Attached files
| file | filename |
|---|---|
| EX-32.1 - DRS Inc. | ex32-1.htm |
| EX-32.2 - DRS Inc. | ex32-2.htm |
| EX-31.1 - DRS Inc. | ex31-1.htm |
| EX-31.2 - DRS Inc. | ex31-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
One)
[X]
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
quarter ended December 31, 2009
[ ]
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
transition period from _______ to _________
Commission
file number:
DRS
Inc.
(Name of
small business issuer in its charter)
|
Nevada
|
20-5914452
|
|
(State
or other jurisdiction of Incorporation
or organization)
|
(IRS
Employer Identification Number)
|
5906-B
238th
Street, SE ∙ Woodinville, Washington 98072
Post Office Box 726 ∙ Bothell, Washington
98041-0726
(Address
of principal executive offices)
(866) 991-9960
(Issuer’s
Telephone Number)
(Former
name, former address and former fiscal year, if changed since last
report)
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 filed such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [x] 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]
(APPLICABLE ONLY TO ISSUERS
INVOLVED IN BANKRUPTCY
PROCEEDINGS
DURING THE PRECEDING FIVE YEARS)
Check
whether the issuer has filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court. Yes [ ]
No [ ]
(APPLICABLE
ONLY TO CORPORATE REGISTRANTS)
State
the number of shares outstanding of each of the issuer’s classes of common
equity, as of the latest practicable date:
As of December 31, 2009, the Company had 15,921,718 shares of common stock
issued and outstanding.
FORM
10-Q – DRS INC.
INDEX
| Page | |
|
Part I. Financial
Statements
|
|
|
Item
1. Financial Statements
|
4
|
|
Balance
Sheets as of December 31, 2009 (Unaudited) and June 30, 2009
(Audited)
|
4
|
|
Statements
of Operations for the Six Months and Quarters ended December 31,
2009
|
|
|
(Unaudited)
and December 31, 2008 (Unaudited)
|
5
|
|
Statements
of Cash Flows for the Six Months ended December 31, 2009
(Unaudited)
|
|
|
and
December 31, 2008 (Unaudited)
|
6
|
|
Statement
of Changes in Shareholder’s Equity for the Six Months ended December
31,
|
|
|
2009
(Unaudited) and December 31, 2008 (Unaudited)
|
7
|
|
Notes
to the Financial Statements for the Six Months ended December 31,
2009
|
|
|
(Unaudited)
and December 31, 2008 (Unaudited)
|
8
|
|
Item
2. Management’s Discussion and Analysis of Financial Condition and
Result
|
|
|
of
Operations
|
15
|
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
|
18
|
|
Item
4T. Controls and Procedures
|
18
|
|
Part II – Other Information
|
|
|
Item
1. Legal Proceedings
|
19
|
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
19
|
|
Item
3. Defaults Upon Senior Securities
|
19
|
|
Item
4. Submission of Matters to a Vote of Security Holders
|
19
|
|
Item
5. Other Information
|
19
|
|
Item
6. Exhibits
|
20
|
|
Signatures
|
20
|
|
Exhibit
Index
|
21
|
DRS
Inc.
Balance
Sheets
As
of December 31, 2009 and June 30, 2009
|
Unaudited
|
Audited
|
|||||||
|
ASSETS
|
31-Dec-09
|
30-Jun-09
|
||||||
|
Current
assets:
|
||||||||
|
Cash
& short term deposits
|
$ | 21,173 | $ | 18,481 | ||||
|
Accounts
receivable (net of allowance for bad debt)
|
201,379 | 329,037 | ||||||
|
Prepaid
expenses
|
17,975 | 24,708 | ||||||
|
Total
current assets
|
$ | 240,527 | $ | 372,226 | ||||
|
Other
assets:
|
||||||||
|
Fixed
assets- net
|
564,132 | 645,330 | ||||||
|
Security
deposits- related party
|
262,770 | 262,769 | ||||||
| $ | 1,067,429 | $ | 1,280,325 | |||||
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts
payable & accrued expenses
|
$ | 477,508 | $ | 465,888 | ||||
|
Capital
lease payable- short term
|
157,628 | 153,963 | ||||||
| $ | 635,136 | $ | 619,851 | |||||
|
Capital
lease payable- long term
|
318,415 | 397,120 | ||||||
|
Notes
payable
|
300,000 | 300,000 | ||||||
|
Loan
payable- shareholder
|
216,930 | 116,041 | ||||||
|
Shareholders'
equity:
|
||||||||
|
Common
stock- $.001 par value, authorized 25,000,000 shares,
|
||||||||
|
issued and outstanding,
15,903,718 shares at 6/30/09 and 15,921,718
at 12/31/09
|
||||||||
| $ | 15,921 | $ | 15,903 | |||||
|
Additional
paid in capital
|
11,476,875 | 11,458,893 | ||||||
|
Retained
deficit
|
(11,895,848 | ) | (11,627,483 | ) | ||||
| (403,052 | ) | (152,687 | ) | |||||
| $ | 1,067,429 | $ | 1,280,325 | |||||
|
See
the notes to the financial statements.
|
||||||||
-4-
DRS
Inc.
Statements
of Operations
For
the Six Months and Quarters Ended December 31, 2009 and December,
2008
|
6
Months
|
6
Months
|
3
Months
|
3
Months
|
|||||||||||||
|
31-Dec-09
|
31-Dec-08
|
31-Dec-09
|
31-Dec-08
|
|||||||||||||
|
Revenues:
|
||||||||||||||||
|
Net
revenues
|
$ | 1,040,925 | $ | 1,680,952 | $ | 473,842 | $ | 882,562 | ||||||||
|
Cost
of revenues
|
(948,623 | ) | (1,497,928 | ) | (439,788 | ) | (786,256 | ) | ||||||||
|
Net
revenues
|
$ | 92,302 | $ | 183,024 | $ | 34,054 | $ | 96,306 | ||||||||
|
General
and administrative expenses:
|
||||||||||||||||
|
General
administration
|
$ | 314,476 | $ | 316,704 | $ | 69,846 | $ | 163,326 | ||||||||
|
Total
general & administrative expenses
|
314,476 | 316,704 | 69,846 | 163,326 | ||||||||||||
|
Net
loss from operations
|
$ | (222,174 | ) | $ | (133,680 | ) | $ | (35,792 | ) | $ | (67,020 | ) | ||||
|
Other
revenues (expenses):
|
||||||||||||||||
|
Interest
income
|
0 | 580 | 0 | 0 | ||||||||||||
|
Interest
expense
|
(46,191 | ) | (24,514 | ) | (23,815 | ) | (9,436 | ) | ||||||||
|
Net
loss before provision for income taxes
|
$ | (268,365 | ) | $ | (157,614 | ) | $ | (59,607 | ) | $ | (76,456 | ) | ||||
|
Provision
for income taxes
|
0 | 0 | 0 | 0 | ||||||||||||
|
Net
loss
|
$ | (268,365 | ) | $ | (157,614 | ) | $ | (59,607 | ) | $ | (76,456 | ) | ||||
|
Loss
per common share:
|
||||||||||||||||
|
Basic
& fully diluted
|
$ | (0.02 | ) | $ | (0.01 | ) | $ | 0.00 | $ | (0.00 | ) | |||||
|
Weighted
average of common shares:
|
||||||||||||||||
|
Basic
& fully diluted
|
15,917,292 | 15,868,268 | 15,921,718 | 15,868,268 | ||||||||||||
|
See
the notes to the financial statements.
|
||||||||||||||||
-5-
DRS
Inc.
Statements
of Cash Flows
For
the Six Months Ended December 31, 2009 and December 31, 2008
|
Unaudited
|
Unaudited
|
|||||||
|
31-Dec-09
|
31-Dec-08
|
|||||||
|
Operating
Activities:
|
||||||||
|
Net
loss
|
$ | (268,365 | ) | $ | (157,614 | ) | ||
|
Adjustments
to reconcile net loss items
|
||||||||
|
not
requiring the use of cash:
|
||||||||
|
Depreciation
expense
|
112,434 | 43,626 | ||||||
|
Bad
debt expense
|
0 | 18,413 | ||||||
|
Interest
expense
|
3,448 | 8,438 | ||||||
|
Changes
in other operating assets and liabilities :
|
||||||||
|
Accounts
receivable
|
127,658 | (77,018 | ) | |||||
|
Prepaid
expense
|
6,733 | 0 | ||||||
|
Accounts
payable
|
11,619 | 138,885 | ||||||
|
Net
cash used by operations
|
$ | (6,473 | ) | $ | (25,270 | ) | ||
|
Investing
Activities:
|
||||||||
|
Security
deposits
|
$ | 0 | $ | (9,050 | ) | |||
|
Purchase
of equipment
|
(31,236 | ) | (28,941 | ) | ||||
|
Net
cash used by investing activities
|
(31,236 | ) | (37,991 | ) | ||||
|
Financing
Activities:
|
||||||||
|
Issuance
of common stock
|
$ | 18,000 | $ | 0 | ||||
|
Loans
from shareholder
|
97,441 | 50,000 | ||||||
|
Payment
of capital lease
|
(75,040 | ) | (36,943 | ) | ||||
|
Net
cash provided by financing activities
|
40,401 | 13,057 | ||||||
|
Net
increase (decrease) in cash during the period
|
$ | 2,692 | $ | (50,204 | ) | |||
|
Cash
balance at July 1st
|
18,481 | 50,525 | ||||||
|
Cash
balance at December 30th
|
$ | 21,173 | $ | 321 | ||||
|
Supplemental
disclosures of cash flow information:
|
||||||||
|
Interest
paid during the period
|
$ | 42,743 | $ | 16,076 | ||||
|
Income
taxes paid during the period
|
$ | 0 | $ | 0 | ||||
|
See
the notes to the financial statements.
|
||||||||
-6-
DRS
Inc.
Statement
of Changes in Shareholder’s Equity
For
the Six Months Ended December 31, 2009 and December 31, 2008
(Unaudited)
|
Issue
|
|||||||||||||||||||||||
|
Common
|
Common
|
Paid
in
|
Accumulated
|
Price
Per
|
|||||||||||||||||||
|
Shares
|
Par
Value
|
Capital
|
Deficit
|
Total
|
Share
|
||||||||||||||||||
|
Balance
at June 30, 2009
|
15,903,718 | $ | 15,903 | $ | 11,458,893 | $ | (11,627,483 | ) | $ | (152,687 | ) | ||||||||||||
|
Issuance
of common stock
|
18,000 | 18 | 17,982 | 18,000 | $ | 1.00 | |||||||||||||||||
|
Net
loss for the period
|
(268,365 | ) | (268,365 | ) | |||||||||||||||||||
|
Balance
at December 31, 2009
|
15,921,718 | $ | 15,921 | $ | 11,476,875 | $ | (11,895,848 | ) | $ | (403,052 | ) | ||||||||||||
|
Common
|
Common
|
Paid
in
|
Accumulated
|
||||||||||||||||||||
|
Shares
|
Par
Value
|
Capital
|
Deficit
|
Total
|
|||||||||||||||||||
|
Balance
at June 30, 2008
|
15,868,268 | $ | 15,868 | $ | 11,423,478 | $ | (11,047,706 | ) | $ | 391,640 | |||||||||||||
|
Net
loss for the period
|
(157,614 | ) | (81,158 | ) | |||||||||||||||||||
|
Balance
at December 31, 2008
|
15,868,268 | $ | 15,868 | $ | 11,423,478 | $ | (11,205,320 | ) | $ | 310,482 | |||||||||||||
|
See
the notes to the financial statements.
|
|||||||||||||||||||||||
-7-
DRS
Inc.
Notes
to the Financial Statements
For
the Six Months Ended December 31, 2009 and December 31, 2008
|
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 removes drywall and other rubbish from construction
sites for disposal and recycling. The Company operates mainly in the
state of Washington.
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 year
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 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 the Statement of Accounting
Standards No. 109 (SFAS No. 109), "Accounting for Income
Taxes". SFAS No. 109 requires 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 basis 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.
-8-
Revenue Recognition- The
Company realizes revenues from drywall 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.
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, a predictive analysis of the outcome of the current
portfolio and prior credit loss experience.
2. Net
Loss per Share
The
Company applies SFAS No. 128, Earnings per Share to compute
net loss per share. In
accordance with SFAS No. 128, 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 warrants outstanding. 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 common share has been computed as follows:
| 31-Dec-09 | 31-Dec-08 | |||||||
|
Net
loss
|
$ | (268,365 | ) | $ | (157,614 | ) | ||
|
Total
common shares outstanding
|
15,921,718 | 15,868,268 | ||||||
|
Weighted
average of shares outstanding
|
15,917,292 | 15,868,268 | ||||||
|
Loss
per common share:
|
||||||||
|
Basic
& fully diluted
|
$ | (0.02 | ) | $ | (0.01 | ) | ||
-9-
3. Provision
for Income Taxes
|
Provision
for income taxes is comprised of the following:
|
31-Dec-09
|
31-Dec-08
|
||||||
|
Net
loss before provision for income taxes
|
$ | (268,365 | ) | $ | (157,614 | ) | ||
|
Current
tax expense:
|
||||||||
|
Federal
|
$ | 0 | $ | 0 | ||||
|
State
|
0 | 0 | ||||||
|
Total
|
$ | 0 | $ | 0 | ||||
|
|
||||||||
|
Less
deferred tax benefit:
|
||||||||
|
Timing
differences
|
(402,892 | ) | (355,986 | ) | ||||
|
Allowance
for recoverability
|
402,892 | 355,986 | ||||||
|
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 | % | ||||
|
Statutory
state and local income tax
|
10 | % | 10 | % | ||||
|
Less
allowance for tax recoverability
|
-44 | % | -44 | % | ||||
|
Effective
rate
|
0 | % | 0 | % | ||||
|
Deferred
income taxes are comprised of the following:
|
||||||||
|
Timing
differences
|
$ | 402,892 | $ | 355,986 | ||||
|
Allowance
for recoverability
|
(402,892 | ) | (355,986 | ) | ||||
|
Deferred
tax benefit
|
$ | 0 | $ | 0 | ||||
|
Note: The
deferred tax benefits arising from the timing differences expires in
fiscal year 2029 and 2028
|
||||||||
|
and
may not be recoverable upon the purchase of the Company under current IRS
statutes.
|
||||||||
-10-
4.
Common Stock Options Outstanding
A list of options outstanding is as follows:
|
Estimated
|
||||||||||||
|
Average
|
||||||||||||
|
Average
|
Years
to
|
|||||||||||
|
Amount
|
Exercise
Price
|
Maturity
|
||||||||||
|
Outstanding
at June 30, 2008
|
3,361,600 | $ | 0.41 | 3.46 | ||||||||
|
Issued
|
0 | |||||||||||
|
Expired
|
0 | |||||||||||
|
Exercised
|
0 | |||||||||||
|
Outstanding
at June 30, 2009
|
3,361,600 | $ | 0.41 | 2.56 | ||||||||
|
Issued
|
6,000 | |||||||||||
|
Expired
|
0 | |||||||||||
|
Exercised
|
0 | |||||||||||
|
Outstanding
at December 31, 2009
|
3,367,600 | $ | 0.41 | 2.06 | ||||||||
5.
General Administrative Expenses
A detail
of general administrative expenses in the statement of operations is as
follows:
|
31-Dec-09
|
31-Dec-08
|
|||||||
|
Salaries
& benefits
|
$ | 115,540 | $ | 0 | ||||
|
Automobile
expense
|
0 | 4,704 | ||||||
|
Bad
debt expense
|
0 | 18,413 | ||||||
|
Bank
fees
|
3,102 | 729 | ||||||
|
Depreciation-
office equipment
|
1,059 | 718 | ||||||
|
Insurance
|
25,775 | 31,622 | ||||||
|
Licenses
|
3,057 | 5,948 | ||||||
|
Management
consulting
|
15,000 | 0 | ||||||
|
Marketing
|
3,338 | 9,201 | ||||||
|
Meals
|
213 | 1,468 | ||||||
|
Administration
|
7,935 | 45,522 | ||||||
|
Professionals
& consulting fees
|
59,466 | 102,925 | ||||||
|
Rent
expense
|
40,905 | 72,821 | ||||||
|
Taxes
|
25,352 | 7,702 | ||||||
|
Telephone
|
13,734 | 14,931 | ||||||
|
Total
|
$ | 314,476 | $ | 316,704 | ||||
-11-
6. Fixed
Assets- Net
The
following table is a summary of fixed assets:
|
31-Dec-09
|
30-Jun-09
|
|||||||
|
Vehicles
|
$ | 557,145 | $ | 546,650 | ||||
|
Equipment
|
298,121 | 277,380 | ||||||
|
Office
equipment
|
6,532 | 6,532 | ||||||
|
Furniture
& fixtures
|
15,035 | 15,035 | ||||||
|
Accumulated
depreciation
|
(312,701 | ) | (200,267 | ) | ||||
|
Fixed
assets- net
|
$ | 564,132 | $ | 645,330 | ||||
Depreciation
expense on leased assets for the periods ended December 31, 2009 and December
31, 2008 is $88,725 and $38,340, respectively.
7.
Commitments and Contingencies
The
Company has entered into various capital lease agreements for the vehicle
equipment. Future minimum lease payments required under these leases
is as follows:
|
2010
|
$ | 193,815 | ||
|
2011
|
134,748 | |||
|
2012
|
88,753 | |||
|
2013
|
79,185 | |||
|
2014
|
48,653 | |||
|
2015
|
11,768 | |||
|
Total
minimum lease payments
|
$ | 556,923 | ||
|
Less
amounts representing interest
|
(80,881 | ) | ||
|
Present
value of net minimum lease payments
|
$ | 476,043 |
8. Litigation
The
Company is a defendant in various lawsuits initiated against it as a result of
the ordinary course of its business. At the date of this report,
management cannot predict the likelihood of an unfavorable outcome of these
lawsuits nor can management estimate a probable range of loss, if any, upon the
resolution of these matters. However, in the opinion of management,
the eventual disposition of these lawsuits will not have a material effect on
the Company’s financial position.
-12-
9.
Related Party Transactions
During
six months ended December 31, 2009 and December 31, 2008, sales revenues to
related parties were $110,318 and $160,991, respectively. Receivables from
related parties were $29,397 and $38,614, respectively.
The
Company has entered into equipment rental agreements with the secretary and
treasurer of the Company and a majority shareholder. The rental
agreements are on a month to month basis and the Company has deposited $227,681
as security with this related party to secure the rental
agreements. The deposits are unsecured and non interest
bearing.
During
fiscal year 2009 and the first six months of 2010, the Company issued notes
payable to a shareholder and received proceeds of $208,000. The loans
are secured by the receivables of the Company and mature from May 2010 to July
2010. Although there was no stated interest on these notes, the
Company imputed an interest rate of 10.67% and recorded interest expense in the
statement of operations.
10.
Debt and Credit Line
In
October 2008, the Company issued a note payable to a creditor and received
proceeds of $200,000. The loan is secured by the receivables of the
Company and matures in December 2009 at an interest rate of 10%. The
note was mutually agreed to by both parties to be extended and be renegotiated
during the 3rd quarter.
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 matures in February 2010 at an interest rate of 12%.
The
Company has a $10,000 line of credit from a bank at a fluctuating interest rate
based on the prime interest rate. The balance on the credit line at
December 31, 2009 is $-0-.
11.
Going Concern
The
accompanying financial statements have been presented in accordance with
generally accepted accounting principles, which assume the continuity of the
Company as a going concern. However, the Company has incurred
significant losses since its inception and continues to rely on financing and
the issuance of shares to raise capital to fund its business
operations.
Management’s
plans with regard to this matter are as follows:
Management
plans to raise capital through an offering of its common stock. The
Company will use the proceeds of this offering to purchase the leased equipment
discussed in Note 9. Management estimates the purchase will save the
Company approximately $475,000 in depreciation expense, leased trucks expense,
and interest expense.
-13-
(This
Page Left Intentionally Blank)
-14-
MANAGEMENT’S DISCUSSION AND ANALYSIS
AND PLAN OF OPERATION
Summary
of Operations
Overview
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.
The
Company was incorporated in November 2006 and is currently focused on drywall
and other waste removal from construction sites for disposal and recycling in
the Northwest United States. The Company recycles the gypsum and other products
from the drywall for sale to farmers in Washington State as
fertilizer. However, the revenues received from these sales were not
material in fiscal years 2009 and 2008 to warrant discussion.
Results
of Operations
For
the Six Months Ended December 31, 2009 and December 31, 2008
Gross
sales from drywall services, drywall removal and recycling, and other hauling
were $1,040,925 and $1,680,952 for the six months ended December 31, 2009, and
December 31, 2008, respectively. Sales are billed to the client based
upon the amount of debris removed, the type of debris, and transportation
distances.
-15-
Gross
margin on sales was about $92,302 and $183,024, six months ended December 31,
2009 and December 31, 2008, respectively.
Administrative
costs for the quarters ended December 31, 2009 and December 31, 2008 are as
follows:
|
31-Dec-09
|
31-Dec-08
|
|||||||
|
Salaries
& benefits
|
$ | 115,540 | $ | 0 | ||||
|
Automobile
expense
|
0 | 4,704 | ||||||
|
Bad
debt expense
|
0 | 18,413 | ||||||
|
Bank
fees
|
3,102 | 729 | ||||||
|
Depreciation-
office equipment
|
1,059 | 718 | ||||||
|
Insurance
|
25,775 | 31,622 | ||||||
|
Licenses
|
3,057 | 5,948 | ||||||
|
Management
consulting
|
15,000 | 0 | ||||||
|
Marketing
|
3,338 | 9,201 | ||||||
|
Meals
|
213 | 1,468 | ||||||
|
Administration
|
7,935 | 45,522 | ||||||
|
Professionals
& consulting fees
|
59,466 | 102,925 | ||||||
|
Rent
expense
|
40,905 | 72,821 | ||||||
|
Taxes
|
25,352 | 7,702 | ||||||
|
Telephone
|
13,734 | 14,931 | ||||||
|
Total
|
$ | 314,476 | $ | 316,704 | ||||
Salaries
are $115,540 for the six months ended December 31, 2009 as compared to $0 for
the six months ending December 31, 2008 due to reclassification of sales
salaries from direct costs to administrative costs in fiscal year
2010.
There
were no salaries for the president and office help for six months ending
December 31, 2009. The company does not see any change in this for
the next quarter.
Bad Debts
were written off in the prior six month period of $18,413. The
Company will examine potential write offs again at June 30, 2010.
Automobile
expenses for the current six month period are $0 as compared to $4,704 for the
six months ending December 31, 2008 due to the expiration of a lease
payment.
Bank fees
were increased slightly in the current six month period due to increased use of
credit card processing in efforts to provide ease of payment for
customers.
-16-
Insurance
costs decreased from $31,622 in prior six month period to $25,775 for current
six month period due to reduction in operations.
Marketing
decreased from $9,201 in prior six month period to $3,338 for current six month
period as a result of reduced spending.
Administration
decreased from $45,522 in prior six month period to $7,935 for current six month
period as a result of reduced spending.
Professionals
and Consulting decreased from $102,925 in prior six month period to $59,466 for
current six month period as a result of the reduction of spending and cost
associated with going public.
Rent
expense decreased from $72,821 in prior six month period to $40,905 for current
six month period as a result of consolidation of the sales and operations office
in order to reduce costs.
Taxes
increased from $7,702 in the prior six month period to $25,352 in the current
six month period as a result of additional retail sales that resulted in higher
state business and occupation tax.
As a
result, our net loss from operations for six months ended December 31, 2009 and
December 31, 2008 was $222,174 and $133,680 respectively. After
deducting the interest costs on the capital leases for our trucks and adding
interest income, we incurred a net loss of $268,365 in the first six months of
2009, or about (.02) per share compared to $157,614 in first six months of 2009,
or about (.01) per share.
For
the Three Months Ended December 31, 2009 and December 31, 2008
Gross
sales from drywall removal and other hauling were $473,842 and $882,562 for the
three months ended December 31, 2009, and December 31, 2008,
respectively. Sales are billed to the client based upon the amount of
debris removed, the type of debris, and transportation distances.
Gross
margin on sales was about $34,054 and $96,306 respectively for the
quarters.
General
administrative expenses were 69,846 and $163,326 respectively for the
quarters.
As a
result, our net loss from operations for quarters ended December 31, 2009 and
December 31, 2008 was $35,792 and $67,020. After deducting the
interest costs on the capital leases for our trucks and adding interest income,
we incurred a net loss of $59,607 in the second quarter of 2009, or about (0.0)
per share compared to $76,456 in second quarter of 2008, or about (0.0) per
share.
Liquidity
& Capital Resources
Cash on
hand at December 31, 2009 was $21,173 compared to $321 at December 31,
2008. We used $6,493 for operations in the first six months compared
to $25,270 in the first six months of the prior year. We used $31,236
to purchase additional equipment and deposits on our new vehicles as of December
31, 2009 compared to $37,991 at December 31, 2008. In first second
six months of 2009, we raised $97,441 by issuing an unsecured note to a
shareholder of the Company. In the first six months of fiscal 2010,
we raised $18,000 by issuing common stock and options. In six months
ended December 31, 2009 and December 31, 2008, we used $75,040 and $36,943,
respectively, to pay down the capital leases on our vehicle
equipment.
-17-
Total
assets at December 31, 2009 and June 30, 2009 were $1,067,429 and $1,280,325,
respectively. Our working capital at December 31, 2009 was $(394,609)
as compared to $(247,625) at June 30, 2009.
The
company's shares started trading on the OTCBB under the ticker symbol DRSX and
on December 31, 2009 closed at a price of $.45 per share. The company is
encouraged by its entry into the public marketplace and hopes to raise the
needed capital by selling the shares that were authorized in its S1 registration
statement in order to pay down current financial obligations and then to move
forward with its plans to purchase the equipment it leases and to expand the
operation. To this end, it has hired V3 Services, Inc., a Pennsylvania
corporation in order to market and promote the company.
Forward Looking
Statements
Management
does not see any additional capital expenditures in the next
quarter.
Focus
over the next several quarters will be to grow the drywall install/finish part
of the company's business as it foresees a stabilization of the local housing
market and believes that this part of its' operation will be the first to
increase.
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK.
The
Company does not hold any assets or liabilities requiring disclosure under this
item.
ITEM
4T. CONTROLS AND PROCEDURES
As
of the end of the period covered by this Quarterly Report on Form 10-Q, our
principal executive officer and principal financial officer has evaluated the
effectiveness of our “disclosure controls and procedures” (“Disclosure
Controls”). Disclosure Controls, as defined in Rule 13a-15(e) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), are procedures that are
designed with the objective of ensuring that information required to be
disclosed in our reports filed under the Exchange Act, such as this Quarterly
Report, is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission’s rules and forms.
Disclosure Controls are also designed with the objective of ensuring that such
information is accumulated and communicated to our management, including the
Chief Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding required disclosure. Our management, including the
Chief Executive Officer and Chief Financial Officer, does not expect that our
Disclosure Controls will prevent all error and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
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. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Company 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. The
design of any system of controls also is based in part upon 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.
Based
upon their controls evaluation, our Chief Executive Officer, and Chief Financial
Officer, has concluded that our Disclosure Controls are effective at a
reasonable assurance level.
-18-
PART II – OTHER
INFORMATION
ITEM
1. LEGAL PROCEEDINGS
There are no material legal proceedings
pending at this time.
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
Not applicable
-19-
ITEM
6. EXHIBITS
Please see Exhibit Index located behind
the signature page.
Copies of the following documents are
included as exhibits to this report pursuant to Item 601 Regulation
S-K.
SIGNATURES
Pursuant
to the requirements 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.
|
|
|
Dated: February
11, 2010
|
|
|
/s/
Daniel Mendes
|
|
|
Daniel
Mendes
|
|
|
Principal
Executive Officer
|
|
|
/s/
George Guimont
|
|
|
George
Guimont
|
|
|
Principal
Financial Officer
|
|
-20-
EXHIBIT
INDEX
|
Exhibit
No.
|
SEC
Ref. No.
|
Title
of Document
|
||
|
1
|
31.1
|
Certification
of the Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
||
|
2.
|
31.2
|
Certification
of the Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
||
|
3
|
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*
|
||
|
4
|
32.2
|
Certification
of the Principal Financial Officer pursuant to U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002*
|
* The
Exhibit attached to this Form 10-Q 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.
-21-