UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13
0R 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ending: September 30,
2011
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number:
DRS Inc.
(Exact Name of Registrant as Specified in its
Charter)
Nevada
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20-5914452
|
(State or Other Jurisdiction of Incorporation or
|
(I.R.S. Employer Identification No.)
|
Organization)
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|
|
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4004 NE 4th St., Suite 107-315, Renton, WA
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98056
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(Address of principal executive offices)
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(Zip Code)
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|
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(206) 920-9104
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(Registrant’s Telephone Number, Including Area Code)
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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. [X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and
post such files). [X] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
We had
18,882,268
shares outstanding
of common stock as of November 14, 2011.
Table of Contents
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PART I – FINANCIAL INFORMATION
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Item 1
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Financial Statements
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4
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Item 2
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Management’s Discussion and Analysis and Plan of Operation
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15
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Item 3
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Quantitative and Qualitative Disclosures about Market Risk
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16
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Item 4
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Controls and Procedures
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16
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PART II – OTHER INFORMATION
|
Item 1
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Legal Procedures
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18
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Item 2
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Unregistered Sales of Equity Securities and Use of Proceeds
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19
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Item 3
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Defaults upon Senior Securities
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19
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Item 4
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Submission of Matters to a Vote of Security Holders
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19
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Item 5
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Other Information
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19
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Item 6
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Exhibits
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20
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PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
As of September
30, 2011 and June 30, 2011
ASSETS
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|
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30-Sep-11
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30-Jun-11
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Current assets:
|
|
|
|
|
|
|
|
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Cash & short term investments
|
|
|
|
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$0
|
|
$10,952
|
Total current assets
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|
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$0
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$10,952
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|
|
|
|
|
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|
|
|
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Other assets:
|
|
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Fixed assets- net
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80,304
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90,536
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|
|
|
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|
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Total assets
|
|
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$80,304
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$101,488
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|
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LIABILITIES & SHAREHOLDERS' EQUITY
|
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Current liabilities:
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|
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|
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Accounts payable & accrued expenses
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$602,154
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$591,249
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Notes payable
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|
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300,000
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300,000
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Debentures & advances payable
|
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60,235
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39,535
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Advances payable to shareholder
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|
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569,602
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565,852
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Capital lease payable
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|
|
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26,682
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26,074
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Total current liabilities
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|
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|
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$1,558,673
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$1,522,710
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Convertible debenture payable- net
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|
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55,564
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55,564
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Capital lease payable
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|
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78,538
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85,441
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Shareholders' equity:
|
|
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Common stock- $.001 par value, authorized 25,000,000 shares,
|
|
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issued and outstanding, 18,882,268 shares at 9/30/11 and
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|
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18,882,268 at 6/30/11
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|
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$18,882
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$18,882
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Additional paid in capital
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11,795,800
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11,795,800
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Retained deficit
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(13,427,153)
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(13,376,909)
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Total shareholders' deficit
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(1,612,471)
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(1,562,227)
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|
|
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|
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|
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Total Liabilities & Shareholders' Deficit
|
|
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$80,304
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$101,488
|
Please see the notes to the financial statements.
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Statements
of Operations
For the Quarters Ended September 30, 2011
and September 30, 2010
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30-Sep-11
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30-Sep-10
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General & administrative expenses:
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|
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General administration
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$47,540
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|
$647,284
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Total general & administrative expenses
|
|
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47,540
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647,284
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|
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Net loss from operations
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|
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($47,540)
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($647,284)
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Other revenue (expense):
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Interest expense
|
|
|
|
|
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(2,704)
|
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(23,914)
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|
|
|
|
|
|
|
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|
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Net loss before provision for income taxes
|
|
|
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($50,244)
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($671,198)
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|
|
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Provision for income taxes
|
|
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0
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0
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|
|
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|
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Loss from continuing operations
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(50,244)
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(671,198)
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Loss from discontinued operations
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0
|
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(252,783)
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|
|
|
|
|
|
|
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|
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Net loss
|
|
|
|
|
|
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($50,244)
|
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($923,981)
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|
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|
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|
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Loss per common share (basic & fully diluted):
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Loss from continuing operations
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($0.00)
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($0.05)
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Loss from discontinued operations
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0.00
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0.00
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Net loss per share
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($0.00)
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($0.05)
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Please see the notes to the financial statements.
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Statements
of Cash Flows
For the Quarters Ended September 30, 2011
and September 30, 2010
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30-Sep-11
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30-Sep-10
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Operating activities:
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|
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Net loss
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|
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|
|
|
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($50,244)
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($923,981)
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Adjustments to reconcile net loss items
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not requiring cash:
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Depreciation expense
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10,232
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27,700
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Bad debt expense
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0
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0
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Impairment expense
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|
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0
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10,473
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Interest expense
|
|
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0
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8,516
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Consulting expense
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|
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0
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|
571,042
|
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Marketing & salary expense
|
|
|
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0
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0
|
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Loss on asset disposals
|
|
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0
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|
40,701
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Changes in other operating assets & liabilities:
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Accounts receivable
|
|
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|
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0
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|
99,677
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Accounts receivable- related parties
|
|
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0
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|
6,329
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Stock subscription receivable
|
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0
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4,950
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Accounts payable & accrued expenses
|
|
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10,905
|
|
59,410
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Net cash used by operations
|
|
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($29,107)
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|
($95,183)
|
|
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Investing activities:
|
|
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Security deposits
|
|
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$0
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$0
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Net cash used by investing activities
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|
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0
|
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0
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|
|
|
|
|
|
|
|
|
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Financing activities:
|
|
|
|
|
|
|
|
|
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Advances from shareholder
|
|
|
|
$3,750
|
|
$31,786
|
|
Proceeds from advances & debentures payable
|
|
20,700
|
|
55,564
|
|
Payment of capital lease
|
|
|
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(6,295)
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|
(16,667)
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Net cash provided by financing activities
|
|
|
|
18,155
|
|
70,683
|
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|
|
|
|
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Net increase (decrease) in cash during the period
|
|
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($10,952)
|
|
($24,500)
|
|
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|
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|
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Cash balance at July 1st
|
|
|
|
|
10,952
|
|
24,500
|
|
|
|
|
|
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|
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Cash balance at September 30th
|
|
|
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$0
|
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$0
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|
|
|
|
|
|
|
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Supplemental disclosures of cash flow information:
|
|
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|
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Interest paid during the period
|
|
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|
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$0
|
|
$15,398
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Income taxes paid during the period
|
|
|
|
$0
|
|
$0
|
Please see the notes to the financial statements.
|
|
|
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|
Statement
of Changes in Shareholder’s Deficit
For the Three Months Ended September 30,
2011 and September 30, 2010
|
|
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Common
|
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Par
|
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Additional Paid
|
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Retained
|
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Shareholders'
|
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Shares
|
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Value
|
|
in Capital
|
|
Deficit
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
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Balance at June 30, 2011
|
18,882,268
|
|
$18,882
|
|
$11,795,800
|
|
($13,376,909)
|
|
($1,562,227)
|
|
|
|
|
|
|
|
|
|
|
|
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Net loss
|
|
|
|
|
|
|
|
|
(50,244)
|
|
(50,244)
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|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2011
|
18,882,268
|
|
$18,882
|
|
$11,795,800
|
|
($13,427,153)
|
|
($1,612,471)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
|
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Common
|
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Par
|
|
Additional Paid
|
|
Retained
|
|
Shareholders'
|
|
|
|
Shares
|
|
Value
|
|
in Capital
|
|
Deficit
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2010
|
17,785,718
|
|
$17,785
|
|
$11,747,036
|
|
($12,413,856)
|
|
($649,035)
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of options
|
|
|
|
|
|
571,042
|
|
|
|
571,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,895
|
|
|
|
38,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
(923,981)
|
|
(923,981)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2010
|
17,785,718
|
|
$17,785
|
|
$12,356,973
|
|
($13,337,837)
|
|
($963,079)
|
|
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DRS Inc.
Notes to the Financial Statements
For the Quarters Ended
September 30, 2011 and September 30, 2010
1.
Organization of the Company and Significant Accounting Principles
DRS
Inc. (the “Company”) is a privately held corporation formed in November 2006 in the state of Nevada. The Company installs
drywall for new construction and removes drywall and other rubbish from construction sites for disposal and recycling. The Company
operates mainly in the state of Washington.
In
September 2010, the Company discontinued its drywall installation and scrapping recycling business and has ceased business operations.
Use of Estimates
-
The preparation of the financial statements in conformity with generally accepted accounting principles requires management to
make reasonable estimates and assumptions that affect the reported amounts of the assets and liabilities and disclosure of contingent
assets and liabilities and the reported amounts of revenues and expenses at the date of the financial statements and for the years
they include. Actual results may differ from these estimates.
Cash-
For the purpose
of calculating changes in cash flows, cash includes all cash balances and highly liquid short-term investments with original maturity
dates of three months or less.
Fixed Assets
-
Fixed
assets are stated at cost. Depreciation expense is computed using the straight-line method over the estimated useful life of the
asset. The following is a summary of the estimated useful lives used in computing depreciation expense:
Office equipment 3
years Vehicles 5 years
Equipment 3 Years
Furniture & fixtures 5
Years
Expenditures for major repairs
and renewals that extend the useful life of the asset are capitalized. Minor repair expenditures are charged to expense as incurred.
Long Lived Assets
-
The Company reviews for the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. An impairment loss would be recognized when estimated future cash flows expected to
result from the use of the asset and its eventual disposition is less than its carrying amount.
Income taxes-
The
Company accounts for income taxes in accordance with generally accepted accounting principles which require an asset and liability
approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually
for differences between financial statement and income tax bases of assets and liabilities that will result in taxable income or
deductible expenses in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets and liabilities to
the amount expected to be realized. Income tax expense is the tax payable or refundable for the period adjusted for the change
during the period in deferred tax assets and liabilities.
The Company follows the accounting
requirements associated with uncertainty in income taxes using the provisions of Financial Accounting Standards Board (FASB) ASC
740,
Income Taxes
. Using that guidance, tax positions initially need to be recognized in the financial statements when it
is more likely than not the positions will be sustained upon examination by the tax authorities. It also provides guidance for
de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As of June 30,
2011, the Company has no uncertain tax positions that qualify for either recognition or disclosure in the financial statements.
All tax returns from fiscal years 2007 to 2010 are subject to IRS audit.
Revenue
Recognition
- The Company realizes revenues from drywall installation and removal jobs when the existence of an unconditional
binding arrangement with a client is present, the work has been performed, the Company fees are determined and fixed, and the assurance
of the revenue collection is reasonably secured. Costs incurred to remove the drywall and dispose waste are charged to cost of
revenues. Such costs include the cost of labor and supplies needed to remove waste from construction sites, the depreciation cost
on the vehicles need to remove the waste, and fuel costs.
Bad Debt Expense
-
The Company provides, through charges to income, a charge for bad debt expense, which is based upon management's evaluation of
numerous factors. These factors include economic conditions prevailing, a predictive analysis of the outcome of the current portfolio
by client, and prior credit loss experience of each client. The Company uses the information from this analysis to develop an estimate
of bad debt reserve based upon the amount of accounts receivable by client at the balance sheet date.
2.
Discontinued Operations
In
September 2010, the management elected to discontinue its drywall installation and scrapping business. The result of operations
for the Company’s drywall installation and drywall scrapping business are included in discontinued operations for quarters
ended September 30, 2011 and September 30, 2010.
|
|
|
30-Sep-11
|
|
20-Sep-10
|
Revenues
|
|
|
$0
|
|
$323,600
|
Cost of revenues
|
|
|
0
|
|
(535,682)
|
Gross margin
|
|
|
0
|
|
(212,082)
|
|
|
|
|
|
|
Interest expense
|
|
|
0
|
|
(40,701)
|
Loss from discontinued operations
|
$0
|
|
($252,783)
|
3. Fixed Assets- Net
The following table is a summary of fixed assets at September
30, 2011 and June 30, 2011:
|
|
|
|
30-Sep-11
|
|
30-Jun-11
|
Vehicles
|
|
|
|
$178,000
|
|
$178,000
|
Accumulated depreciation
|
|
|
|
(97,696)
|
|
(87,464)
|
Fixed assets- net
|
|
|
|
$80,304
|
|
$90,536
|
Assets
leased under capital lease agreements are $178,000 at September 30, 2011 and June 30, 2011. Depreciation expense on these leased
assets for the quarters ended September 30, 2011 and September 30, 2010 is $10,232 and $10,967, respectively.
4.
Debt
In
October 2008, the Company issued a note payable to a creditor and received proceeds of $200,000. The loan is secured by the assets
of the Company and is due on demand at an interest rate of 10%.
In
January 2009, the Company issued a note payable to a creditor and received proceeds of $100,000. The loan is secured by the receivables
of the Company and is due on demand at an interest rate of 12%.
In
September 2010, the Company issued a convertible debenture and received proceeds of $55,564. The debenture allows the holder to
convert the face value of the debenture to shares of common stock at $0.40 per share. The debenture carries an interest rate of
7% and matures in September 2013.
In June, 2011, the Company
received loan proceeds of $20,000 from Asher Enterprise LLC for general corporate use. The loan is unsecured and matures on March
21, 2012, bears interest of 8% and is convertible into common shares of the Company at a conversion price equal to 61% of the market
price of the shares at the date of conversion, commencing 180 days from the date of closing.
In August, 2011, the Company
received loan proceeds of $27,500 from Asher Enterprise LLC for general corporate use. The loan is unsecured and matures on May
10, 2012, bears interest of 8% and is convertible into common shares of the Company at a conversion price equal to 61% of the market
price of the shares at the date of conversion, commencing 180 days from the date of closing.
5. Provision for Income Taxes
Provision for income taxes is comprised of the following:
|
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|
|
|
30-Sep-11
|
|
30-Sep-10
|
|
|
|
|
|
|
|
|
|
Pretax loss
|
|
|
|
|
($47,744)
|
|
($923,981)
|
|
|
|
|
|
|
|
|
|
Current tax expense:
|
|
|
|
|
|
|
|
Federal
|
|
|
|
|
|
$0
|
|
$0
|
State
|
|
|
|
|
|
0
|
|
0
|
Total
|
|
|
|
|
|
$0
|
|
$0
|
|
|
|
|
|
|
|
|
|
Less deferred tax benefit:
|
|
|
|
|
|
|
Tax loss carry-forward
|
|
|
|
(998,231)
|
|
(658,582)
|
Allowance for recoverability
|
|
|
|
998,231
|
|
658,582
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
|
$0
|
|
$0
|
|
|
|
|
|
|
|
|
|
A reconciliation of provision for income taxes at the statutory rate to provision
|
|
|
for income taxes at the company's effective tax rate is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Statutory U.S. federal rate
|
|
|
|
34%
|
|
34%
|
Less allowance for tax loss carryforward
|
|
|
-34%
|
|
-34%
|
Effective rate
|
|
|
|
|
0%
|
|
0%
|
|
|
|
|
|
|
|
|
|
Deferred income taxes are comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax loss carry-forward
|
|
|
|
$998,231
|
|
$658,582
|
Allowance for recoverability
|
|
|
|
(998,231)
|
|
(658,582)
|
Deferred tax asset
|
|
|
|
|
$0
|
|
$0
|
|
|
|
|
|
|
|
|
|
Note: The deferred tax asset arising from the tax loss carry-forward expires in fiscal years 2026 to 2031
|
and may not be recoverable upon the purchase of the Company under current IRS statutes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6. Commitments and Contingencies
The Company has entered into a capital lease agreement for the vehicle
equipment. Future minimum lease payments required under these leases is as follows:
|
|
|
|
|
|
2012
|
|
$35,304
|
|
|
|
|
|
|
2013
|
|
35,304
|
|
|
|
|
|
|
2014
|
|
35,304
|
|
|
|
|
|
|
2015
|
|
17,652
|
Total minimum lease payments
|
|
|
|
$123,564
|
Less amount representing interest
|
|
|
|
(18,344)
|
Present value of minimum lease payments
|
|
$105,220
|
In
addition, the Company leases space for its operations located in the State of Washington. Minimum payments due under these leases
are as follows.
7.
Litigation
The following is a summary of litigation
to which the company is a party.
McEvoy Oil Company sued for non-payment
of invoices totalling $17,710. On December 16, 2010, a judgment was granted to the plaintiff, awarding interest and costs. In addition,
plaintiff is entitled to 18% interest on the judgment amount until it is paid in full. As of June 30, 2011, the total amount accrued
was $25,425 for this judgement.
Poly-America L.P. filed a lawsuit
for non-payment of invoices totalling $7,541. On October 22, 2009, plaintiff was granted a judgment, awarding it interest and costs.
In addition, plaintiff is entitled to receive 5% interest on the judgment amount until it is paid in full. As of June 30, 2011,
the total amount accrued was $10,045 for this judgement.
Scan Coin North, Inc. filed a lawsuit
for non-payment of invoices totalling $5,763. On December 7, 2010, plaintiff was granted a judgment, awarding it interest and costs.
In addition, plaintiff is entitled to receive 5% interest on the judgment amount until it is paid in full. As of June 30, 2011,
the total amount accrued was $10,021 for this judgement.
Industrial Hydraulic
Services filed
a lawsuit for non-payment of invoices totalling $3,048, which has not been concluded. As of June 30, 2011,
the total amount accrued was $5,069 for this judgement.
National Service
bureau filed a lawsuit for non-payment of invoices totaling $4,488, which has not been concluded. As of June 30, 2011, the total
amount accrued for this judgment was $6,063.
Nelson Distributing,
Inc. filed a lawsuit for non-payment of invoices totaling $37,320. On December 15, 2010,
plaintiff was granted a judgment,
awarding it interest and costs. In addition, plaintiff is entitled to receive 18% interest on the judgment amount until it is paid
in full. As of June 30, 2011, the total amount accrued for this judgment was $48,500.
During
the quarter ended March 31, 2011, Teletrac Inc. filed a suit against the company claiming an unpaid invoice balance of $30,960.30
plus 12% interest since March 28, 2010, attorney’s fees and court costs. This lawsuit has not been concluded. As of June
30, 2011, the total amount accrued for this suit was $35,944.
8.
Options Outstanding
A list of options outstanding at September 30, 2011 is as follows:
|
|
|
|
|
|
|
|
Average
|
|
Average
|
|
|
|
|
|
|
|
|
Exercise
|
|
Years to
|
|
|
|
|
|
|
|
|
Price
|
|
Maturity
|
Options outstanding at June 30, 2010
|
|
3,249,664
|
|
$0.30
|
|
1.44
|
Issued
|
|
|
|
|
|
0
|
|
|
|
|
Expired
|
|
|
|
|
|
(1,216,332)
|
|
|
|
|
Exercised
|
|
|
|
|
|
0
|
|
|
|
|
Options outstanding at June 30, 2011
|
|
2,033,332
|
|
$0.34
|
|
5.62
|
|
|
|
|
|
|
|
|
|
|
|
Issued
|
|
|
|
|
|
0
|
|
|
|
|
Expired
|
|
|
|
|
|
0
|
|
|
|
|
Exercised
|
|
|
|
|
|
0
|
|
|
|
|
Options outstanding at September 30, 2011
|
|
2,033,332
|
|
$0.34
|
|
1.26
|
9. Net Loss per Share
Basic net loss per share
has been computed based on the weighted average of common shares outstanding during the years. Diluted net loss per share gives
the effect of outstanding common stock equivalents of the options outstanding at year end. The effects on net loss per share of
the common stock equivalents, however, are not included in the calculation of net loss per share since their inclusion would be
anti-dilutive.
Net loss per share has been
computed as follows:
|
|
30-Sep-11
|
|
30-Sep-10
|
Loss from continuing operations
|
|
($47,744)
|
|
($671,198)
|
Loss from discontinued operations
|
|
0
|
|
(252,783)
|
Net loss
|
|
($47,744)
|
|
($923,981)
|
|
|
|
|
|
Weighted average shares outstanding
|
|
18,882,268
|
|
17,785,718
|
|
|
|
|
|
Loss per common share (basic & fully diluted):
|
|
|
|
Loss from continuing operations
|
|
($0.00)
|
|
($0.05)
|
Loss from discontinued operations
|
|
0.00
|
|
0.00
|
Net loss per share
|
|
($0.00)
|
|
($0.05)
|
ITEM 2. MANAGEMENT’S
DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
You should read the following discussion and
analysis in conjunction with the Consolidated Financial Statements and Notes thereto, and the other financial data appearing elsewhere
in this Report.
The information set forth in Management’s
Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains certain “forward-looking
statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange
Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, including, among others (i) expected changes
in the Company’s revenues and profitability, (ii) prospective business opportunities and (iii) the Company’s strategy
for financing its business. Forward-looking statements are statements other than historical information or statements of current
condition. Some forward-looking statements may be identified by use of terms such as “believes”, “anticipates”,
“intends” or “expects”. These forward-looking statements relate to the plans, objectives and expectations
of the Company for future operations. Although the Company believes that its expectations with respect to the forward-looking statements
are based upon reasonable assumptions within the bounds of its knowledge of its business and operations, in light of the risks
and uncertainties inherent in all future projections, the inclusion of forward-looking statements in this report should not be
regarded as a representation by the Company or any other person that the objectives or plans of the Company will be achieved. In
light of these risks and uncertainties, there can be no assurance that actual results, performance or achievements of the Company
will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.
The foregoing review of important factors should not be construed as exhaustive. The Company undertakes no obligation to release
publicly the results of any future revisions it may make to forward-looking statements to reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events.
Overview
The Company
was incorporated in November 2006 and has operated as a drywall installer, scrapper and recycler at various times during its history.
Until May, 2009, DRS had owned a facility that recycles scrap drywall into gypsum powder and paper for sale to farmers in Washington
State. At that time, the recycling operation was taken over by a former employee and DRS entered into an operating agreement with
a separate entity.
In
September, 2010, we decided to refocus our attention on the drywall scrap recycling operations, while withdrawing for the time-being
from both the drywall installation business and the drywall scrapping business. To this end, we have intended to raise capital
to repurchase the drywall scrap recycling processing operation that we previously owned, as well as to expand the recycling operation
to other regions of the country by opening new facilities, based on what we learned when we were previously involved in the drywall
scrap recycling business.
We
believe we need an initial capital infusion of up to $1 million in order to re-enter the scrap drywall recycling business, and
position the company for growth. To date, we have been unsuccessful in our efforts to raise sufficient capital to re-enter the
drywall recycling business as planned.
Results
of Operations
For the
Nine Months ending September 30, 2011 and September 30, 2010
Sales
revenue from continuing operations in the three months ended September 30, 2011 and September 30, 2010 was nil, as a result of
our decision in September 2010 to cease operations as a drywall installer and scrapper, and refocus our efforts on drywall recycling.
To date, we have not been successful in raising sufficient capital to re-enter the drywall recycling business. Total expenses incurred
in continuing operations during the three months ending September 30, 2011 were $47,540, compared to $647,284 during the quarter
ended September 30, 2010. The expenses were mainly to professional fees paid in conjunction our attempts to raise capital and otherwise
move the company forward. Expenses will continue to be kept at a bare minimum in order to keep cash requirements as low as possible.
Liquidity
& Capital Resources
Cash
on hand at September 30, 2011 was nil compared to $10,952 at June 30, 2011. During the quarter, we used $29,107 in operations,
partially offset by net financing activity of $18,155, as well as using up the cash on hand at June 30, 2011.
Based upon current plans, we expect to incur
operating losses in future periods. We cannot guarantee that we will be successful in generating sufficient revenues to support
operations in the future. Failure to generate sufficient revenues will cause us to go out of business. We have been unsuccessful
to date in re-entering the drywall recycling business as planned due to our inability to raise sufficient capital to do so. We
anticipate that an initial capital infusion of up to $1 million is needed to re-enter the drywall recycling business and position
the Company for future growth.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The
Company does not hold and assets or liabilities requiring disclosure under this item.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
.
Our management,
with the participation of our President, who is our chief executive officer, and our Secretary/Treasurer, who is our chief financial
officer, have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), in connection with the preparation
of this Quarterly Report on Form 10-Q/A, as of September 30, 2011. Based on the review described above, our President and Secretary/Treasurer
determined that our disclosure controls and procedures were effective as of the end of the period covered by this report, and that
no changes to controls and procedures were made or were needed to be during the last quarter that materially affected, or was reasonably
likely to materially affect, internal control over financial reporting.
Internal
Control Over Financial Reporting
.
Management
is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and
the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control
system’s objectives will be met.
The design
of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered
relative to their costs. In addition, because of the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of
fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty
and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is
based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness
to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration
in the degree of compliance with policies or procedures.
Our management
assessed our internal control over financial reporting as of September 30, 2011 based on criteria established in Internal Control—Integrated
Framework issued by the Committee of
Sponsoring
Organizations of the Treadway Commission. Based on such assessment, our management concluded that our internal control over financial
reporting was effective as of September30, 2011 to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting
principles.
There were
no changes in our internal control over financial reporting that occurred during the third fiscal quarter ended September 30, 2011,
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART
II – OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
The following is a summary of litigation
to which the company has been a party.
McEvoy Oil Company sued for non-payment
of invoices totalling $17,709.51. On December 16, 2010, a judgment was granted to the plaintiff, awarding interest and costs totalling
$5,445.06. In addition, plaintiff is entitled to 18% interest on the judgment amount until it is paid in full. As of June 30, 2011,
the total amount accrued was 23,325.85.
Poly-America L.P. filed a lawsuit
for non-payment of invoices totaling $7,540.60. On October 22, 2009, plaintiff was granted a judgment, awarding it interest and
costs totaling $1,708.00. In addition, plaintiff is entitled to receive 5% interest on the judgment amount until it is paid in
full.
Scan Coin North, Inc. filed a lawsuit
for non-payment of invoices totaling $5,762.55. On December 7, 2010, plaintiff was granted a judgment, awarding it interest and
costs totaling $3,323.28. In addition, plaintiff is entitled to receive 5% interest on the judgment amount until it is paid in
full.
Industrial Hydraulic Services filed
a lawsuit for non-payment of invoices totaling $3,047.91, which has not been concluded.
National Service
bureau filed a lawsuit for non-payment of invoices totaling $4,488.21, which has not been concluded.
Nelson Distributing, Inc. filed
a lawsuit for non-payment of invoices totaling $37,320.07. On December 15, 2010, plaintiff was granted a judgment, awarding it
interest and costs totaling $6,827.13. In addition, plaintiff is entitled to receive 18% interest on the judgment amount until
it is paid in full.
During
the quarter ended March 31, 2011, Teletrac Inc. filed a suit against the company claiming an unpaid invoice balance of $30,960.30
plus 12% interest since March 28, 2010, attorney’s fees and court costs. This lawsuit has not been concluded.
ITEM 2. UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM
5. OTHER INFORMATION
None.
ITEM
6. EXHIBITS
The Exhibit
Index attached behind the signature page is incorporated herein by reference. The exhibits required by Item 601 of Regulations
S-K are attached.
SIGNATURES
Pursuant to
the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
|
DRS Inc.
|
|
By:
|
|
|
|
Daniel Mendes, President, Sec/Treas.
|
November 14, 2011
|
|
(principal executive officer)
|
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
By:
|
|
|
|
Daniel Mendes, President, Secretary/Treasurer
and Director
(principal executive officer)
|
|
November 14, 2011
|
By:
|
|
|
|
Philip Blair Mullin, Chief Financial Officer
and Director
(principal financial and accounting officer)
|
|
November 14, 2011
|
EXHIBIT INDEX
* The Exhibit attached to this Form 10-Q/A shall not be deemed “filed”
for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to liability
under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended,
or the Exchange Act, except as expressly set forth by specific reference in such filing.
SEC Ref. No. Title of Document
SEC Ref. No.
|
Title of Document
|
3.1
|
Articles of Incorporation – incorporated by reference to Form 10-K/A filed April 21, 2011
|
3.2
|
By-Laws - incorporated by reference to Form 10-K/A filed April 21, 2011
|
3.3
|
Certificate of Amendment – incorporated by reference to Form 10-K filed September 28, 2011
|
10.1
|
Consulting Agreement dated May 18, 2007 by and between Ron Royce and Dan Guimont, Daniel Mendes and DRS Inc. - incorporated by reference to Form 10-K/A filed April 21, 2011
|
10.2
|
Amendment to Consulting Agreement by and Between Ron Royce and Dan Guimont, Daniel Mendes and DRS Inc. - incorporated by reference to Form 10-K/A filed April 21, 2011
|
10.3
|
Operating Agreement dated May 15, 2009 between Drywall Recycling Services Inc. and DRS Inc. - incorporated by reference to Form 10-K/A filed April 21, 2011
|
14.1
|
Code of Conduct - incorporated by reference to Form 10-K/A filed April 21, 2011
|
17.1
|
Resignation of George Guimont as Director and Secretary/Treasurer - incorporated by reference to Form 10-K/A filed April 21, 2011
|
31.1
|
Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – filed herein
|
31.2
|
Certification of the Principal Financial/Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – filed herein
|
32.1
|
Certification of the Principal Executive Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - filed herein
|
32.2
|
Certification of the Principal Financial/Accounting Officer pursuant
to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - filed herein
|
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