- Quarterly Report (10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ending: September 30, 2010

[ ] 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	20-5914452
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

8245 SE 36th St. , Mercer Island , Washington	98040
(Address of principal executive offices)	(Zip Code)

(866) 991-9960
(Registrant’s Telephone Number, Including Area Code)

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

Title of each class:	Name of each exchange on which registered:
Common Stock: $0.01 par value	OTCBB

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). [ ] 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]

We had 17,785,718 shares outstanding of common stock as of November 12, 2010.

Table of Contents
PART I – FINANCIAL INFORMATION
Item 1	Financial Statements	4
Item 2	Management’s Discussion and Analysis and Plan of Operation	15
Item 3	Quantitative and Qualitative Disclosures about Market Risk	17
Item 4	Controls and Procedures	17
PART II – OTHER INFORMATION
Item 1	Legal Procedures	18
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	19

PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements

Balance Sheets

As of September 30, 2010 and June 30, 2010

ASSETS	30-Sep-10			30-Jun-10
Current assets:
Cash & short term deposits	$	0		$	24,500
Accounts receivable (net of allowance for bad debt)		39,783			139,461
Accounts receivable- related parties		553			6,882
Stock subscription receivable		0			4,950
Total current assets	$	40,336		$	175,793

Other assets:
Fixed assets- net		231,079			362,067
Security deposit- related party		227,681			227,681
Security deposits		27,088			27,088
Total assets	$	526,184		$	792,629

LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable & accrued expenses	$	457,365		$	438,402
Bank overdraft		40,447			0
Deferred income- related party		40,000			40,000
Notes payable		300,000			300,000
Loan payable- shareholder		368,847			328,545
Capital lease payable- short term		65,344			119,718
Total current liabilities	$	1,272,003		$	1,226,665

Convertible debenture- net of conversion feature		16,669			0
Capital lease payable- long term		200,591			214,999

Shareholders' deficit
17,785,718 at 9/30/10	$	17,785		$	17,785
Additional paid in capital		12,356,973			11,747,036
Retained deficit		(13,337,837	)		(12,413,856	)
Total shareholders' deficit		(963,079	)		(649,035	)

Total Liabilities & Shareholders' Deficit	$	526,184		$	792,629

See the notes to the financial statements.

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Statements of Operations

For the Quarters Ended September 30, 2010 and September 30, 2009


Revenues:	30-Sep-10			30-Sep-09
Net revenues	$	316,549		$	496,685
Net revenues - related parties		7,051			70,398
Cost of revenues		(526,682	)		(460,085	)
Cost of revenues- related party		(9,000	)		(48,750	)
Gross margin (loss)	$	(212,082	)	$	58,248

General and administrative expenses:
General administration	$	647,284		$	244,630
Total general & administrative expenses		647,284			244,630

Net loss from operations	$	(859,366	)	$	(186,382	)

Other revenues (expenses):
Loss on Asset Disposals		(40,701	)		0
Interest expense		(23,914	)		(22,376	)
Net loss before provision for income taxes	$	(923,981	)	$	(208,758	)
Provision for income taxes		0			0

Net loss	$	(923,981	)	$	(208,758	)

Loss per common share:
Basic & fully diluted	$	(0.05	)	$	(0.01	)
Weighted average of common shares:
Basic & fully diluted		17,785,718			15,912,817

See the notes to the financial statements.

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Statements of Cash Flows

For the Quarters Ended September 30, 2010 and September 30, 2009

Operating Activities:	30-Sep-10			30-Sep-09

Net loss	$	(923,981	)	$	(208,758	)
Adjustments to reconcile net loss items
not requiring the use of cash:
Depreciation expense		27,700			52,682
Bad debt expense		0			15,063
Impairment expense		10,473			0
Consulting expense		571,042			0
Interest expense		8,516			3,448
Loss on asset disposals		40,701			0

Changes in other operating assets and liabilities :
Accounts receivable		99,677			146,074
Accounts receivable- related parties		6,329			0
Stock subscription receivable		4,950			0
Prepaid expense		0			6,733
Accounts payable		18,963			(31,017	)
Net cash used by operations	$	(135,630	)	$	(15,775	)

Investing Activities:
Purchase of equipment	$	0		$	(11,768	)
Net cash used by investing activities		0			(11,768	)

Financing Activities:
Issuance of common stock	$	0		$	18,000
Bank overdraft		40,447			0
Proceeds from convertible debenture		55,564			0
Loans from shareholders		31,786			28,000
Payment of capital lease		(16,667	)		(35,993	)
Net cash provided by financing activities		111,130			10,007

Net increase (decrease) in cash during the period	$	(24,500	)	$	(17,536	)
Cash balance at July 1st		24,500			18,481
Cash balance at September 30th	$	0		$	945

Supplemental disclosures of cash flow information:
Interest paid during the period	$	15,398		$	18,928
Income taxes paid during the period	$	0		$	0

See the notes to the financial statements.

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Statement of Changes in Shareholder’s Deficit

For the Quarters Ended September 30, 2010 and September 30, 2009

	Common Shares		Common Par Value		Paid in Capital		Accumulated Deficit			Total			Issue Price Per Share
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
Issuance of convertible debenture						38,895					38,895
Net loss for the period								(923,981	)		(923,981	)
Balance at September 30, 2010		17,785,718	$	17,785	$	12,356,973	$	(13,337,837	)	$	(963,079	)

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								0			0
Balance at September 30, 2009		15,921,718	$	15,921	$	11,476,875	$	(11,627,483	)	$	(134,687	)

See the note to the Financial Statements

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Notes to the Financial Statements

For the Quarters Ended September 30, 2010 and September 30, 2009

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 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.

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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 September 30, 2010, the Company has no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. All tax returns from fiscal years 2006 to 2009 are subject to IRS audit.

Revenue Recognition - The Company realizes revenues from drywall removal, scrapping, and installation 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 or install 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. The Company’s reserve for bad debt is $72,073 at September 30, 2010 and $56,073 at September 30, 2009.

2. 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 period 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 common share has been computed as follows:

	30-Sep-10			30-Sep-09

Net loss	$	(923,981	)	$	(208,758	)
Total common shares outstanding		17,785,718			15,921,718
Weighted average of shares outstanding		17,785,718			15,912,817

Loss per common share:
Basic & fully diluted	$	(0.05	)	$	(0.01	)

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3. Concentration of Credit Risks

The Company’s president and secretary have provided personal guarantees on some of the leased vehicles. A withdrawal of this support may have a material adverse effect on the Company’s ability to lease equipment. In addition, the president and secretary combined own approximately 69% of the Company and therefore have the majority votes to elect all of the board of directors and control all of the Company’s operations.

4. Provision for Income Taxes

Provision for income taxes is comprised of the following:	30-Sep-10			30-Sep-09
Net loss before provision for income taxes	$	(923,981	)	$	(579,777	)
Current tax expense:
Federal	$	0		$	0
State		0			0
Total	$	0		$	0

Less deferred tax benefit:
Timing differences		(658,582	)		(379,646	)
Allowance for recoverability		658,582			379,646
Provision for income taxes	$	0		$	0

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	$	658,582			379,656
Allowance for recoverability		(658,582	)		(379,646	)
Deferred tax benefit	$	0		$	0

Note: The deferred tax benefits arising from the timing differences expire in fiscal 2030 and 2029 and may not be recoverable upon the purchase of the Company under current IRS statutes.

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5. Issuance of Common Stock Options

During the quarter ended September 30, 2010, the Company issued 1,500,000 options to purchase 1,500,000 shares of common stock at $0.07 per share to a financing company as part of a factoring agreement. The factoring agreement allows the Company to sell certain receivables to the factoring company at an interest rate of 2%. The options expire in July 2011.

The Company applies the Black Sholes option pricing model to value its issuance of options. The Company estimated certain parameters of the model at issuance as follows; volatility is 21%, dividend yield is 0%, and a risk free interest rate of 0.5%. Using the model, the Company determined the value of the issuance to be $571,042 and expensed the amount in the statement of operations for the quarter ended September 30, 2010.

A list of options outstanding is as follows :

	Amount		Average Exercise Price		Average Years to Maturity
Outstanding at June 30, 2010		3,249,664	$	0.40		1.63
Issued		1,500,000
Expired		0
Exercised		0
Outstanding at September 30, 2010		4,749,664	$	0.30		1.19

6. Fixed Assets - Net

The following table is a summary of fixed assets at September 30, 2010 and June 30, 2010:

	30-Sep-10			30-Jun-10
Vehicles	$	240,000		$	457,000
Equipment		190,090			227,459
Office equipment		6,532			6,532
Furniture & fixtures		0			15,035
Accumulated depreciation		(205,543	)		(343,959	)
Fixed assets- net	$	231,079		$	362,067

Assets leased under capital lease agreements, more fully discussed in Note 7, are $390,081 at September 30, 2010 and $597,081 at June 30, 2010. Depreciation expense on these leased assets for the quarters ended September 30, 2010 and September 30, 2009 is $25,227 and $50,109, respectively.

During the quarter ended September 30, 2010, the Company disposed of $253,625 of assets and recorded a loss on the disposal of $40,701. In addition, the Company abandoned some of its furniture and fixtures in unused warehouse space and recorded an impairment expense of $10,473.

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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:

2011	$	84,609
2012		74,401
2013		74,401
2014		61,369
2015		17,652
Total minimum lease payments	$	312,433

Less amounts representing interest		(46,499	)

Present value of net minimum lease payments	$	265,935

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 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.

9. Related Party Transactions

During quarter ended September 30, 2009, sales revenues of $70,398 were generated from companies owned by the Company’s management and other shareholders. Accounts receivables from related parties at September 30, 2009 were $6,882. During quarter ended September 30, 2010, sales revenues of $7,051 were generated from companies owned by the Company’s management and other shareholders. Accounts receivables from related parties at September 30, 2010 were $553.

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. For the quarters ended September 30, 2010 and September 30, 2009, the Company paid $9,000 and $48,750, respectively to this related party for the equipment’s rental.

The Company has received advances from the president of the Company and other shareholders of $390,350 through September 30, 2010. The advances are secured by the receivables of the Company, are due on demand, and have no stated interest rate. The Company imputed an interest rate of 10.67% on the advances and has recorded the interest expense in the statement of operations.

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10. Debt

In September 2010, the Company issued a convertible debenture to a creditor and received proceeds of $55,564. The debenture matures in September 2013, has an interest rate of 7%, and is convertible at $0.40 per share. As a result of the issue, the Company recorded a beneficial conversion feature of $38,895. The beneficial conversion feature is recorded as equity and will be amortized to interest expense over the life of the debenture.

A schedule of debt outstanding at September 30, 2010 is as follows:

Lender	Face Amount	Interest Rate	Maturity Date	Collateral

Creditor	$200,000	10.00%	Demand	Accounts receivable
Creditor	$100,000	12.00%	Demand	Accounts receivable
Related party	$368,847	10.67%	Demand	Accounts receivable
Net debenture	$16,669	7.00%	30-Sep-13

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 has carefully reviewed the company’s circumstances and has concluded, as reported in the 10-K for the fiscal year ended June 30, 2010, that continuing in the drywall installation business and the drywall scrapping business is not a viable solution to the company’s recent history of losses, due to the highly competitive nature of the installation business and the insufficient number of scrapping jobs in the company’s local market area. However, it has determined that, with sufficient capital to support its business plan, the drywall recycling business could produce enough profit contribution to make the company profitable in the foreseeable future. The company has considerable experience and expertise in this business, but did not have sufficient capital to support it, which lead to the decision in May 2009 to transfer operations to a Drywall Recycling Services, Inc. Management feels that its expertise, plus the high margins and scalability of the business gives the company a reasonable opportunity to turn around the company’s losses into profits. Management has determined that its needs approximately $1 million of new capital to commence operations in the drywall recycling business with additional capital, the amount of which as yet undetermined, needed over the course of the next 1-2 years to support expansion. Management is currently finalizing plans to raise this needed capital and intends to begin executing on this new business plan in its second fiscal quarter of 2011. Without an infusion of capital the company will be unable to execute on the new business plan and may have to reduce operations even further, in order to keep from going out of business entirely.

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12. Subsequent Events

On November 15, 2010, George Guimont, the Company’s Director and Secretary/Treasurer, announced his resignation from these positions with the Company, effective November 30, 2010. The Company is currently considering its options to replace Mr. Guimont in these positions.

13. Segment Reporting

The result of operations by segment is as follows:

	30-Sep-10			30-Sep-09
Sales:
Drywall recycling	$	47		$	65,728
Scrapping		45,330			501,355
Drywall installation		278,223			0
Total sales	$	323,600		$	567,083
Earnings:
Drywall recycling	$	(8,263	)	$	22,190
Scrapping		(168,018	)		36,058
Drywall installation		(35,802	)		0
Corporate		(711,899	)		(267,006	)
Total earnings	$	(923,981	)	$	(208,758	)
Depreciation:
Drywall recycling	$	3,047		$	15,640
Scrapping		18,836			36,492
Drywall Installation		5,817			0
Corporate		0			550
Total depreciation	$	27,700		$	52,682

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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 during the fiscal year ended June 30, 2010 was focused on the installation of drywall and the removal of drywall waste from construction sites for disposal and recycling in the Northwest United States. 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 began receiving a royalty of 2% of the revenues of the recycling facility.

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 intend to rise 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 at least $1 million in order to re-enter the scrap drywall recycling business, with follow-on investment required depending on how aggressively we intend to expand.

Results of Operations

For the Three months ending September 30, 2010 and September 30, 2009

Sales revenue in the quarter ended September 30, 2010 were $323,600 which is a 43% decrease from revenues in the corresponding quarter in 2009. This decrease was driven by several factors, including the following:

·	The fiercely competitive environment in the drywall installation business;

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·	The lack of scrapping jobs in a concentrated geographic area;

·	The lack of working capital to support being able to take on new work:

·	The change in credit terms with a major customer wherein payment terms were extended to 85 days from 30 days, which used working capital; and

·	Ultimately the decision in September, 2010 to withdraw from the drywall installation business and the drywall scrapping business.

Cost of revenue exceeded sales revenue in the quarter ended September 30, 2010, resulting in a negative gross profit margin of $212,082, compared to a gross profit margin of $58,248 in the corresponding quarter of 2009. This deterioration resulted from the following:

·	A reduction in revenue realized on each job, caused by the fierce competitive environment;

·	Not having enough overall revenue to offset fixed costs and depreciation in the cost of revenue; and

·	Not having a sufficient number of jobs to use direct labor efficiently.

General & Administrative expenses were $649,284 in the quarter ended September 30, 2010, which was a 165% increase in General & Administrative expense incurred in the same quarter of 2009. However, these expenses included a one-time, non-cash charge if $571,042 to record the cost of stock options that were issued to a company that entered into an agreement with the company to factor accounts receivable. Without this non-cash item, General & Administrative expense was $76,242, which is a 69% reduction in comparable expenses from the same quarter in 2009. This decrease arose from management’s efforts to minimize losses as much as possible, in light of the extremely difficult operating environment. These reductions in expense arose mainly from Salaries & Benefits, Insurance Costs, Consulting costs, and Administration costs. As a result, the company had a net loss from operations of $859,366 in the current quarter, compared to a net loss from operations of $186,382 in the same quarter in 2009. This loss was $288,324 after adjusting for the non-cash charge noted in the paragraph above, which is 55% larger than the loss from the corresponding quarter in 2009.

The company incurred a loss of disposal of assets of $40,701 as a result of reducing the truck fleet, which resulted in a reduction of monthly operating expense. It also incurred interest expense of $23,914 in the current quarter compared to interest expense of $22,376 incurred in the same quarter last year. Net loss for the current quarter was $923,981, compared to $208,758 during the same quarter a year earlier. After adjusting for the non-cash charge noted above, the net loss was $352,939.

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Basic and diluted loss per share was $.05 in the current quarter, compared to $.01 in the same quarter of 2009. Weighted average common shares outstanding increased from 15,912,817 to 17,785, 718, as the company issued shares to source cash to offset losses.

Liquidity & Capital Resources

Cash on hand at September 30, 2010 was $0, compared to $24,500 at June 30, 2010. During the quarter, the company used $135,630 in operations, comprised of the net loss of $923,981, offset by non-cash charges of $658,432, and reductions in accounts receivable and stock subscription receivable. The cash that was used in operations was offset by shareholder loans, a convertible loan and bank overdrafts, and using up the cash on hand at June 30, 2010. $16,667 was used to make payment on a capital lease during the quarter. As a result primarily of the above, non-cash working capital decreased by $156,295 during the quarter.

During the quarter, management determined that it was unlikely to be successful continuing in the fiercely competitive drywall installation business and the uncertain drywall scrapping business. As a result, the decision was made to cease operations for the time-being at least, in both of these businesses. Accordingly, net losses are expected to be less in the following quarters, and hence there will be less pressure on the company to source cash to support operations. The company is preparing a business plan to re-enter the drywall scrap recycling business and expects to complete this plan and begin executing on it during the following quarter. Management estimates that the company needs $1 million to commence operations in the drywall recycling business, and an additional amount, as yet undetermined, required within the next 1-2 years, depending on how rapid the company’s desired growth rate is, which will be determined when the business plan is completed. Without an infusion of capital the company will be unable to execute on the new business plan and may have to reduce operations even further, in order to keep from going out of business entirely.

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, has 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 Annual Report on Form 10-K, as of June 30, 2010. 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.

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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 June 30, 2010 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 June 30, 2010 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 first fiscal quarter ended September 30, 2010, 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

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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

On November 15, 2010, George Guimont, our Director and Secretary/Treasurer, announced his resignation from these positions with the Company, effective November 30, 2010. We are currently considering our options to replace Mr. Guimont in these positions.

ITEM 6. EXHIBITS

Please see Exhibit Index located behind the signature.

Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.

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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.

November 15, 2010	DRS Inc.
	By:	/s/ Daniel Mendes
		Daniel Mendes
		Principal Executive Officer
	By:	/s/ George Guimont
		George Guimont
		Principal Financial Officer

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EXHIBIT INDEX

* 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.

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*