UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 13, 2000
DIVERSIFIED PRODUCT INSPECTIONS, INC.
--------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 0-25657 65-0877741
- ----------------------------- -------------- -------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) file number) Identification No.)
3 Main Street
Oakridge, TN 37830
- --------------------------------------- ---------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (423) 482-8480
f/k/a SHOE KRAZY, INC.
222 Lakeview Avenue, Suite 160
West Palm Beach, FL 33401
-----------------------------------------------------
(Former name or former address, if changes since last report)
Copy of Communications to:
Mintmire & Associates
265 Sunrise Avenue
Suite 204
Palm Beach, FL 33480
(561) 832-5696
<PAGE>
ITEM 5. OTHER EVENTS
This Form 8-K/A amends the Form 8-K filed on March 21, 2000 by
Diversified Product Inspections, Inc., a Florida corporation formerly known as
Shoe Krazy, Inc. The purpose of this amendment to Form 8-K is to provide
financial statements and the pro forma financial information for Diversified
Product Inspections, Inc.., a Florida corporation, as required by Item 7 of Form
8-K.
The Agreement for the Exchange of Common Stock dated March 13, 2000,
provided that issued and outstanding stock after effecting the Agreement was
10,875,000 plus additional shares to be issued in connection with financing.
Such shares for financing totaled 241,900 making total issued and outstanding
shares 11,116,900.
On May 19, 2000 the subsidiary ("SPI") changed its name to
Diversified Products Investigations, Inc.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
Pursuant to the requirements of Regulation S-X 210.3.05(b), the
following are audited financial statements of Diversified Product Inspections,
Inc., a Florida corporation, for the period from January 1, 1998 to December 31,
1999. The registrant acquired all of the outstanding capital stock of such
entity on March 13, 2000.
TABLE OF CONTENTS
Independent Auditor's Report
FINANCIAL STATEMENTS PAGE
- ---------------------------------------- --------
BALANCE SHEETS F-2
STATEMENTS OF OPERATIONS F-3
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY F-4
STATEMENTS OF CASH FLOWS F-5
NOTES TO FINANCIAL STATEMENTS F-6
<PAGE>
The Board of Directors
Diversified Product Inspections, Inc.
Independent Auditors' Report
We have audited the accompanying balance sheets of DIVERSIFIED PRODUCT
INSPECTIONS, INC. as of December 31, 1999 and 1998 and the related statements of
operations, changes in stockholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of DIVERSIFIED PRODUCT
INSPECTIONS, INC. as of December 31, 1999 and 1998, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
The accompanying financial statements for 1999 have been prepared
assuming that the Company will continue as a going concern. As discussed in note
6, the Company's recurring losses from operations and limited capital resources
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters is also described in note 6. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
May 10, 2000
Oak Park, Illinois
<PAGE>
<TABLE>
<CAPTION>
DIVERSIFIED PRODUCT INSPECTIONS, INC.
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
ASSETS
1999 1998
--------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 53,335 $ 20,700
Accounts receivable 69,226 36,845
Deferred tax assets 22,556 8,793
--------------- --------------
Total Current Assets 145,117 66,338
--------------- --------------
FIXED ASSETS, AT COST
56,639 35,917
Vehicles 45,886 8,000
---------------- --------------
Equipment 43,917
Less accumulated depreciation 32,722 20,912
---------------- --------------
Net Property, Plant and Equipment 69,803 23,005
---------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit loan payable $ 21,585 $
Current maturities of long-term debt 10,551 1,827
Accounts payable 15,935 12,691
Accrued salaries 298,275 213,975
Accrued income tax 11,401 5,214
---------------- --------------
Total Current Liabilities 357,747 233,707
---------------- --------------
LONG-TERM LIABILITIES
Deferred tax liabilities 5,178 3,516
Notes payable, net of current maturities 31,915 5,071
Loan from shareholder 4,025 17,525
---------------- --------------
Total Long-Term Liabilities 41,118 26,112
---------------- --------------
STOCKHOLDERS' EQUITY
Capital stock, no par value; 50,000,000 shares
authorized; 9,000,000 issued and outstanding 100 100
Additional paid in capital 360,000 360,000
Retained earnings (544,045) (530,576)
---------------- --------------
Total Stockholders' Equity (183,945) (170,476)
---------------- --------------
$ 214,920 $ 89,343
================ ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
DIVERSIFIED PRODUCT INSPECTIONS, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
---------------- ---------------
<S> <C> <C>
REVENUES $ 618,948 $ 329,491
---------------- ---------------
OPERATING EXPENSES
Advertising 3,500 5,788
Amortization 1,752
Automobile 19,091 16,855
Computer supplies and consultants 13,736 6,541
Conferences, seminars, and related expenses 45,905 13,182
Contributions 1,150 295
Depreciation 11,810 6,634
Dues and subscriptions 1,776 1,153
Insurance 26,693 8,242
Interest 5,048 2,004
Licenses and permits 5,730 1,079
Miscellaneous 6,795 4,206
Office expense 21,420 19,678
Payroll taxes 16,953 7,512
Printing and reproduction 6,551 3,987
Professional fees 4,509 200
Rent 35,195 17,796
Salaries 325,932 224,867
Postage and shipping 41,437 19,691
Tools and supplies 16,366 8,386
Utilities 21,068 13,814
---------------- ---------------
TOTAL OPERATING EXPENSES 632,417 381,910
NET LOSS BEFORE PROVISION FOR INCOME TAXES (13,469) (52,419)
---------------- ---------------
Federal income tax 9,108 5,214
State tax 2,993 63
Deferred tax expense (12,101) (5,277)
---------------- ---------------
- -
---------------- ---------------
NET LOSS $ (13,469) $ (52,419)
================ ===============
NET LOSS PER SHARE $ (0.00) $ (0.01)
================ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
DIVERSIFIED PRODUCT INSPECTIONS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
--------------- -------------
<S> <C> <C>
COMMON STOCK
Beginning of year $ 9,000,000 $ 9,000,000
End of year 9,000,000 9,000,000
=============== =============
ADDITIONAL PAID IN CAPITAL
Beginning of year (8,639,900) (8,639,900)
End of year (8,639,900) (8,639,900)
=============== =============
RETAINED EARNINGS -
Beginning of year (530,576) (478,157)
Net loss (13,469) (52,419)
--------------- -------------
End of year (544,045) (530,576)
=============== =============
TOTAL STOCKHOLDERS' EQUITY $ (183,945) $ (170,476)
=============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
DIVERSIFIED PRODUCT INSPECTIONS, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
---------------- ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (13,469) $ (52,419)
Adjustments to reconcile net loss to net cash
provided by operating activities -
Depreciation and amortization 13,562 6,634
Deferred income taxes (12,101) (5,277)
Changes in operating assets and liabilities
Increase in accounts receivable (32,381) (34,298)
Increase in accounts payable 3,244 1,521
Increase in accrued taxes 6,187 5,214
Increase in accrued salaries 84,300 109,950
---------------- ------------------
Net cash provided by operating activities 49,342 31,325
---------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (49,846) (19,784)
---------------- ------------------
Net cash used by investing activities (49,846) (19,784)
---------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceed from notes payable 30,761 6,898
Payments for loan from shareholder (13,500)
Net proceeds from line of credit loan 21,585
Payments of installment note payable (5,707)
---------------- ------------------
Net cash provided by financing activities 33,139 6,898
---------------- ------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS
32,635 18,439
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 20,700 2,261
---------------- ------------------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 53,335 $ 20,700
================ ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
DIVERSIFIED PRODUCT INSPECTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS - The Company is engaged primarily in the inspection
and investigation of product liability claims. All investigators are
licensed in the state where they practice.
DEPRECIATION - For financial reporting purposes, depreciation of
property, plant and equipment has been computed over estimated useful
lives primarily using the straight-line method. Depreciation charges
totaled $11,810 and $6,805 in 1999 and 1998.
The following estimated useful lives being used:
Type of Asset Estimated Useful Life
------------- ----------------------------
Equipment 5-7 Years
Vehicles 5 Years
INCOME TAXES - Income taxes are provided for the tax effects of
transactions reported in the financial statements and consist of taxes
currently payable plus deferred taxes related primarily to differences
between the basis of the allowance for doubtful accounts, accrued
expenses and property, plant and equipment for financial and income tax
reporting. Deferred tax assets and liabilities represent the future tax
return consequences of these differences, which will be either taxable or
deductible, when the assets and liabilities are recovered or settled.
PER COMMON SHARE AMOUNTS - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts
of revenues and expenses during the reporting period. Actual results
could differ form those estimates.
STATEMENT OF CASH FLOWS - For purposes of the Statement of Cash Flows,
the Company considers all highly liquid debt instruments that have a
maturity of three months or less when purchased to be cash equivalents.
Noncash investing and financing activities included $10,514 of capital
lease obligation incurred in 1999. Net cash provided by operating
activities include cash payments for interest and income taxes for the
years ended December 31, 1999 and 1998 as follows:
1999 1998
--------------- --------------
Interest $ 5,048 $ 2,004
Income taxes $ 5,277 $
F-6
<PAGE>
DIVERSIFIED PRODUCT INSPECTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PER COMMON SHARE AMOUNTS - Per common share amounts are computed on the
basis of the weighted average number of shares of common stock
outstanding. The Company had no dilutive securities outstanding for any
period presented. Accordingly, basic and diluted earnings per share are
the same.
2. NOTES PAYABLE
The Company's obligations under notes payable consist of the following:
<TABLE>
<S> <C> <C>
1999 1998
An installment note payable, secured by a van,
due in monthly installments of $597, including
interest, at 7.345%, through December 12, 2003. $ 27,392 $
An installment note payable, secured by a van,
due in monthly installments of $199, including
interest, at 9.25%, through May 12, 2002. 5,071 6,898
A capital lease payable, secured by computer
equipment, due in monthly installments of $371,
including impute interest, at 9%, through September
2002. 10,003
$ 42,466 $ 6,898
Less amounts due in one year 10,551 1,827
Long-term portions of notes payable $ 31,915 $ 5,071
</TABLE>
The future minimum payments are as follows:
2000 $ 10,551
2001 11,767
2002 9,980
2003 6,635
2004 3,533
Total minimum lease payments 42,466
F-7
<PAGE>
DIVERSIFIED PRODUCT INSPECTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
2. NOTES PAYABLE (CONTINUED)
LEASES - The Company leases certain computer equipment under agreements
which are classified as capital leases. The leases have purchase options
at the end of the original lease term. Leased capital assets included in
property, plant, and equipment at December 31, 1999 and 1998 are as
follows:
1999 1998
Computer equipment $ 10,514 $
Accumulated amortization (1,752)
$ 8,762 $
Future minimum payments, by year and in the aggregate, under
noncancellable capital leases with initial or remaining terms of one year
or more consist of the following at December 31, 1999:.
2000 $ 4,452
2001 4,452
2002 3,339
Total minimum lease payments 12,243
Amounts representing interest (2,240)
Present value of net minimum payments $ 10,003
Current portion $ 3,221
3. LINE OF CREDIT LOAN
The Company has a $50,000 business line of credit through one of its bank
credit cards. The annual interest rate is 11.5% compounded daily. This
line of credit is unsecured and requires monthly payments. The balance at
December 31, 1999 and 1998 was $21,585 and $0, respectively.
4. LEASE 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. Total costs applicable to leased facilities were
$41,437 and $16,691 in 1999 and 1998. Future base rental minimum lease
payment on these leases are not disclosed since none of the leases are
over one year.
F-8
<PAGE>
DIVERSIFIED PRODUCT INSPECTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
5. INCOME TAXES
As described in Note 1, temporary differences exist in income taxes
between financial statements and tax reporting.
The provision for income taxes consisted of the following at December 31,
1999 and 1998:
1999 1998
Currently payable -
Federal $ 9,108 $ 5,214
State 2,993 63
12,101 5,277
Deferred (12,101) (5,277)
$ $
The deferred income tax assets and liabilities recorded in the statement
of financial position as of December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
Deferred Deferred Deferred Deferred
Income Income Income Income
Tax Assets Tax Liabilities Tax Assets Tax Liabilities
<S> <C> <C> <C> <C>
Depreciation $ $ 5,178 $ $ 3,516
Accruals not currently deductible 57,299 41,105
-------------- --------------- ------------ -----------
57,299 5,178 41,105 3,516
Valuation allowance 34,743 32,312
-------------- --------------- ------------ -----------
$ 22,556 $ 5,178 $ 8,793 $ 3,516
</TABLE>
6. GOING CONCERN
The Company financial statements for the year ended December 31, 1999
have been prepared on a going concern basis which contemplates the
realization of the assets and the settlement of liabilities and
commitments in the normal course of business. The Company incurred a net
loss of $13,469 for the year ended December 31, 1999 and as of December
31, 1999 had a stockholders' equity deficit of $183,945. The Company
expects to incur substantial expenditures to expand its operations,
including relocation costs from Florida to Tennessee. The Company's
working capital at December 31, 1999 will not be sufficient to meet such
objectives as presently structured. Management recognizes that the
Company must generate additional resources and consider modifications to
its investigative programs or other reductions in operating cash to
enable it to continue operations with available resources. Management
plans include a private placement under regulation D-504 for an offering
price of $1,000,000, see Note 8.
F-9
<PAGE>
DIVERSIFIED PRODUCT INSPECTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
The company has retained counsel to advise it on the private placement as
well as a restructuring and merger, see Note 8. The Company also intends
to add a financial advisor to its management team. To date, the offering
has generated over $400,000 in invested capital, see Note 8. The Company
has also continued to adjust its billing procedures and raised its prices
for investigative services and is considering other revenue
opportunities. However, there can be no assurance assuming the Company is
successful in raising additional funds and generates additional billing
that the company will achieve profitability or positive working capital,
and therefore management may be required to sharply curtail operating
expenses.
7. CONCENTRATIONS OF CREDIT RISK
During the normal course of business, the Company extends credit
primarily to insurance companies covering a wide region of the United
States. Over 40% of 1999 were from revenues and receipts from three
insurance companies.
The Company maintains its cash balances at various high credit quality
financial institutions. The balances may, at times, exceed federally
insured credit limits.
8. SUBSEQUENT EVENTS
In January of 2000, the Company offered five hundred thousand (500,000)
shares of its common stock to accredited investors and to no more than
thirty-five (35) non- accredited investors, pursuant to an exemption from
registration under the Securities Act of 1933. Each purchaser will be
required to buy a minimum of five thousand (5,000) shares at $2.00 per
share, for a minimum consideration of ten thousand dollars ($10,000). To
date over $400,000 has been collected in the offering escrow account.
Some of the proceeds have been used as a down payment on the purchase of
a building in Tennessee.
On February 21, 2000, the Company entered into a merger agreement with
Shoe Krazy, Inc., a Florida corporation, whereby existing shareholders of
the Company transferred 100% of the Company's issued and outstanding
shares of stock to Shoe Krazy, Inc. Each share of the Company's stock was
exchanged for two shares of Shoe Krazy's stock.
On February 16, 2000, the Company entered into a lease for one file
server, twelve computers and various peripherals. The lease is for
thirty-six (36) months requiring on advance payment of $2,322.94 plus
thirty-four (34) monthly payments of $1,072.95. The lease also provides
for a purchase option at the then fair market value.
Also 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 leasee
has also entered into an agreement to purchase the facility. Leasee 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-10
<PAGE>
DIVERSIFIED PRODUCT INSPECTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
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 30, 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.
On January 24, 2000, the company entered into another equipment lease for
a copier and fax machine. This lease is for thirty-six (36) months at
$196 per month.
9. ACCRUED SALARIES
Top level management, which consists of three officers, has not taken its
full salaries of $50,000 per annum per person over the last three and
one-quarter years (October 1996 - December 1999). The Company is planning
on setting this liability by cash, stock or a combination thereof, as soon
as it becomes financially feasible. During the years ended December 31,
1999 and 1998 the Company accrued salaries for these officers in the amount
of $84,300 and $109,950, respectively. Consequently, total accrued salaries
consist of $298,275 and $213,975 for the years ended December 31, 1999 and
1998, respectively.
F-11
<PAGE>
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
<PAGE>
<TABLE>
<CAPTION>
Diversified Product Inspections, Inc.
Consolidated Balance Sheets
December 31, March 31,
1999 2000
-------------------- ----------------
(audited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and equivalents $ 53,335 $ 360,130
Accounts receivable 69,226 27,329
Deferred tax assets 22,556 22,556
-------------------- ----------------
Total current assets 145,117 410,015
-------------------- ----------------
PROPERTY AND EQUIPMENT
Equipment 56,639 100,032
Vehicles 45,886 45,886
Less accumulated depreciation (32,722) (41,358)
-------------------- ----------------
Net property and equipment 69,803 104,560
-------------------- ----------------
OTHER ASSETS
Deposit on real property 0 215,000
-------------------- ----------------
Total other assets 0 215,000
-------------------- ----------------
Total Assets $ 214,920 $ 729,575
==================== ================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Accounts payable $ 15,935 $ 16,270
Accrued expenses
Income taxes 11,401 14,779
Salaries 298,275 319,875
Current portion of long-term debt 10,551 16,836
Line of credit payable 21,585 17,585
-------------------- ----------------
Total current liabilities 357,747 385,345
-------------------- ----------------
LONG-TERM DEBT
Deferred taxes 5,178 5,178
Notes payable, net of current portion 31,915 59,015
Loan from shareholder 4,025 4,025
-------------------- ----------------
Total long-term debt 41,118 68,218
-------------------- ----------------
Total Liabilities 398,865 453,563
-------------------- ----------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock, $1.00 and $0.0001 par value,
authorized 10,000,000 and 50,000,000 shares;
9,000,000 and 11,116,900 issued and
outstanding shares 9,000,000 1,112
Additional paid-in capital (8,639,900) 799,801
Accumulated deficit (544,045) (524,901)
-------------------- ----------------
Total stockholders' equity (deficiency) (183,945) 276,012
-------------------- ----------------
Total Liabilities and Stockholders' Equity (Deficiency) $ 214,920 $ 729,575
==================== ================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-2
<PAGE>
<TABLE>
<CAPTION>
Diversified Product Inspections, Inc.
Consolidated Statements of Operations
Three Months Ended March 31,
(unaudited)
1999 2000
------------------ ------------------
<S> <C> <C>
REVENUES $ 154,395 $ 289,444
------------------ ------------------
OPERATING EXPENSES
Compensation:
Officers 45,000 45,000
Others 40,806 74,557
Depreciation 3,689 6,712
General and administrative 44,339 139,036
------------------ ------------------
Total operating expenses 133,834 265,305
------------------ ------------------
Operating Income 20,561 24,139
------------------ ------------------
OTHER INCOME (EXPENSE):
Interest expense (653) (1,616)
------------------ ------------------
Total other income (expense) (653) (1,616)
------------------ ------------------
Net loss before income tax 19,908 22,523
Income tax expense 2,986 3,378
------------------ ------------------
Net income $ 16,922 $ 19,145
================== ==================
Net loss per common share $ 0.002 $ 0.002
================== ==================
Weighted average number of common shares outstanding 9,000,000 11,116,900
================== ==================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
Diversified Product Inspections, Inc.
Consolidated Statements of Stockholders' Equity (Deficiency)
Total
Additional Stockholders'
Number of Common Paid-in Equity
Shares Stock Capital Deficit (Deficiency)
---------------- --------------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
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)
Three months ended March 31, 2000:
- ----------------------------------
(unaudited)
Shares issued for cash 241,900 241,900 198,760 0 440,660
Reverse merger 1,875,000 (9,240,788) 9,240,941 0 153
Net income 0 0 0 19,144 19,144
---------------- --------------- ----------------- ------------- ---------------
BALANCE, March 31, 2000 (unaudited) 11,116,900 $ 1,112 $ 799,801 $ (524,901)$ 276,012
================ =============== ================= ============= ===============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
Diversified Product Inspections, Inc.
Consolidated Statements of Cash Flows
Three Months Ended March 31,
(unaudited)
1999 2000
------------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 16,922 $ 19,144
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation 3,689 6,712
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (15,553) 41,897
Increase (decrease) in accounts payable (2,076) 335
Increase (decrease) accrued salaries 39,990 21,600
------------------- -----------------
Net cash provided (used) by operating activities 42,972 89,688
------------------- -----------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property and equipment (37,886) (42,241)
Deposit on real property 0 (215,000)
------------------- -----------------
Net cash provided (used) by investing activities (37,886) (257,241)
------------------- -----------------
CASH FLOW FROM FINANCING ACTIVITIES:
Shareholder advances 0 0
Shareholder advance repayments (13,500) 0
Common stock sold for cash, net 0 440,660
Proceeds of long-term debt 32,272 42,241
Debt payments (1,138) (8,706)
------------------- -----------------
Net cash provided by financing activities 17,634 474,195
------------------- -----------------
Net increase (decrease) in cash and equivalents 22,720 306,642
CASH and equivalents, beginning of period 20,700 53,335
------------------- -----------------
CASH and equivalents, end of period $ 43,420 $ 359,977
=================== =================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid in cash $ 653 $ 1,616
=================== =================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-5
<PAGE>
Diversified Product Inspections, Inc.
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Principles
The Company 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 $3,689 and $6,712 for the three months ended March 31, 1999 and
2000, respectively.
d) Cash and equivalents The Company considers investments with an
initial maturity of three months or less as cash equivalents.
e) Principles of consolidated 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
three months ended March 31, 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 three 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
11,116,900 shares of common stock issued and outstanding at December
31, 1999 and March 31, 2000.
F-6
<PAGE>
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 the
Company's 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.
(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 and net deferred income tax
liability of $5,178 at December 31, 1999 and March 31, 2000. The
deferred tax asset is composed of accruals not currently deductible,
and the deferred tax liability is composed of the net difference
between book and tax depreciation.
(4) Going Concern As shown in the accompanying financial statements, the
Company incurred a net loss totaling $13,500 for the year ended
December 31, 1999, net income of $19,000 for the three months ended
March 31, 2000, and reflects stockholders' equity of approximately
$276,000 as of March 31, 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 $4,700 and $27,000 at March 31, 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 $9,200, $4,600 and $35,600 at March 31,
2000. Under those leases, the Company is obligated to payments
totaling $10,000, $16,000 and $22,400 for the twelve months ending
March 31, 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
<PAGE>
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.
F-8
<PAGE>
INDEX TO PROFORMA FINANCIAL STATEMENTS
Proforma Consolidated Balance Sheet.......................................F-2
Proforma Consolidated Statements of Operations............................F-3
Notes to Proforma Consolidated Financial Statement.......................F-4
<PAGE>
<TABLE>
<CAPTION>
Diversified Product Inspections, Inc.
f/k/a Shoe Krazy, Inc.
Proforma Consolidated Balance Sheet
December 31, 1999
(Unaudited)
Diversified
Shoe Product
Krazy, Inspections, Proforma
Inc. Inc. Adjustments Proforma
----------------- ------------------- --------------------- --------------
ASSETS
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash $ 198 $ 53,335 $ 53,533
Accounts receivable 0 69,226 69,226
Deferred tax asset 0 22,556 22,556
----------------- ------------------- --------------
Total current assets 198 145,117 145,315
----------------- ------------------- --------------
PROPERTY AND EQUIPMENT
Equipment 0 56,639 56,639
Vehicles 0 45,886 45,886
----------------- ------------------- --------------
Total property and equipment 0 102,525 102,525
Less: Accumulated depreciation 0 (32,722) (32,722)
----------------- ------------------- --------------
Total property and equipment 0 69,803 69,803
----------------- ------------------- --------------
OTHER ASSETS
Investment in subsidiary 296,797 0 a) (296,797) 0
----------------- ------------------- --------------
Total other assets 296,797 0 0
----------------- ------------------- --------------
Total Assets $296,995 $ 214,920 215,118
================= =================== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 0 $ 15,935 $ 15,935
Accrued expenses
Income taxes 0 11,401 11,401
Salaries 0 298,275 298,275
Current portion of long-term debt 0 10,551 10,551
Line of credit payable 0 21,585 21,585
----------------- ------------------- --------------
Total current liabilities 0 357,747 357,747
----------------- ------------------- --------------
LONG-TERM DEBT
Deferred taxes 0 5,178 5,178
Notes payable 0 59,015 59,015
Loan from stockholder 0 4,025 4,025
----------------- ------------------- --------------
Total long-term debt 0 68,218 68,218
----------------- ------------------- --------------
Total Liabilities 0 425,965 425,965
----------------- ------------------- --------------
STOCKHOLDERS' EQUITY
Preferred stock, no par value, 10,000,000 shares
authorized; 0 shares issued and outstanding 0 0 0
Common stock, $0.0001 and $1.00 par value, 50,000,000
and 10,000,000 shares authorized; 10,875,000 and
9,000,000 shares issued and outstanding, respectively 1,088 9,000,000 a) (9,000,000) 1,088
Additional paid-in capital 359,210 (8,639,900) a) 8,639,900 359,210
Accumulated deficit (63,303) (544,045) a) 63,303 (544,045)
----------------- ------------------- --------------
Total stockholders' equity 296,995 (183,945) (183,747)
----------------- ------------------- --------------
Total Liabilities and Stockholders' Equity $ 296,995 $ 242,020 $ 242,218
================= =================== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-2
<PAGE>
<TABLE>
<CAPTION>
Diversified Product Inspections, Inc.
f/k/a Shoe Krazy, Inc.
Proforma Consolidated Statements of Operations and Comprehensive Income (Loss)
Year Ended December 31, 1999
(Unaudited)
Diversified
Shoe Product
Krazy, Inspections, Proforma
Inc. Inc. Adjustments Proforma
--------------------- ------------------ --------------------- ------------------
<S> <C> <C> <C> <C>
REVENUES $ 0 $ 618,948 $ 618,948
OPERATING EXPENSES
Compensation:
Officers 0 180,000 180,000
Others 0 145,932 145,932
General and administrative 62,302 289,627 a) (62,302) 289,627
Depreciation 0 11,810 11,810
--------------------- ------------------ ------------------
Total operating expenses 62,302 627,369 627,369
--------------------- ------------------ ------------------
Operating loss (62,302) (8,421) (8,421)
--------------------- ------------------ ------------------
OTHER INCOME (EXPENSE)
Interest expense 0 5,048 5,048
--------------------- ------------------ ------------------
Total other income (expense) 0 (5,048) (5,048)
--------------------- ------------------ ------------------
Net loss before tax $ (62,302) $ (13,469) $ (13,469)
Income tax expense 0 0 0
--------------------- ------------------ ------------------
Net loss $ (62,302) $ (13,469) $ (13,469)
===================== ================== ==================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-3
<PAGE>
Diversified Product Inspections, Inc.
f/k/a Shoe Krazy, Inc.
Notes to Proforma Consolidated Financial Statements
(Unaudited)
(1) Proforma Changes On March 13, 2000, the Company entered into a Share
Exchange Agreement with Diversified Product Inspections Inc., a
Florida corporation. The business combination was closed on March
13, 2000 and is accounted for as a reverse merger and a
reorganization of Diversified Product Inspections, Inc.
(2) Proforma Adjustments
a) Eliminate investment in subsidiary and subsidiary equity
F-4
<PAGE>
INDEX TO PROFORMA FINANCIAL STATEMENTS
Proforma Consolidated Balance Sheet...................................F-2
Proforma Consolidated Statements of Operations........................F-3
Notes to Proforma Consolidated Financial Statement...................F-4
<PAGE>
<TABLE>
<CAPTION>
Diversified Product Inspections, Inc.
f/k/a Shoe Krazy, Inc.
Proforma Consolidated Balance Sheet
March 31, 2000
(Unaudited)
Diversified
Shoe Product
Krazy, Inspections, Proforma
Inc. Inc. Adjustments Proforma
----------------- ------------------- ------------------- ------------
ASSETS
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash $ 153 $ 359,977 $ 360,130
Accounts receivable 0 27,329 27,329
Deferred tax asset 0 22,556 22,556
----------------- ------------------- ------------
Total current assets 153 409,862 410,015
----------------- ------------------- ------------
PROPERTY AND EQUIPMENT
Equipment 0 100,032 100,032
Vehicles 0 45,886 45,886
----------------- ------------------- ------------
Total property and equipment 0 145,918 145,918
Less: Accumulated depreciation 0 (41,358) (41,358)
----------------- ------------------- ------------
Total property and equipment 0 104,560 104,560
----------------- ------------------- ------------
OTHER ASSETS
Investment in subsidiary 737,412 0 a) (737,412) 0
Deposits 0 215,000 215,000
----------------- ------------------- ------------
Total other assets 737,412 215,000 215,000
----------------- ------------------- ------------
Total Assets $ 737,565 $ 729,422 $ 729,575
================= =================== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 0 $ 16,270 $ 16,270
Accrued expenses:
Income taxes 0 14,779 14,779
Salaries 0 319,875 319,875
Current portion of long-term debt 0 16,836 16,836
Line of credit payable 0 17,585 17,585
----------------- ------------------- ------------
Total current liabilities 0 385,345
----------------- ------------------- ------------
LONG-TERM DEBT
Deferred taxes 0 5,178 5,178
Notes payable 0 59,015 59,015
Loan from stockholder 0 4,025 4,025
----------------- ------------------- ------------
Total long-term debt 0 68,218 68,218
----------------- ------------------- ------------
Total Liabilities 0 453,563 453,563
----------------- ------------------- ------------
STOCKHOLDERS' EQUITY
Preferred stock, no par value, 10,000,000 shares
authorized, 0 shares issued and outstanding 0 0 0
Common stock, $0.0001 and $1.00 par value, 50,000,000
and 10,000,000 shares authorized; 11,116,900 and
9,241,900 shares issued and outstanding, respectively 1,112 9,241,900 a) (9,241,900) 1,112
Additional paid-in capital 799,801 (8,441,140) a) 8,441,140 799,801
Accumulated deficit (63,348) (524,901) a) 63,348 (524,901)
----------------- ------------------- ------------
Total stockholders' equity 737,565 275,859 276,012
----------------- ------------------- ------------
Total Liabilities and Stockholders' Equity $ 737,565 $ 729,422 $ 729,575
================= =================== ============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-2
<PAGE>
<TABLE>
<CAPTION>
Diversified Product Inspections, Inc.
f/k/a Shoe Krazy, Inc.
Proforma Consolidated Statements of Operations and Comprehensive Income (Loss)
Three Months Ended March 31, 2000
(Unaudited)
Diversified
Shoe Product
Krazy, Inspections, Proforma
Inc. Inc. Adjustments Proforma
------------------- ------------------ ------------------- ---------------
<S> <C> <C> <C> <C>
REVENUES $ 0 $ 289,444 $ 289,444
OPERATING EXPENSES
Compensation:
Officers 0 45,000 45,000
Others 0 74,557 74,557
General and administrative 45 139,036 a) (45) 139,036
Depreciation 0 6,712 6,712
------------------- ------------------ ---------------
Total operating expenses 45 265,305 265,305
------------------- ------------------ ---------------
Operating income (loss) (45) 24,139 24,139
------------------- ------------------ ---------------
OTHER INCOME (EXPENSE)
Interest expense 0 (1,616) (1,616)
------------------- ------------------ ---------------
Total other income (expense) 0 (1,616) (1,616)
------------------- ------------------ ---------------
Net income (loss) before tax $ (45) $ 22,523 $ 22,523
Income tax expense 0 (3,378) (3,378)
------------------- ------------------ ---------------
Net income (loss) $ (45) $ 19,145 $ 19,145
=================== ================== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-3
<PAGE>
Diversified Product Inspections, Inc.
f/k/a Shoe Krazy, Inc.
Notes to Proforma Consolidated Financial Statements
(Unaudited)
(1) Proforma Changes On March 13, 2000, the Company entered into a Share
Exchange Agreement with Diversified Product Inspections, Inc., a
Florida corporation. The business combination was closed on March
13, 2000 and is accounted for as a reverse merger and a
reorganization of Diversified Product Inspections, Inc.
(2) Proforma Adjustments
a) Eliminate investment in subsidiary and subsidiary equity
F-4
<PAGE>
Item 8. Change in Fiscal Year
Diversified Product Inspections, Inc. changed its fiscal year end to
December 31 to conform with the fiscal year end for its subsidiary.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
DIVERSIFIED PRODUCT INSPECTIONS, INC.
(Registrant)
Date May 22, 2000 By: /s/ John Van Zyll
--------------------------------
John Van Zyll, President
By: /s/ Ann M. Furlong
--------------------------------
Ann M. Furlong, Chief Financial Officer
