuer Information Report has been compiled to fulfill the disclosure requirements of Rule 15c2- 11 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934 as Amended. The enumerated items and captions correspond generally to the format set forth in the Rule. Item 1: Exact Name of the Issuer and its Predecessors. Issuer: Diversified Product Inspections, Inc., a Florida corporation formerly known as Shoe Krazy, Inc., Subsidiary: Diversified Product Investigations, Inc. Item 2: Address of Issuer's Principal Executive Offices. The principal executive office of the Issuer is located at: 3 Main Street Oakridge, Tennessee 37830 (865) 482-8480 Voice (865) 482-8477 Fax Item 3: Issuer's State of Incorporation. Diversified Product Inspections, Inc. The Issuer was organized in the State of Florida on October 17, 1994. Item 4: Exact Title and Class of Issuer's Securities. The Issuer has only one class of equity securities issued and outstanding; that being Common Voting Stock. Authorized common is 50,000,000 shares. Shares of Preferred Stock are authorized but none have been issued or are outstanding. Authorized Preferred Stock is 10,000,000 shares. The Board of Directors is authorized to set the terms, conditions and limitations of such Preferred Stock. Item 5: Par or Stated Value of Issuer's Securities. The par value of the Issuer's common stock is $0.0001 par value. Item 6: Number of Shares or Total Amount of Issuer's Securities Outstanding as of the End of the Issuer's Most Recent Fiscal Year. December 31, 1999 Fiscal Year End (Issued and Outstanding) 2,100,000 shares of issued and outstanding as of December 31, 1999. Item 7: Name and Address of the Issuer's Stock Transfer Agent. The Company currently serves as its own Transfer Agent. The address for stock transfer matters is 265 Sunrise Avenue, Suite 204, Palm Beach, FL 33480. Telephone number is (561) 832-5696. Facsimile number is (561) 659-5371. Item 8: The Nature of the Issuer's Business. Diversified Products Inspections, Inc., originally known as Shoe Krazy, Inc., was organized on October 17, 1994. The Company was formed to engage in investment and business development operations related to the sale of shoes and other foot products, primarily in Florida. Significant efforts were expended to make the business plan and model work but those efforts failed. On March 13, 2000, the Company acquired all of the outstanding capital stock of its current subsidiary, Diversified Product Investigations, Inc. in a stock for stock exchange. The business plan and operation of the Company as presently constituted is outlined below. Diversified Product Inspections, Inc. The Company maintains a web page at: http://www.dpi-inc.com. Diversified Product Inspection, Inc. specializes in conducting investigations and laboratory analysis of a wide variety of products to determine the "cause and origin" of failures. The Company's primary customers are insurance companies that are interested in subrogating claims to recover losses. The insurance industry is one of the largest business enterprises in the United States. Insurance claims paid by the industry in 1998 were approximately $150 billion and estimated to be $180 billion in 1999. In 1998, depending upon the insurance company, only 1% to 5% of claims were subrogated. It is estimated that the subrogation potential could be $10-15 billion annually, based on the industry internal goals of 7-10%1. DPI's clients have been able to subrogate as high as 68% of submitted claims. Diversified Product Inspections, Inc. is the inspiration of entrepreneur John VanZyll. After many years of experience in home construction, and employment as a Customer Service Manager for several large developers and homebuilders, Mr. VanZyll recognized the opportunity and need for a service that would help protect consumers and assist them in making informed decisions regarding home or appliance purchases. During the course of home investigations, the Company noted a large number of defective products not necessarily related to home construction. Because the home inspection industry is saturated and highly competitive, DPI sought to differentiate itself from its competitors by adding product failure investigations, as an additional service. The Company quickly realized that there was tremendous demand for this type of service by the insurance industry and has since been able /to establish itself as a specialist in this rapidly growing field. DPI has developed a sustainable competitive advantage in this lucrative niche market through the creation of a proprietary database. DPI began to accumulate a database of known defective products, and in 1994 began concentrating, almost exclusively, on defective product investigations for the insurance subrogation field. DPI now has a computerized database with key identifiers of over 300,000 products, a library of over 80,000 photos and documentation, plus hundreds of videos. To the Company's knowledge, there is no other company in the US that possesses such an extensive database, or is capable of providing the cost-effective range of services and experience that DPI can offer its clients. DPI has enjoyed steady growth in customer base over its nine year history. The Company currently provides investigative services for over 1,600 insurance adjusters in more than 40 states. The Company employs eight state-licensed Private Investigators who are trained and certified as "Cause and Origin" investigators, and six lab technicians. DPI also offers pre- failure evaluations of structures, building materials and appliances. Since its formation, DPI has also experienced steady growth in revenues and profits. Since 1996, the Company has increased gross sales from $188,780 to $329,547 in 1998. Gross - -------- 1 National Underwriters, Inc, "Claims", Oct 1999 Diversified Product Inspections, Inc. revenues from services for 1999 are $558,625 for the period Jan 1 through Oct 31, and are projected at $670,350 for the year. This growth has been realized without any outside funding and only a limited marketing campaign. The Company also operates a rapidly growing "Small Item Mail-in Programz" and "Large Item Ship-In Program" to extend its services throughout the country. Until December 1999, the Company was expanding using its own resources. In June 1999, the Company established a satellite office in Salisbury, North Carolina. In August 1999, the Company signed a lease for land and building for a new headquarters and laboratory to be located in Oakridge, TN. Customers DPI's primary clients are insurance companies: Allstate Insurance Amica Insurance Appalachian Claim Services Bankers Insurance Bankers Security Bausley & Associates C.J.W. Associates Claim Solutions Services, Inc. C.N.A. Insurance C.S.A.A Crawford and Company Curley & Associates Elliot Claims Service, Inc. Farmers Insurance Fire & Arson Investigation Consultants, Inc. Fire Service Restoration Fireman's Fund Insurant First Floridian (Travelers) Florida Farm Bureau Frontier Adjusters Grotefeld & Denenberg, L.L.C. Hartford Insurance Diversified Product Inspections, Inc. Inspire Insurance Solutions Kentucky National Insurance Langham & Associates Liberty Mutual McDonald, Tinker, Skaer Morrison, Mahoney & Miller Nationwide Insurance Nationwide Mutual Northfield Associates Post & Schell, P.C. Professional Public Adjuster, Inc. Property JUA Services Prudential Insurance Purofirst Midsouth Insurance Reliance Insurance Republic Insurance Residential Warranty Rimkus Consulting Safeco Insurance Schaeffer Engineering Scottsdale Insurance SCS & Associates Selective Insurance Servpro, Inc. Shepard, Filburn & Goodblatt, PA Southern Family Insurance State Farm Insurance T.I.G. Insurance The Johnson Group Totura & Company Travelers Insurance United Pacific Insurance Diversified Product Inspections, Inc. USAA Insurance Westfield Companies Zurich American Item 9: The Nature of Products or Service's Offered. Overview Insurance claims in the United States are hundreds of millions of dollars every year. A vast majority of these claims are the result of product failures caused by defective products. Until DPI entered this market, depending upon the insurance company, only 1% to 5% of claims were successfully subrogated. Through the use of DPI's proprietary database, the Company is able to investigate the "cause and origin" of losses and provide their clients with information enabling them to cost-effectively subrogate almost 70% of their claims. 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. Until recently, Insurance companies have not aggressively pursued subrogation. There are many reasons for this lack of effort in this area. Liability can be difficult to prove. Product failure investigations can be expensive, especially if conducted by an engineering lab. Proximate cause must be demonstrated through a preponderance of the evidence. The product and its manufacturer must be positively identified. Because of the high cost and other factors, many insurance companies only pursue subrogation claims over a certain amount. Competitive Advantage: DPI provides the Insurance Industry with the industry's first cost-effective investigative service. DPI has a staff of professional investigators and laboratory analysts, who are supported by an extensive proprietary product database. DPI's database is unique to the industry and enables DPI to quickly identify the manufacturer of a defective product and offer its investigative services at cost-effective levels. DPI enjoys a clear and sustainable competitive advantage as a result of this proprietary database. Proprietary Database: The Company's Proprietary Database contains an extensive listing of product identifiers, and known defects and failures. This computerized database contains key identifiers of over 300,000 products. In addition, DPI possesses a library of over 80,000 photos and documentation, plus hundreds of videos. This database is the result of 8 years of research and is frequently updated. Any competitor entering the field would have to create its own database from scratch, an undertaking of great time and cost. Diversified Product Inspections, Inc. Products and Services for the Insurance Industry The primary business of DPI is the determination of the "Origin and Cause" of property damages and the identification of the defective product that caused the loss. DPI finds itself in a unique position of being a pioneer in what is a growing and increasingly important field - Subrogation Recovery. Demand for these services should grow as the percentage of successfully subrogated claims increases. Currently, the insurance industry's internal goals are to successfully subrogate 7% of claims2. Product identification after a failure (especially fire) has been one of the main reasons for the lack of successful subrogation. DPI's laboratory has a 97% success rate in product identification. Insurance companies and adjusters using DPI's service have consistently been able to successfully subrogate in excess of 68% of investigated claims. This is an improvement of 66% over the industry average and at a fraction of the cost of conventional engineering firms. After the deduction of DPI's reasonable fees, these subrogation recoveries are pure profit to the insurance company. Defective Product Investigations DPI performs professional forensic investigations to identify the products and materials involved in a claim loss and determine the cause of the failure. DPI employs state-licensed Private Investigators who have been certified in "Origin and Cause" analysis. It is the determination of "Origin and Cause" that is the basis for successful subrogation of a claim. The client mails small items to DPI, or investigations can be carried out on site, as in the case of fire and arson investigations. DPI or insurance company personnel recover shippable items from the site. The items are appropriately packaged and shipped to the DPI Laboratory. Crucial to the legal process of subrogation is maintenance of the "chain of evidence." DPI maintains secure facilities and has personnel who are trained in the procedures for properly handling, storing and cataloging of evidence. Small Item Mail-In Program The "Small Item Mail-In Program" is a benchmark result of the great success that DPI has been able to achieve in the state of California. In just one Allstate Insurance Company claims offices near Bakersfield, the client was able to successfully recover over $4 million in subrogated claims. As a result of this overwhelming success, Allstate Insurance Company has instructed all its adjusters in California to submit all of their defective products to DPI. Items are placed in the pre-addressed, pre-paid Fed-Ex box or envelope and submitted to DPI for identification and analysis. DPI performs this task at their lab and submits a report to the insurance adjuster. The item is retained in secure storage as evidence until the claim is closed. DPI has recently reached an arrangement with State Farm Insurance Co.; similar to one that is now in place with All State Insurance Company. In November 1999, State Farm invited DPI to attend the National Association of Subrogation Professionals (NASP) convention in Las Vegas. DPI was introduced as an investigative specialist in the field. DPI recommends subrogation. The determination to pursue that subrogation is determined by the insurance carrier. DPI has been asked by the office in Texas if the Company can handle the influx of up to 500 items per month, but this does not reflect a firm commitment to submit that number. The table below is a partial listing of items that can be mailed in using the Small Item Mail-in Program:
Check Copper CPVC Pipe Freeze Toilet Tanks Faucets Valves Pipe Proof Hose Bibs - ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- Garbage Polybutelen Pressure Sump Toilet Surge Disposals e Release Pumps Valves Protectors Valves - ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- Under Washer Water Water Water Level Water Counter Hoses Control Filters Switches Softeners Water Solenoids Heaters - ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- Water Hair Dryers Toasters Curling Clock Supply Irons Radios Lines - ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
The minimum fee for these services is $175.00. Fire damaged items (accounting for 30-40% of the items submitted) incur a minimum additional charge of 1 log hour @ $75.00 per hour. Currently, DPI is receiving approximately 100 items per week at an average of $200 for each item submitted. This has grown from 40 items per week in January. With growth of 15% per month, the Small Item Mail-In Program is projected to produce approximately $3.3 million in revenue in Year 2000 and gross profits of approximately $2.7 million. (These projections include storage revenue for the 8,565 items currently in storage) Large Item Ship-In Program DPI also has a program to handle large items, including refrigerators, air conditioning units, stoves, dishwashers, etc. These larger items are either picked up by DPI, within a range of 150 miles of one of their offices, or shipped directly by the client. Items picked up by DPI are billed for log hours for the driving, handling and laboratory analysis. Items shipped by the client are shipped prepaid and billed for the inspection fee and monthly storage. Revenue streams are generated from the log hours billed and from the secure storage of the items until the case is settled. Storage is typically $40 per year per item. The average investigation is $255.00 plus 1 log hour @ $75.00, not including the travel time. DPI is currently receiving 10 items per week under this program. Growth has been averaging 5% increase per month. Revenues for the year 2000 are projected at $217,270 with gross profits projected at $182,400 for the 12 month period. Satellite Office/Outsource Program As part of DPI's future expansion plans, the Company intends to open 4 additional satellite Office/Labs in New York, Texas and North and South California. This will give DPI 6 satellite locations and a main headquarter/laboratory in Oakridge, TN. The company is also training outsource personnel to service any location where the insurance industry needs the service and is capable of generating a minimum of 10 inspection/evidence collections per week. These individuals will be paid on a per investigation basis and be responsible for their own offices and expenses. The Company plans to train 30 outsource personnel in the next 12 months if the necessary funds are available. Revenues or the Satellite/Outsource Program are projected at $2.9 million for Year 2000 and gross profits of $1.9 million. Chain of Custody - Evidence Collecting and Storage - -------- 2 Allstate Insurance Company Diversified Product Inspections, Inc. DPI also provides for the storage of evidence and derives income from the safe storage of materials. DPI is practiced in the maintenance of the "Chain of Custody" of evidence, which is critical to successfully bringing a subrogation case to court. The statute of limitations for filing litigation is 3 years. Due to the crowded court dockets, the average item remains in storage for 2 years. Storage is an additional revenue stream for DPI as the Company can perform this service more securely and efficiently than the insurance companies can themselves. Currently, DPI has over 8,600 items in secure storage at an average rate of $35.00 per annum. Revenue from storage is included in the financial projections for the Small Item Mail-in Program, Satellite/Outsource Program and Large Item Ship-in Programs. The mark-up on storage is substantial. Storage revenues are projected at $457,600 for Year 2000 and gross profits of $451,000. Indoor Air Quality Analysis DPI provides in-depth indoor air quality analysis and is a pioneer in identifying airborne contamination and determining the causes of sick buildings. DPI has designed proprietary measuring instruments capable of detecting airborne chemical contaminants in structures. DPI also utilizes state laboratories to supplement their own lab. These contaminants are potential health threats and come from a variety of sources within modern buildings including air conditioners, heaters, refrigerators and materials used in the construction of the building. DPI is one of a handful of companies in the country that is capable of identifying the contaminants involved and the origin and cause within the structure. The most dangerous and most common cause of indoor air contamination comes from leaking refrigerants contacting a heat source that can convert the Freon into deadly phosgene gas (mustard gas). The presence of this reaction is frequently evidenced by carbon sooting. Almost all air conditioners and many refrigerators leak Freon. There are many sources of heat in the home (heat strips, pilot lights, electric range and oven, toasters, etc.), which are capable of converting the Freon into phosgene gas. DPI has conducted a nationwide study on the prevalence of phosgene in the home. The Company has identified phosgene as the cause of numerous severe health and respiratory problems that have even resulted in death. The Geneva Convention outlaws the production of phosgene, and its presence can only occur through the accidental conversion of Freon. Air Tests conducted by DPI are to determine contaminants of Freon. This Freon can be converted to Phosgene gas under the right conditions. The determination of Phosgene poisoning can only be determined by appropriate medical personnel. DPI has been able to identify the chemicals and conditions that could result in Phosgene poisoning. Due to the high frequency and potentially deadly effects of phosgene, DPI has developed a prototype that the Company believes is capable of neutralizes the Freon before it can be converted to phosgene. DPI is planning to market this device as an inexpensive retrofit to existing systems and is seeking an appropriate licensing agreement. Structure Evaluations and Consumer Product Evaluations Home Evaluations and Consumer Product are not to be confused with a home inspection. Home inspections are typically performed as a pre-purchase inspection that concentrates on the current functionality of items in the home. The Consumer Product and Home Evaluation reports on the failure rates and recalls of the products used in the home. The difference is significant. Structure Evaluations are performed on-site by a qualified DPI investigator. In addition to reporting on the current functionality of the structure and appliances (roof, siding, heating and cooling system, etc), DPI goes further and identifies the manufacturers of the various building materials and appliances. The client is also informed of known failure rates, defects and hazards, recalls and current or pending legal proceedings. As an example, a home inspection would report that the siding on the home is in good condition if it is painted and shows no obvious signs of decay. DPI's inspection would report on the type of siding and whether or not that siding was the subject of high rates of failure, or the subject of a recall. DPI would also report to the client whether the siding was the subject of a class action settlement and the procedures for making a claim. (i.e. Louisiana Pacific siding case) Diversified Product Inspections, Inc. Consumer Product Evaluations are a survey of common items in the home for the purpose of identifying products that are the subject of a recall or are known to have a history of failure. DPI's evaluation informs the consumer of current working status of the product, the risks and failure rates of various products, recalls, current legal proceeding and remedies. DPI is planning to offer the Consumer Products Evaluation, on the Company website. Consumers will be offered an opportunity to evaluate a single product or an entire household. Package deals will be available which will include a 1-year subscription to the company newsletter, the "Investigator." The "Investigator" keeps consumers informed of current product recalls and safety tips for the home. The Company intends to provide this services for a nominal fee or no-charge. The Company believes that revenue can be derived from the database that is being accumulated under this program. Database Marketability - The Consumer Product Evaluation database may be marketable to several different clients. The database will include consumer buying habits, which is of value to manufactures and retailers. The database will also contain the location of products that may present potential liability for manufacturers, which is valuable to manufacturers and insurance companies. Additional Services Full Engineering Services - DPI is abl to provide clients with full engineering services including mechanical and electrical engineering Metallurgist Services - the DPI lab is equipped to perform a full range of metallurgical services capable of analyzing submitted items for design load, metal fatigue, hairline cracking, etc. Training Seminars - DPI investigators are also trained as instructors and are licensed in most states due to reciprocity agreements. DPI has been approached by the states of California, Texas, Virginia, N. Carolina and S. Carolina to conduct licensing seminars for insurance adjusters. Each of these states has a requirement that adjusters receive additional training each year. Manufacturer Defective Product Notifications DPI provides manufacturers with a service that assists those companies in locating products that are subject to recall. It is inevitable that a certain number of defective products will slip through the manufacturer's quality control inspections and make their way into the marketplace. These defective products, once identified, are a source of potential liability for the manufacturer. Manufactures are often eager to locate and replace defective products before the product fails and causes high damages. If the average damages are relatively high, the manufacture, in many cases, is willing to pay a reward or bounty for information that will assist them in locating the product prior to failure. This is where DPI's database of consumer profiles will come into play. (See: Consumer Product Evaluations). DPI plans to maintain a website where consumers can receive a home evaluation online. The consumer may pay a nominal fee to enter all household appliances, mechanical devices, lawn equipment and materials of and around the house into the computer. The computer will then compare the profile to the database of known defective products. DPI will then inform the consumer and the manufacturer of the location of the product so that a replacement can be scheduled. To understand the process, one need only look at the example of the number one cause of flooding in the home - the washing machine hose. State Farm paid over $140,000,000 in damage claims caused from water damage an example is failed laundry hoses. Claims from water damage can vary greatly and do not have an industry average. 3. These hoses are relatively inexpensive and easy to replace and are designed to provide service for 3 years. If a manufacturer has a run of faulty hoses that fail to meet design specs, the manufacture could be liable for subrogation recovery. As subrogation rates increase, manufacturers will have an incentive to locate and replace the defective hoses. DPI will be able to provide manufacturers with this information, as its "Consumer Products Evaluation" database expands. - -------- Diversified Product Inspections, Inc. Item 10: The Nature and Extent of the Issuer's Facilities. The Issuer conducts its business in approximately 30,000 square feet of office and warehouse space located at 3 Main Street, Oakridge, Tennessee. The Issuer occupies said premises pursuant to a written lease which expires June 2003 for a monthly rent of $21,000. Item 11: Names of the Chief Executive Officers and Members of the Board of Directors of the Issuer. Directors and Executive Officers The following table includes the names, positions held and ages of our executive officers and directors. All directors serve for one year and until their successors are elected and qualify. Officers are elected by the Board and their terms of office are, except as otherwise stated in employment contracts, at the discretion of the Board. NAME POSITION John VanZyll President, Chairman, Chief Executive Officer and Director Marvin Stacy Chief Operating Officer and Director Dean Madden Chief Financial Officer, Treasurer and Director Ann Furlong Secretary and Director David Dowell Director John VanZyll, President Chairman of the Board, Chief Executive Officer and Director. Entrepreneur and founder of Diversified Product Inspections, Mr. VanZyll 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. VanZyll is considered an expert in the field of investigation and subrogation by the insurance industry and has conducted over 60 training seminars and trained over 1600 insurance adjusters. Diversified Product Inspections, Inc. Marvin Stacy, Director, Chief Operating Officer. Mr. Stacy has over 40 years of experience in all aspects of electrical and mechanical engineering and design. Mr. Stacy is also gifted as an investigator and is responsible for the operation of the laboratory. He has designed custom testing equipment and designs solutions for manufacturers to correct design flaws and shortcomings. Dean Madden, Chief Financial Officer, Treasure and Director. Mr. Madden is serving as the Company's interim CFO. Mr. Madden has over 33 years of experience in all aspects of accounting. Mr. Madden served as CFO and Director of GMAC of Canada from 1983 - 1988. Mr. Madden has worked in various accounting positions throughout his career, specializing in auditing, taxes, and preparation of financial statements. Ann M. Furlong, Secretary and Director. Ms. Furlong has over 29 years of experience as a professional manager and the owner and founder of several successful businesses. Ms. Furlong has provided the administrative and organizational expertise that has greatly contributed to DPI's success since its founding in 1991, including the compilation of the company's proprietary database. David Dowell, Esquire, Director. Mr. Dowell was awarded a B.S. degree in Business from Indiana University in 1985 and a degree in Juris Prudence from Indiana University School of Law in 1988. Upon graduation, Mr. Dowell was admitted to the Indiana Bar and was retained by Coopers and Lybrand as a tax associate. He moved to Florida in 1990 and became law clerk for the Fifth Circuit Court in Lake County. In 1992, Mr. Dowell opened a private practice and specializes in Corporate Law and Bankruptcy Item 12: Remuneration of Officers and Directors. Although there are no formal agreements between the Company and its employees, officers and directors, the Company intends to enter into such agreements in the near future. Item 13: Management Option to Purchase Stock/Securities. None. Item 14: Interest of Management and Others in Certain Transactions. None. Item 15: Principal Security Holders and Security Holdings of Management. Diversified Product Inspections, Inc. The following table sets forth information known to us relating to the beneficial ownership of shares of common stock by each person who is known by us to be the beneficial owner of more than five percent of the outstanding shares of common stock; each director; each executive officer; and all executive officers and directors as a group. Unless otherwise indicated, the address of each beneficial owner in the table set forth below is care of Diversified Product Inspections, Inc. Name and Address of Amount and Nature of Percent of Class Beneficial Owner Beneficial Ownership John VanZyll 5,000,000 45% Marvin Stacey 2,000,000 18% Anne Furlong 2,000,000 18% All Executive Officers and 9,000,000 81% Directors as a Group Item 16: Pending Legal Proceedings. None. Item 17: Nature of Trading Market. None. Item 18: Recent Sales/Issuance of Unregistered Securities. 1. On or about October 17, 1994, the Company issued a total of 600,000 shares of its common stock for services in an offering conducted pursuant to Section 3(b) of the Securities Act of 1933, and Rule 504 of Regulation D promulgated thereunder. This offering was made in the state of Florida. The shares were subsequently transferred pursuant to 4(1) of the Securities Act of 1933 to 25 purchasers. The Company thereafter effected a forward split of such shares at the rate of 3.125 to 1, for holders of record on March 1, 2000. Post split shares total 1,875,000. 2. In December 1998 the Company received gross proceeds in the amount of $50,000.00 from the sale of a total of 1,000,000 shares of restricted common stock, $.0001 par value per share, to 25 subscribers in an offering conducted pursuant to Section 3(b) and 4(2) of the Securities Act of 1933, and Rule 505 and 506 of Regulation D promulgated thereunder. This offering was made in the state of Georgia and the State of Florida. These shares were canceled as a part of and at the time of the acquisition of Diversified Products Investigations, Inc. on or about March 13, 2000. 3. On December 1, 1998, the Company issued and sold 500,000 shares of its common stock to Mr. Rodney Delaney Ford, the President, Secretary and Treasurer of the Company, in consideration and exchange for services valued at $12,500.00 in connection with the organization of the Company. These shares were issued to pursuant to Section 4(2) of the Securities Act of 1933, and Rule 506 of Regulation D promulgated thereunder. This offering was made in the state of Georgia. These shares were canceled as a part of and at the time of the acquisition of Diversified Products Investigations, Inc. on or about March 13, 2000. 4. On or about March 13, 2000, the Company issued 9,241,900 shares of its restricted common stock to thirteen (13) shareholders of Diversified Product Investigations, Inc. pursuant to a Share Exchange Agreement of same date in sole consideration of the exchange of all issued and outstanding shares of Diversified Product Investigations, Inc to the Company. Diversified Product Inspections, Inc. Item 19: Indemnification of Directors and Officers. The Florida Business Corporation Act (the "Corporation Act") permits the indemnification of directors, employees, officers and agents of Florida corporations. The Company's Articles of Incorporation (the "Articles") and Bylaws provide that the Company shall indemnify its directors and officers to the fullest extent permitted by the Corporation Act. The provisions of the Corporation Act that authorize indemnification do not eliminate the duty of care of a director, and in appropriate circumstances equitable remedies such as injunctive or other forms of non-monetary relief will remain available under Florida law. In addition, each director will continue to be subject to liability for (i) violations of criminal laws, unless the director had reasonable cause to believe his conduct was lawful or had no reasonable cause to believe his conduct was unlawful, (ii) deriving an improper personal benefit from a transaction, (iii) voting for or assenting to an unlawful distribution and (iv) willful misconduct or conscious disregard for the best interests of the Company in a proceeding by or in the right of a shareholder. The statute does not affect a director's responsibilities under any other law, such as the Federal securities laws. The effect of the foregoing is to require the Company to indemnify the officers and directors of the Company for any claim arising against such persons in their official capacities if such person acted in good faith and in a manner that he reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the act and is therefore unenforceable. The Company has not made any provision for the indemnification of its officers or directors. The Articles of Incorporation and By-Laws do not have any provisions for indemnification. Neither the Company's Articles of Incorporation nor By-Laws makes provisions for the purchase of liability insurance on behalf of its officers or directors. Currently the Company does not maintain any such liability insurance. Item 20: The Issuer's Most Recent Balance Sheet and Statement of Income and Retained Earnings. See Form 8-KA dated May 22, 2000 attached hereto and made a part hereof. CLIENT FORMAT Diversified Product Inspections, Inc. independent auditors' report Item 21: Issuer's Financial Statements for the Two Preceding Fiscal Years. See Form 8-KA dated May 22, 2000 attached hereto and made a part hereof. Item 22: Disclosure Whether The Broker or Dealer or any Associated Person is Affiliated, Directly or Indirectly with the Issuer. The Issuer has no knowledge of any Broker or Dealer or associated person who is submitting quotations with respect to the Issuer's securities who may be simultaneously affiliated directly or indirectly with the Issuer. There are no members of the Board of Directors or Management with any affiliation to any Broker/Dealer. Item 23: Disclosure Whether the Quotation is Being Published or Submitted on Behalf of any other Broker/Dealer. The Issuer has no knowledge of any quotation being published or submitted on behalf of any other Broker/Dealer. Item 24: Disclosure Whether the Quotation is Being Published on Behalf of any 10% or more Beneficial Owner. No Quotation is being submitted or being published directly or indirectly on behalf of the Issuer or any Director or Officer or any person, directly or indirectly the beneficial owner of more than 10% of the issued and outstanding shares of any equity security of the Issuer. Item 25: Other Information. The Attachments and Exhibits referred to hereinabove and attached hereto are more particularly described in the Index of Attachments and Exhibits, which follows the signature page hereof. Diversified Product Inspections, Inc. Item 26: Contact Representative. The Name of the Issuer's Representative to contact regarding any matter arising from this Report or the Information contained herein is: DIVERSIFIED PRODUCT INSPECTIONS, INC. John VanZyll, President The undersigned hereby state that he has read the information set forth hereinabove, and attests hereby that, to the best of his current knowledge and belief, such information is true and correct. Diversified Product Inspections, Inc. By:------------------------ John VanZyll Diversified Product Inspections, Inc. Exhibit E DIVERSIFIED PRODUCT INSPECTIONS, INC. SUBSCRIPTION DOCUMENTS Name of Subscriber: _______________________________ Memorandum Number: _______________________________ Diversified Product Inspections, Inc. INSTRUCTIONS TO SUBSCRIBERS Persons wishing to subscribe for shares (as defined herein) of Diversified Product Inspections, Inc., Inc., a Florida corporation, are required to complete the pertinent documents in this package. Please comply with the following instructions: 1. Please complete and sign the Subscription Agreement and Purchaser Questionnaire provided to you. In those cases in which Shares will be held in joint ownership, all parties must sign. Your check or wire transfer in the amount of $2.50 for each Share purchased should be made payable to "Donald Mintmire Trust Account for the benefit of Diversified Product Inspections, Inc." Check and this signed subscription documents to be sent to: Donald Mintmire Trust Account Mintmire & Associates 265 Sunrise Ave #204 Palm Beach, Florida 33480 Phone (561) 832-5696 Fax (561) 659-5371 SPECIAL SUBSCRIPTION INSTRUCTIONS AND A CERTIFICATE FOR CORPORATION, PARTNERSHIP AND TRUST SUBSCRIBERS If the Investor is a corporation, partnership, trust or other entity, the following additional instructions must be followed. Information in addition to that requested below may also be required in some cases. 1. Corporations, partnerships and trusts must have the Subscription Agreement completed and executed by an authorized corporate officer, general partner or trustee who is making the investment decision on behalf of the corporation, partnership or trust. 2. Corporations, partnerships and trusts must provide the following information: (a) Corporations must attach a copy of their currently effective Articles of Incorporation. (b) Partnerships must attach a copy of their currently effective partnership agreement, including the date of formation and a list of all the partners. Diversified Product Inspections, Inc. (c) Trusts must attach a copy of their currently effective trust instrument authorizing investments by a trustee. The authorized corporate officer, general partner or trustee must complete, date, and sign the Certificate set forth on page 9 hereof. SUBSCRIPTION AGREEMENT Name(s) of Subscriber(s): Total Subscription Price: ___________________________________ $ ____________ ___________________________________ $ ____________ _____________________________________ $ ____________ Diversified Product Inspections, Inc. Attn: John VanZyll 3 Main Street Oakridge, Tennessee 37830 Gentlemen: 1. Subscription. The undersigned (the "Subscriber") hereby subscribes for and agrees to purchase the number of Shares (the "Shares") of the .001 par value per share Common Stock (the "Common Stock") of Diversified Product Inspections, Inc., a Florida corporation (the "Corporation") in accordance with the terms of this Subscription Agreement (the "Subscription Agreement"). 2. Subscription Instruments. The Subscriber hereby tenders to the Corporation the following materials (the "Subscription Materials"), all of which have been duly completed and executed by the Subscriber; a. A check or wire transfer, in the amount of $2.50 per Share being subscribed for, made payable to "Donald Mintmire Trust Account for the benefit of Diversified Product Inspections, Inc." b. One signed copy of this Subscription Agreement; and c. One signed copy of the Purchaser Questionnaire. Diversified Product Inspections, Inc. 3. Acceptances or Rejection of Subscription. The Subscriber understands and agrees that: a. If this subscription is accepted, the proceeds delivered herewith shall be used to admit the subscribers whose subscriptions were accepted as shareholders of the Corporation; and b. If this subscription is rejected, the Subscription Materials and the subscription funds will be promptly returned to the Subscriber. No interest will be paid on any subscription funds. 4. Representations and Warranties. The Subscriber hereby represents and warrants to the Corporation as follows: a. The Subscriber has received the Confidential Private Placement Memorandum of the Corporation dated December 1, 1999 including all Exhibits thereto (collectively, the "Memorandum"), and, prior to the execution of this Subscription Agreement by the Subscriber, have carefully reviewed the Memorandum. The Subscriber has relied solely on the information contained in the Memorandum in making his investment decision, and, in making such investment decision, has disregarded any other written or oral statements or information, if any, concerning the Company or an investment in Shares made by any party, including, without limitation, the officers, directors, and employees of the Company. All capitalized terms contained herein shall have the meanings given to them in the Memorandum unless otherwise specifically defined herein. The Subscriber understands the business in which the Corporation will be engaged and has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of an investment in the Corporation and making an informed investment decision with respect thereto. He has obtained sufficient information to evaluate the merits and risks of the investment and to make such a decision. b. The Subscriber has had sufficient access to all documents and records pertaining to the Corporation and this proposed investment in the Shares. Additionally, the subscriber has had the opportunity to ask questions and receive answers concerning the terms and conditions of the offering and to obtain any additional information which the Corporation possesses, or can acquire without unreasonable effort or expense, necessary to verify the accuracy of the information furnished in the Memorandum. c. The Subscriber (i) has adequate means to provide for his current needs and possible personal contingencies and those of his family, if applicable, in the same manner as he would have been able to provide prior to making the investment in the Shares, (ii) has no need for liquidity in this investment, (iii) is aware of and able to bear the risks of this investment for an indefinite period of time and (iv) is presently able to afford a complete loss of such investment. Diversified Product Inspections, Inc. d. The Subscriber recognizes that the Corporation is a growth stage entity, and that the Shares as an investment involve significant risks, including, without limitation, those set forth in the Memorandum. e. The Subscriber understands that none of the Shares have been registered under the Securities Act of 1933, as amended (the "Securities Act") or the securities laws of any state in reliance upon exemptions there from for private offerings. The Subscriber understands that the Shares must be held indefinitely unless the sale thereof is subsequently registered under the Securities Act and applicable state securities laws or exemptions from such registration are available. The Subscriber further understands that the Corporation has no obligation to repurchase any of the Shares, register any of the Shares under any Federal or state securities laws on his behalf or to assist him in complying with any exemption from registration and that it is not contemplated that any of the Shares will ever be registered under the Securities Act or applicable state securities laws. f. The Shares are being purchased solely for the Subscriber's account for investment and not for the account of any other person and not with a view to or for distribution, assignment or resale in connection with any distribution within the meaning of the Securities Act, and no other person has a direct or indirect beneficial interest in such Shares. The Subscriber represents that he has no agreement, understanding, commitment or other arrangement with any person and no present intention to sell, transfer or assign any Shares. g. The Subscriber realizes that he may not be able to sell or dispose of any of the Shares that no market of any kind (public or private) will be available for any of the Shares. In addition, the Subscriber understands that his right to transfer the Shares will be subject to restrictions contained in applicable Federal and state securities laws. h. All information which the Subscriber has provided to the Corporation concerning himself, his financial position and his knowledge of financial and business matters, including all information contained in this Subscription Agreement, is correct and complete as of the date set forth on the signature page hereof, and if there should be any adverse change in such information prior to his subscription being accepted, he will immediately provide the Corporation with such information. i. The Subscriber's principal residence (if Subscriber is an individual) or principal business address, as applicable, is in the State of _________________ and the Subscriber has no present intention to move such residence or principal business address, as applicable, from such State. Diversified Product Inspections, Inc. j. The Subscriber understands that the financial projections included in the Memorandum are for planning purposes only, and the Subscriber hereby represents and warrants that neither the Subscriber nor any of his advisors are relying on such financial projections in connection with determining the merits of an investment in the Shares. The Subscriber understands and acknowledges that no representations concerning the accuracy of information or financial projections, if any, not included in the Memorandum are being made and he and all of his advisors have completely disregarded such information or financial projections, in determining whether to invest in the Shares. k. The Subscriber understands that the Corporation may at any time, in its sole discretion, arrange for the offer and sale of additional shares of its capital stock, including, without limitation, additional shares of Common Stock to current or additional shareholders, at such prices and in such amounts as it, in its sole discretion, may determine to be in the best interests of the Corporation. 5. Subscription. The Subscriber hereby subscribes for _________ Shares at $2.50 per Share for an aggregate price of $ ________________ and has provided a check or wire transfer for that amount payable to: "Mintmire Trust Account Trust Account for the benefit of Diversified Product Inspections, Inc." TYPE OF OWNERSHIP: Please check one: ______________ Individual (One signature required) ______________ Joint tenants with rights of survivorship (All parties must sign) ______________ Tenants by the Entirety (Both parties must sign) ______________ Tenants in common (All parties must sign) ______________ Corporation (Authorized officer must sign) ______________ Other Entity (Specify type) (Authorized party must sign) Diversified Product Inspections, Inc. SIGNATURE PAGE FOR INDIVIDUAL INVESTORS IN WITNESS WHEREOF, the Subscriber has executed this Subscription Agreement this _____ day of ________________, 2000 Investor Signature: __________________________________ Print Name.___________________________ Investor (If Joint Ownership) Signature: ___________________________________ Print Name: _________________________________ Diversified Product Inspections, Inc. SIGNATURE PAGE FOR CORPORATE INVESTORS IN WITNESS WHEREOF, the undersigned, intending to be legally bound, has executed this Subscription Agreement this _____ day of _____________________, 2000 . _______________________________________ Name of Corporation By: ___________________________________ Signature of authorized representative Title: ________________________________ Title of authorized representative Diversified Product Inspections, Inc. SIGNATURE PAGE FOR PARTNERSHIP INVESTORS IN WITNESS WHEREOF, the undersigned, intending to be legally bound, has executed this Subscription Agreement this _____ day of _________________, 2000 ________________________________________ Name of Partnership By: _____________________________________ Signature of general partner Title: __________________________________ Title of additional general partner if required Diversified Product Inspections, Inc. SIGNATURE PAGE FOR TRUST INVESTORS IN WITNESS WHEREOF, the undersigned, intending to be legally bound, has executed this Subscription Agreement this _____ day of ___________________, 2000 ______________________________________ Name of Trust By: ___________________________________ Signature of Trustee Title: _________________________________ Title of additional Trustee if required Diversified Product Inspections, Inc. CERTIFICATE FOR CORPORATE, PARTNERSHIP OR TRUST SUBSCRIBER The undersigned, an authorized officer, trustee or general partner of _______________________________________, hereby certifies that: (a) The Subscriber has been duly formed and is validly existing under the laws of the State of ___________________, with full power and authority to invest in Diversified Product Inspections Inc., a Florida corporation; and (b) The Subscriber's Subscription Agreement has been duly and validly authorized, Executed and delivered on behalf of the Subscriber, and upon the Corporations acceptance of the Subscribers subscription, the Subscription Agreement will constitute the valid, binding and enforceable agreement of the Subscriber. ________________________________________ Name of Subscriber ________________________________________ Signature of an authorized corporate officer, general partner or trustee ____ Date _______________ Title Diversified Product Inspections, Inc. ACCEPTANCE DIVERSIFIED PRODUCT INSPECTIONS, INC. HEREBY ACCEPTS THE SUBSCRIPTION FOR SHARES CONTAINED IN THIS SUBSCRIPTION AGREEMENT. Diversified Product Inspections, Inc. By: _____________________________________ John VanZyll Its: President Date: _________________ Diversified Product Inspections, Inc. Exhibit F Diversified Product Inspections, Inc. PURCHASER QUESTIONNAIRE Instructions. This Purchaser Questionnaire must be completed by each person who has indicated an interest in purchasing Shares. The purpose of this Purchaser Questionnaire is to permit the Corporation to determine whether each such person meets certain standards imposed by Federal and state securities laws. If the answer to any question is "None" or "Not Applicable," please so state. Please complete, sign, date and return this Purchaser Questionnaire to Mintmire & Associates. Should there be any material change in the information contained herein prior to acceptance by the Corporation of your subscription for Shares, you must notify the Corporation or its authorized representative immediately. Signed subscription documents, signed questionnaire and check to be sent to: Mintmire & Associates 265 Sunrise Ave #204 Palm Beach, Florida 33480 Phone (561) 832-5696 Fax (561) 659-5371Mintmire & Associates QUESTIONNAIRE (Please Print or Type) SECTION I - GENERAL INFORMATION (ALL PURCHASERS MUST COMPLETE) Name: _________________________________________________________________ Home Address (if individual) or principal place of business: __________________________________________________________________ Occupation (if individual): _______________________________________________________ Employer (if individual): _______________________________________________________ Diversified Product Inspections, Inc. (c) i) Please indicate your principal state of residence (if individual) or principal place of business for the last two years: _______________________________________________________________ ii) Do you have any present intention of changing the information provided in Section (c) (i) above? Yes _____ No _____ iii) If "Yes", please explain: ________________________________________________________________ ________________________________________________________________ With respect to tenants in common, joint tenants, and tenants by the entirety, complete only if information differs from that above. i) Home Address (Principal Residence): ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ Telephone: (_____) ______________ Social Security Number: ____________________________________ Taxpayer Identification Number: ____________________________ ii) Occupation: __________________________________ Employer: ___________________________________________________________ Business Address: ___________________________________________________ Diversified Product Inspections, Inc. ________________________________________________ _______ iii)(A) Please indicate your state of principal residence for the last two years: _________________________________________________________ (B) Do you have any intention of changing your present state of residence in the near future? Yes ___ No ___ (C) If "Yes," please explain: _____________________________________________________ _____________________________________________________ _____________________________________________________ SECTION 2- ACCREDITED INVESTOR STATUS The Subscriber hereby acknowledges that the representations contained in this Section 2 are made for the purpose of qualifying the Subscriber as an "Accredited Investor" as that term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act, and applicable state securities laws. The Subscriber hereby represents that the statement or statements initialed below are true and correct in all respects. The Subscriber understands that a false representation may constitute a violation of law and that any person who suffers damage as a result of a false representation may have a claim against the Subscriber for damages. PLEASE INITIAL THE APPROPRIATE STATEMENTS: _____ (i) I am an Accredited Investor because I had an individual net income (excluding any income attributable to my spouse) in excess of $200,000 or joint net income with my spouse in excess of $300,000 in each of the two most recent years and I reasonably expect an income of the same level in the current year. _____ (ii) I am an Accredited Investor because my individual net worth, or joint net worth with my spouse is, at the present time, in excess of $1,000,000. Diversified Product Inspections, Inc. For this purpose, "net worth" refers to the fair market value of all of my assets, including home and furnishings, less all of my liabilities. ______ (iii) I am an Accredited Investor because I am a director or executive officer of the Corporation. ______ (iv) The Subscriber is an Accredited Investor because it is an entity in which all of the equity owners are Accredited Investors. ______ (v) I am an Accredited Investor because ___________________ __________________________________________________________________ ______ (vi) I am not an Accredited Investor. I hereby certify that the information provided in this Purchaser Questionnaire is correct. Signature:________________________________ Date: ___________________ Print Name:_______________________________ Signature:________________________________ Date: ___________________ Print Name:_______________________________ (All Subscribers Must Sign) EX-27 3 0003.txt FDS --
5 0001075445 DIVERSIFIED PRODUCT INSPECTIONS, INC. 1 U.S. Currency 9-mos Dec-31-1999 Jan-1-2000 Sep-30-2000 1 62,909 0 95,220 0 0 654,554 150,202 (52,858) 654,554 747,641 0 0 0 1,116 (159,595) 654,554 0 753,235 1,178,682 1,178,682 0 0 (9,266) (434,713) 0 0 0 0 0 (434,713) (.01) 0
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