Table of Contents





UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON, D.C.
20549




FORM
10-Q







x
            Quarterly
      Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934For
      the quarterly period ended March 31, 2009. ̈
            Transition
      Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934For
      the transition period _____________ to
  ______________.





Commission
File number:333-146290





DEFENSE
SOLUTIONS HOLDING, INC.


(Exact name of small business
issuer as specified in its charter)





Nevada
              (State
      or other jurisdiction of Incorporation or organization)
            26-3624592
              (IRS
      Employee Identification No.)





707
Eagleview Boulevard


Exton,
Pennsylvania  19431-1159


(Address
of principal executive offices)





(610)
833-6000


(Registrant’s
telephone number, including area code)





(Former
name, former address and former fiscal year, if changed since last
report)


Not
Applicable


(Address
of principal executive offices)





Former
fiscal year ended July 31





Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90
days.


Yes xNo o





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 (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


Yes o  No o





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
definition of “accelerated filer, large accelerated filer”, and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





Large
      accelerated filer  ̈
            Accelerated
      filer  ̈Non-accelerated
      filer  ̈ (Do
      not check if a smaller reporting company)
            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




As of May
18, 2009, there were 32,108,566 shares of the Registrant’s common stock
outstanding.









Table of Contents




DEFENSE
SOLUTIONS HOLDING, INC.


f/k/a
FLEX RESOURCES CO. LTD.




Form
10-Q




Index




Part I. FINANCIAL INFORMATION
            PageItem 1.  Financial Statements
      (Unaudited)
            1Balance Sheets as of March 31, 2009, and December 31,
      2008
            1Statements of Operations for the Three Months ended March 31,
      2009 and 2008
            2Statements of Cash Flows for the Three Months ended March 31,
      2009 and 2008
            3Notes to Interim Financial Statements March 31, 2009, and
      2008
            4Item 2.  Management’s Discussion of Financial
      Conditions and Results of Operations
            21Item 3.  Quantitative and Qualitative Disclosures
      About Market Risk
            26Item 4.  Controls and
    Procedures
            26Part II. OTHER INFORMATIONItem 1.  Legal Proceedings
            27Item 1A.  Risk Factors
            27Item 2.  Unregistered Sales of Equity Securities and
      Use of Proceeds
            27Item 3.  Defaults Upon Senior
      Securities
            27Item 4.  Submission Of Matters To A Vote of Security
      Holders
            28Item 5.  Other Information
            28Item 6.  Exhibits
            28Signatures
            29






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PART I. FINANCIAL INFORMATION




Item 1. Financial Statements




DEFENSE
      SOLUTIONS HOLDING, INC.(FORMERLY
      FLEX RESOURCES CO. LTD)BALANCE SHEETSAS
      OF MARCH 31, 2009, AND DECEMBER 31, 2008(Unaudited)
  ASSETS2009
              
              
              2008Current
      Assets:Cash
      and cash equivalents
              
              $
              184,076
              
              
              $
              61,612Accounts
      receivable-Trade
      ($0 allowance for doubtfulaccounts
      in 2009 and 2008, respectively)
              
              
              122,674
              
              
              
              136,657Employee
              
              
              —
              
              
              
              7,850Inventory
              
              
              100,000
              
              
              
              100,000Total
      current assets
              
              
              406,750
              
              
              
              306,119Property
      and Equipment:Computer
      and office equipment
              
              
              105,290
              
              
              
              105,290Furniture
      and fixtures
              
              
              102,928
              
              
              
              102,928208,218
              
              
              
              208,218Less
      - Accumulated depreciation and amortization
              
              
              (118,604
              )
              
              
              (109,659
              )Net
      property and equipment
              
              
              89,614
              
              
              
              98,559Total
      Assets
              
              $
              496,364
              
              
              $
              404,678LIABILITIES AND
      STOCKHOLDERS' (DEFICIT)Current
      Liabilities:Current
      portion of long-term debt and capital lease obligations
              
              $
              1,067,559
              
              
              $
              1,095,924Checks
      in excess of bank balance
              
              
              16,796
              
              
              
              145Bank
      lines of credit
              
              
              773,513
              
              
              
              773,552Convertible
      promissory note
              
              
              500,000
              
              
              
              500,000Accounts
      payable - Trade
              
              
              824,034
              
              
              
              560,429Accrued
      liabilities
              
              
              1,166,781
              
              
              
              901,654Deferred
      revenues
              
              
              51,553
              
              
              
              —Promissory
      notes - Related parties
              
              
              40,000
              
              
              
              40,000Due
      to related parties
              
              
              147,068
              
              
              
              140,839Total
      current liabilities
              
              
              4,587,304
              
              
              
              4,012,543Long-term
      Debt, less current portion:Capital
      lease obligations
              
              
              33,448
              
              
              
              43,262Total
      long-term debt
              
              
              33,448
              
              
              
              43,262Total
      liabilities
              
              
              4,620,752
              
              
              
              4,055,805Commitments
      and ContingenciesStockholders'
      (Deficit):Preferred
      stock, par value $0.001 per share; 10,000,000 sharesauthorized;
      zero shares issued and outstanding
              
              
              —
              
              
              
              —Common
      stock, par value $0.001 per share, 75,000,000 sharesauthorized;
      31,796,292 shares issued andoutstanding
      in 2009 and 2008
              
              
              31,796
              
              
              
              31,796Stock
      subscriptions - 875,000 shares of common stock
              
              
              1,750,000
              
              
              
              1,750,000Less
      - Stock subscriptions receivable
              
              
              (1,100,000
              )
              
              
              (1,350,000
              )Additional
      paid-in capital
              
              
              1,280,750
              
              
              
              1,259,262Accumulated
      (deficit)
              
              
              (6,086,934
              )
              
              
              (5,342,185
              )Total
      stockholders' (deficit)
              
              
              (4,124,388
              )
              
              
              (3,651,127
              )Total
      Liabilities and Stockholders' (Deficit)
              
              $
              496,364
              
              
              $
              404,678
 The
accompanying notes to financial statements are an integral part of these balance
sheets.




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DEFENSE
      SOLUTIONS HOLDING, INC.(FORMERLY
      FLEX RESOURCES CO. LTD)STATEMENTS OF OPERATIONSFOR
      THE THREE MONTHS ENDED MARCH 31, 2009, AND 2008(Unaudited)
  Three
      Months EndedMarch
      31,2009
              
              
              2008Revenues
              
              $
              401,856
              
              
              $
              78,385Expenses:Operating,
      general and administrative
              
              
              1,066,136
              
              
              
              695,605Stock
      option compensation expense
              
              
              21,489
              
              
              
              42,978Depreciation
      and amortization
              
              
              8,945
              
              
              
              8,892Consulting
      fees paid by common stock subscribed
              
              
              —
              
              
              
              22,500Total
      expenses
              
              
              1,096,570
              
              
              
              769,975(Loss)
      from Operations
              
              
              (694,714
              )
              
              
              (691,590
              )Other
      Income (Expense):Other
      income
              
              
              327
              
              
              
              162Interest
      expense and other
              
              
              (50,362
              )
              
              
              (47,427
              )Total
      other income (expense)
              
              
              (50,035
              )
              
              
              (47,265
              )Provision
      for income taxes
              
              
              —
              
              
              
              —Net
      (Loss)
              
              $
              (744,749
              )
              
              $
              (738,855
              )(Loss)
      Per Common Share:(Loss)
      per common share - Basic and Diluted
              
              $
              (0.02
              )
              
              $
              (0.02
              )Weighted
      Average Number of Common SharesOutstanding
      - Basic and Diluted
              
              
              31,796,292
              
              
              
              31,796,292
 The
accompanying notes to financial statements are an
integral part of these statements.


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DEFENSE
      SOLUTIONS HOLDING, INC.(FORMERLY
      FLEX RESOURCES CO. LTD)STATEMENTS OF CASH FLOWSFOR
      THE THREE MONTHS ENDED MARCH 31, 2009, AND 2008
              (Unaudited)




Three
      Months EndedMarch
      31,2009
            
            
            2008Operating
      Activities:Net
      (loss)
            
            $
            (744,749
            )
            
            $
            (738,855
            )Adjustments
      to reconcile net (loss) to net cash(used
      in) operating activities:Consulting
      fees paid by common stock subscribed
            
            
            —
            
            
            
            22,500Stock
      option compensation expense
            
            
            21,488
            
            
            
            42,978Depreciation
      and amortization
            
            
            8,945
            
            
            
            8,892Amortization
      of debt issuance costs
            
            
            —
            
            
            
            7,500Changes
      in net assets and liabilities-Accounts
      receivable - Trade
            
            
            21,834
            
            
            
            859,356Accounts
      payable - Trade
            
            
            263,605
            
            
            
            (89,276
            )Accrued
      liabilities
            
            
            265,127
            
            
            
            182,607Deferred
      revenue
            
            
            51,553
            
            
            
            (761,000
            )Net
      Cash (Used in) Operating Activities
            
            
            (112,197
            )
            
            
            (465,298
            )Investing
      Activities:Net
      Cash (Used in) Investing Activities
            
            
            —
            
            
            
            —Financing
      Activities:Proceeds
      from stock subscriptions
            
            
            250,000
            
            
            
            —Checks
      in excess of bank balance
            
            
            16,651
            
            
            
            8,237Proceeds
      from bank loans and lines of credit
            
            
            —
            
            
            
            1,021,894Payments
      of principal on bank loans and lines of credit
            
            
            (39
            )
            
            
            (474,400
            )Debt
      issuance costs
            
            
            —
            
            
            
            (25,000
            )Payments
      of principal on capital lease obligations
            
            
            (38,180
            )
            
            
            (30,871
            )Proceeds
      from the issuance of promissory notes - Related Parties
            
            
            6,229
            
            
            
            —Payments
      of principal on promissory notes - Related parties
            
            
            —
            
            
            
            (50,000
            )Proceeds
      from related party loans
            
            
            —
            
            
            
            1,006Payments
      on related party loans
            
            
            —
            
            
            
            (2,956
            )Net
      Cash Provided by Financing Activities
            
            
            234,661
            
            
            
            447,910Net
      Increase (Decrease) in Cash and Cash Equivalents
            
            
            122,464
            
            
            
            (17,388
            )Cash
      and Cash Equivalents - Beginning of Period
            
            
            61,612
            
            
            
            34,607Cash
      and Cash Equivalents - End of Period
            
            $
            184,076
            
            
            $
            17,219Supplemental
      Disclosure of Cash Flow Information:Cash
      paid during the periods for:Interest
            
            $
            49,781
            
            
            $
            47,776Income
      taxes
            
            $
            —
            
            
            $
            —


The
accompanying notes to financial statements are an integral part of these
statements.




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DEFENSE
SOLUTIONS HOLDING, INC.


(FORMERLY
FLEX RESOURCES CO. LTD.)
 NOTES TO INTERIM FINANCIAL STATEMENTS
 MARCH
31, 2009, AND 2008
 (Unaudited)


(1) Summary of
Significant Accounting Policies





Basis of Presentation and
Organization





Defense
Solutions Holding, Inc. (“DSHI” or the “Company” and formerly Flex Resources Co.
Ltd.) is a Nevada corporation that initially pursued the acquisition and
exploration of mineral claims.  (See below for a discussion of the
change in business plan of the Company).  The Company was incorporated
under the laws of the State of Nevada on February 8, 2007.





On
February 8, 2007, the Company acquired, in a reverse merger, all of the issued
and outstanding shares of Flex Resources Ltd. (“Flex Canada”), a British
Columbia, Canada Corporation, from its sole stockholder.  Flex Canada
was incorporated under the laws of the Province of British Columbia, Canada, on
December 15, 2006, and prior to the completion of the reverse merger, had
limited operations.  The consideration for the acquisition of Flex
Canada by the Company was a one-for-one share exchange of 2,900,000 shares of
common stock.  The transaction was treated as a reverse merger for
financial reporting purposes.  The reverse merger was recorded as a
recapitalization of the Company, with the net assets of the Company and Flex
Canada brought forward at their historical bases.  Expenses of
reorganization were expensed as incurred.





On August
23, 2008, the Company sold all of the outstanding shares of common stock of Flex
Canada to its former president and Director for $100, and began to evaluate
other business opportunities.





On
November 14, 2008, the Company acquired, through a second reverse merger (the
“Merger”), all of the outstanding shares of common stock of Defense Solutions,
Inc., a Delaware corporation (“DSI”), and the former stockholders of DSI were
issued an aggregate of 16,793,401 shares of the Company’s common stock (a ratio
of 2.3163 shares of common stock of the Company for each share of common stock
of DSI) in exchange for their shares of DSI common stock.  As a result
of the Merger, the former stockholders of DSI became the majority stockholders
of the Company.  Further, in connection with the Merger, the Company
changed is corporate name to Defense Solutions Holding, Inc.  The
reverse merger was recorded as a recapitalization of the Company, with the
assets and liabilities of the entities being brought over at their historical
cost bases.  Expenses of the reorganization were expensed as
incurred.  In addition, at or about the time of the closing of the
Merger, the Company completed the initial closing of a private placement
pursuant to which it sold to subscribers 125,000 shares of its common stock for
an aggregate purchase price of $250,000 (the “Private Placement”).





DSI was
organized and incorporated on April 10, 2007, under the laws of the State of
Delaware.  DSI is an international program/project management,
business development, and executive consulting firm, initially established as a
limited liability company in 2001, to service the defense, homeland security,
information technology, and telecommunication markets.  The Company
intends to carry on DSI’s business in the same manner as it was carried on by
DSI before the Merger as the Company’s sole line of business.  The
accompanying financial statements of the Company were prepared from the accounts
of the Company under the accrual basis of accounting.  In addition,
the accompanying financial statements reflect
the completion of a reverse merger between the Company and DSI, which was
effected on November 14, 2008.






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DEFENSE
SOLUTIONS HOLDING, INC.


(FORMERLY
FLEX RESOURCES CO. LTD.)
 NOTES
TO INTERIM FINANCIAL STATEMENTS
 MARCH
31, 2009, AND 2008
 (Unaudited)


On August
21, 2008, DSI organized and incorporated Defense Solutions Guinea SARL in the
Republic of Guinea, West Africa, as a wholly owned
subsidiary.  Effective December 31, 2008, the Company discontinued the
development stage activities of this subsidiary.





Interim FinancialStatements





The
accompanying interim financial statements of DSHI as of March 31, 2009, and
December 31, 2008, and for the three months ended March 31, 2009, and 2008, are
unaudited, and have been prepared in conformity with accounting principles
generally accepted in the United States of America (“GAAP”) for interim
reporting, and in accordance with the requirements of this Quarterly Report on
Form 10-Q.  In the opinion of management, the accompanying financial
statements include all known adjustments (which consist primarily of normal,
recurring accruals, estimates, and assumptions that impact the financial
statements) necessary to present fairly the financial position at the balance
sheet dates and the results of operations for the three months then
ended.  The results of operations for the three months ended March 31,
2009, are not necessarily indicative of the operating results for the full year
ending December 31, 2009.  The accompanying financial statements
should be read in conjunction with the audited financial statements and
notes thereto included within the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2008, including significant accounting
policies.





Cash
and Cash Equivalents





For
purposes of reporting within the statements of cash flows, the Company considers
all cash on hand, cash accounts not subject to withdrawal restrictions or
penalties, and all highly liquid debt instruments purchased with a maturity of
three months or less to be cash and cash equivalents.





Accounts
Receivable





The
Company establishes an allowance for doubtful accounts in amounts sufficient to
absorb potential losses on accounts receivable.  As of March 31, 2009,
and December 31, 2008, no allowance for doubtful accounts was deemed necessary
by management.  While management uses the best information available
upon which to base estimates, future adjustments to the allowance may be
necessary if economic conditions differ substantially from the assumptions used
for the purpose of analysis.





Inventory





Inventory
is stated at the lower of cost using the first-in, first-out (FIFO) method or
market.  As of March 31, 2009, and December 31, 2008, inventory was
stated at a market value of $100,000.  The inventory was sold by the
Company subsequent to March 31, 2009, for $160,000.




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DEFENSE
SOLUTIONS HOLDING, INC.


(FORMERLY
FLEX RESOURCES CO. LTD.)
 NOTES
TO INTERIM FINANCIAL STATEMENTS
 MARCH
31, 2009, AND 2008
 (Unaudited)


Revenue
Recognition





DSHI
generates revenues from short-term and long-term project management, executive
consulting, and business development services.





Revenues
from short-term project management, executive consulting, and business
development services are recognized in accordance with Staff Accounting Bulletin
No. 104, “Revenue Recognition
in Financial Statements” (“SAB 104”).  Revenues are recognized
for financial reporting purposes when there is persuasive evidence of an
agreement or contract, contract milestones have been met or delivery has
occurred, acceptance has been approved by the customer, the fee is fixed or
determinable, and collection of the related receivable is probable.





Revenues
from long-term project management, executive consulting, and business
development services are recognized on a percentage-of-completion basis, in
accordance with Statement of Position 81-1, “Accounting for Performance of
Construction-Type and Certain Production-Type
Contracts.”  Customers are billed and related costs are
recognized, according to individual contracts, over the term of such
contracts.  A provision is made for the amount of any expected loss on
a contract at the time it is known.





Property
and Equipment





The
components of property and equipment are stated at cost.  Property and
equipment costs are depreciated or amortized for financial reporting purposes
over the useful lives of the related assets by the straight-line
method.  Useful lives utilized by the Company for calculating
depreciation or amortization are as follows:




Computer
      and office equipment
              5
      yearsFurniture
      and fixtures
              7
      years


Upon
disposition of an asset, its cost and related accumulated depreciation or
amortization are removed from the accounts, and any resulting gain or loss is
recognized.





Share-Based
Compensation





The
Company uses the fair value recognition provision of Financial Accounting
Standards No. 123R, “Share
Based Payment”(“FASB No. 123R”), which requires the Company to expense
the cost of employee services received in exchange for an award of equity
instruments based on the grant date fair value of such
instruments.  The Company uses the Black-Scholes option pricing model
to calculate the fair value of the equity instruments on the grant
date.





The
Company also uses the provisions of EITF 96-18, “Accounting for Equity Instruments
That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services” (“EITF 96-18”), to account for stock-based
compensation awards issued to non-employees for services.  Such awards
for services are recorded at either the fair value of the services rendered or
the instruments issued in
exchange for such services, whichever is more readily determinable, using the
measurement date guidelines enumerated in EITF 96-18.




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DEFENSE
SOLUTIONS HOLDING, INC.
 (FORMERLY
FLEX RESOURCES CO. LTD.)
 NOTES
TO INTERIM FINANCIAL STATEMENTS
 MARCH
31, 2009, AND 2008
 (Unaudited)


Lease
Obligations





All
noncancellable leases with an initial term greater than one year are categorized
as either capital or operating leases.  Assets recorded under capital
leases are amortized according to the same methods employed for property and
equipment or over the term of the related lease, if shorter.





Impairment
of Long-Lived Assets





Defense
Solutions evaluates the recoverability of long-lived assets and the related
estimated remaining lives at each balance sheet date.  The Company
records an impairment or change in useful life whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable or the
useful life has changed.  For the periods ended March 31, 2009, and
2008, no events or circumstances occurred for which an evaluation of the
recoverability of long-lived assets was required.





Deferred
Offering Costs





The
Company defers as other assets the direct incremental costs of raising capital
until such time as the offering is completed.  At the time of the
completion of the offering, the costs are charged against the capital
raised.  Should the offering be terminated, deferred offering costs
are charged to operations during the period in which the offering is
terminated.





Advertising and Promotion
Costs





Advertising
and promotion costs are charged to operations when incurred.  For the
periods ended March 31, 2009, and 2008, advertising and promotion costs amounted
to $0 and $300, respectively.





Loss Per Common
Share





Basic
loss per share is computed by dividing the net loss attributable to the common
stockholders by the weighted average number of shares of common stock
outstanding during the period.  Diluted loss per share is computed
similar to basic loss per share except that the denominator is increased to
include the number of additional common shares that would have been outstanding
if the potential common shares had been issued and if the additional common
shares were dilutive.  There were no dilutive financial instruments
issued or outstanding for the periods ended March 31, 2009, and
2008.





Income
Taxes




The
Company accounts for income taxes pursuant to SFAS No. 109, “Accounting for Income Taxes”
(“SFAS 109”).  Under SFAS 109, deferred tax assets and liabilities are
determined based on temporary differences between the bases of certain assets
and liabilities for income tax and financial reporting purposes.  The
deferred tax assets and liabilities are classified according to the financial
statement classification of the assets and liabilities generating the
differences.






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DEFENSE
SOLUTIONS HOLDING, INC.
 (FORMERLY
FLEX RESOURCES CO. LTD.)
 NOTES
TO INTERIM FINANCIAL STATEMENTS
 MARCH
31, 2009, AND 2008
 (Unaudited)
   Fair
Value of Financial Instruments


Defense
Solutions estimates the fair value of financial instruments using the available
market information and valuation methods.  Considerable judgment is
required in estimating fair value.  Accordingly, the estimates of fair
value may not be indicative of the amounts the Company could realize in a
current market exchange.  As of March 31, 2009, and December 31, 2008,
the carrying value of financial instruments approximated fair value due to the
short-term maturity of these instruments.





Estimates





The
financial statements are prepared on the basis of accounting principles
generally accepted in the United States of America.  The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of March 31, 2009, and December
31, 2008, and revenues and expenses for the periods ended March 31, 2009, and
2008.  Actual results could differ from those estimates made by
management.





(2) Operations
and Going Concern





The
operations of the Company are focused on project management, executive
consulting, and business development services to clients in the international
defense and homeland security markets related to technology upgrades to
modernize armored vehicles; strategic studies, analyses, and evaluation
projects.  For the periods ended March 31, 2009, and 2008, the Company
has established only limited sources of revenues to cover its operating
costs.  It also has significant debt and lease obligations, and has
raised only a limited amount of equity.  As such, it has incurred an
accumulated deficit, had negative working capital as of March 31, 2009, and
December 31, 2008, and its cash resources are insufficient to carry out its
business plan.  The Company intends to conduct additional capital
formation activities through the issuance of its common stock, and rely upon
loans from stockholders and other parties.





While
management of the Company believes that the Company will be successful in its
capital formation and planned operating activities, there can be no assurance
that the Company will be able to raise additional equity capital, or be
successful in the conduct of its business that will generate sufficient revenues
to sustain the operations of the Company.





The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern.  The
operations and financial elements described above, as well as other factors,
raise substantial doubt about the Company’s ability to continue as a going
concern.  The accompanying financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the possible inability of the Company to continue as a going
concern.






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DEFENSE
SOLUTIONS HOLDING, INC.
 (FORMERLY
FLEX RESOURCES CO. LTD.)
 NOTES
TO INTERIM FINANCIAL STATEMENTS
 MARCH
31, 2009, AND 2008
 (Unaudited)


(3) Related Party
Transactions





As of
March 31, 2009, and December 31, 2008, the Company owed to related parties
$147,068 and $140,839, respectively, for various working capital loans received.
The loans are unsecured, non-interest bearing, and have no terms for
repayment.





As of
March 31, 2009, and December 31, 2008, the Company owed to two-related parties a
total of $40,000 related to the issuance of two subordinated secured promissory
notes.  On each of the subordinated secured promissory notes, the
interest rate on the amount borrowed is 12 percent per annum.  The
total amount of principal and accrued interest related to the subordinated
secured promissory notes was due and payable on October 31, 2008, unless the
Company elected to extend the due date for each promissory note for up to an
additional 12 months, and pay an extension fee of 6 percent of the principal
outstanding plus accrued interest.  The Company elected to extend the
due dates of the subordinated secured promissory notes to October 31, 2009, but
did not pay any of the extension fees of 6 percent related to such
notes.  The 6 percent extension fees due on the subordinated secured
promissory notes have been accrued as of March 31, 2009, and December 31, 2008,
in the accompanying financial statements.  The promissory notes are
each secured by a subordinated lien on the assets of the Company.  In
addition, the promissory notes entitle the related-party lenders to receive a
percentage of the Company’s EBITDA earned from the date of the promissory notes
through December 31, 2009 (regardless of whether the other amounts owed under
the promissory notes have been paid) as determined by the Company’s Board of
Directors, equal to 25 percent multiplied by the aggregate amounts borrowed
under the promissory notes, payable in arrears (the “EBITDA
payment”).  The first EBITDA payments were due to be made on October
31, 2008, and such payments were to be made in respect of the EBITDA earned from
the date of issuance of the promissory notes through September 30,
2008.  Subsequent EBITDA payments shall be made within thirty days
after the end of each successive calendar quarter in respect of the EBITDA
earned from the last day on which the prior payment was calculated and ending on
the last day of such calendar quarter, and continue until the related-party
lenders have received an amount equal to the maximum amount of principal
outstanding under the subordinated secured promissory notes.  For the
period ended March 31, 2009, no EBITDA payments were made under the terms of the
promissory notes due to losses incurred by the Company.




(4) Long-term
Debt and Leases





Leases:





Capital Leases





The
Company currently has capital lease commitments for computer and office
equipment, furniture and fixtures, and inventory.  As of March 31,
2009, and December 31, 2008, the total cost of capitalized leases presented in
the accompanying balance sheets amounted to $168,524 and $168,524, respectively,
for computer and office equipment, and furniture and fixtures, and $260,178 and
$260,178 (reduced for impairment to $100,000 in 2009 and 2008), respectively,
for inventory.  Amortization of the capital lease costs, except
inventory, is included in depreciation and amortization expense.






- 9
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 Table of Contents




DEFENSE
SOLUTIONS HOLDING, INC.
 (FORMERLY
FLEX RESOURCES CO. LTD.)
 NOTES
TO INTERIM FINANCIAL STATEMENTS
 MARCH
31, 2009, AND 2008
 (Unaudited)


Operating Lease





In
addition, the Company currently has an operating lease commitment for office
space with an unrelated party for a period of five years through November
2010.  Lease expense related to the office space for the periods ended
March 31, 2009, and 2008, was $46,885 and $32,335, respectively.





Future
noncancellable minimum rental commitments for leases as of March 31, 2009, were
as follows:




Year
              
              Operating
                Lease
              
              
              Capital
                Leases2009
              
              $
              74,787
              
              
              $
              64,7512010
              
              
              91,406
              
              
              
              33,273Total
              
              $
              166,193
              
              
              
              98,024Less
      - Amount representing interest
              
              
              
              
              
              
              (7,017
              )Present
      value of net minimum lease payments
              
              
              
              91,007Less
      - Current portion
              
              
              
              
              
              
              (57,559
              )Capital
      lease obligations, less current portion
              
              
              $
              33,448
   - 10
-
 Table of Contents
  DEFENSE
SOLUTIONS HOLDING, INC.
 (FORMERLY
FLEX RESOURCES CO. LTD.)
 NOTES
TO INTERIM FINANCIAL STATEMENTS
 MARCH
31, 2009, AND 2008
 (Unaudited)


Short-term
and Long-term Debt:





The
Company has bank lines of credit, third-party short-term debt, and related party
notes and loans.  As of March 31, 2009, and December 31, 2008,
short-term and long-term debt consisted of the following:




2009
              
              
              2008Lines
      of credit with Banks, monthly payments ofinterest
      only; interest ranging from prime - 0.75%to
      prime + 8%; due on demand; generallypersonally
      guaranteed by officers and Directors, orcollateralized
      by personal residential real estate of Directors.
              
              $
              773,513
              
              
              $
              773,552Short-term
      promissory notes with unrelated parties;12%
      interest; principal and interest due on 10/31/09;collateralized
      by additional terms of a loan agreementor
      subordinated secured promissory note, includingall
      assets of the Company subordinated to existingdebt,
      as necessary; EBITDA premium payments also due.
              
              
              1,010,000
              
              
              
              1,010,000Convertible
      note - 6% interest; convertible into 250,000shares
      of common stock; due October 31, 2008, unsecured;extended
      to April 23, 2009.
              
              
              500,000
              
              
              
              500,000Short-term
      promissory notes with related parties; nointerest
      rate or 12% interest; due at various datesthrough
      10/31/09, unsecured or secured by a subordinatedlien
      on assets of the Company; EBITDA premium paymentsalso
      due.
              
              
              40,000
              
              
              
              40,000Loans
      from related parties; non-interest bearing;no
      terms for repayment; unsecured.
              
              
              147,068
              
              
              
              140,838Capital
      lease obligations, secured.
              
              
              91,007
              
              
              
              129,186Total
              
              
              2,561,588
              
              
              
              2,593,576Less
      - Current portion
              
              
              (2,528,140
              )
              
              
              (2,550,314
              )Long-term
      portion
              
              $
              33,448
              
              
              $
              43,262


On
November 1, 2007, Company entered into a loan agreement with a third-party
lender (the “Lender”) to borrow up to $1,000,000.  As of March 31,
2009, and December 31, 2008, the Company had borrowed $1,000,000 and
$1,000,000, respectively, under the loan agreement.  The interest rate
on amounts borrowed is 12 percent per annum.  The total amount of
principal and accrued interest was due and payable on October 31,
2008.  However, under the terms of the loan agreement, the Company
elected to extend the due date for up to an additional 12 months to October 31,
2009, and accrued, but did not pay as required, an extension fee of 6 percent on
the principal outstanding plus accrued interest.  The loan is secured
by a first lien on all assets of the Company, subordinated to existing debt, as
necessary.




In
addition to the loan amounts, accrued interest, and extension fees, and subject
to an election made by the Lender, the Company shall pay to the Lender 25
percent, up to a maximum of one times the aggregate total amount advanced under
the loan agreement by the Lender, of the Company’s earnings before interest,
taxes, depreciation and amortization (“EBITDA”) realized through December 31,
2009 (the “Revenue Stream Payments”).  The Company was not obligated
to make any Revenue Stream Payments on or prior to October 31,
2008.  The Revenue Stream Payments shall be made by the Company to the
Lender no later than June 30, 2010, based on the audited financial statements
from the relevant calendar year.  As an alternative to the Revenue
Stream Payments, the Lender was able to elect, at its sole discretion, at any
time on or prior to October 31, 2008, to have a warrant issued whereby each
$100,000 advanced to the Company under the loan agreement shall entitle the
Lender to purchase such number of shares of common stock of the Company
representing one percent of the Company’s issued and outstanding capital stock,
on a fully diluted basis, at an exercise price per share equal to the par value
of the Company’s common stock ($0.001 per share).  The warrant was
exercisable for a period of seven years from the date of issuance, by means of
cash or cancellation of all or a part of the indebtedness under the loan
agreement, on a dollar for dollar basis.  As of October 31, 2008, the
Lender did not elect to have the warrant issued.




- 11
-
 Table of Contents




DEFENSE
SOLUTIONS HOLDING, INC.
 (FORMERLY
FLEX RESOURCES CO. LTD.)
 NOTES
TO INTERIM FINANCIAL STATEMENTS
 MARCH
31, 2009, AND 2008
 (Unaudited)


Lastly,
the loan agreement grants to the Lender the right to appoint one member of the
Board of Directors of the Company until the latest of (i) not less than $200,000
is owed in principal under the loan agreement; or (ii) the Lender holds not less
than five percent of the Company’s outstanding common stock, on a fully diluted
basis.




On
November 30, 2007, the Company issued a subordinated secured promissory note to
a third-party lender to borrow $10,000 for working capital
purposes.  The interest rate on the amount borrowed is 12 percent per
annum.  The total amount of principal and accrued interest was due and
payable on October 31, 2008, unless extended by the Company for up to an
additional 12 months, and the payment of an extension fee of 6 percent of the
principal outstanding plus accrued interest.  The Company elected to
extend the due date of the subordinated secured promissory note to October 31,
2009, but did not pay any of the extension fees of 6 percent related to such
note.  The 6 percent extension fees due on the subordinated secured
promissory note has been accrued as of March 31, 2009 and December 31,
2008, in the accompanying financial statements.  The promissory note
is secured by a subordinated lien on the assets of the Company.  In
addition, the promissory note entitles the lender to receive a percentage of the
Company’s EBITDA earned from the date of the promissory note through December
31, 2009 (regardless of whether the other amounts owed under the promissory note
have been paid) as determined by the Company’s Board of Directors, equal to 25
percent multiplied by the aggregate amount borrowed under the promissory note,
payable in arrears (the “EBITDA payment”).  The first EBITDA payment
is due to be made on October 31, 2008, and such payment shall be made in respect
of the EBITDA earned from the date of issuance of the promissory note through
September 30, 2008.  Subsequent EBITDA payments shall be made within
thirty days after the end of each successive calendar quarter in respect of the
EBITDA earned from the last day on which the prior payment was calculated and
ending on the last day of such calendar quarter, and continue until the
third-party lender has received an amount equal to the maximum amount of
principal outstanding under the subordinated secured promissory
note.




On July
9, 2008, DSI issued an unsecured convertible promissory note to a third party
lender in the amount of $500,000 for working capital purposes.  The
interest rate on the amount borrowed is 6 percent per annum.  The
total amount of principal and accrued interest was due and payable on October
31, 2008, and was extended to April 23, 2009.  The lender had the
right, at any time prior to the date the note was paid in
full, convert any part or all of the outstanding principal and accrued interest
thereon into fully paid and non-assessable shares of common stock at the price
of $2.00 per share.  On April 23, 2009, the Company agreed to convert
the unsecured convertible promissory note and related accrued interest into
250,000 shares of common stock of the Company, and release the third party
lender from any further obligation under its subscription agreement with the
Company to buy additional shares of common stock.  See Note
10.




- 12
-
 Table of Contents




DEFENSE
SOLUTIONS HOLDING, INC.
 (FORMERLY
FLEX RESOURCES CO. LTD.)
 NOTES
TO INTERIM FINANCIAL STATEMENTS
 MARCH
31, 2009, AND 2008
 (Unaudited)


(5) Capital
Stock




Preferred Stock




The
Company is authorized to issue 10,000,000 shares of $0.001 par value preferred
stock.  The rights and preferences related to the preferred stock will
be established by the Board of Directors of the Company.




Common Stock




The
Company is authorized to issue 75,000,000 shares of $0.001 par value common
stock.  All shares of common stock shares have equal voting rights,
are non-assessable, and have one vote per share.  Voting rights are
not cumulative and, therefore, the holders of more than 50 percent of the common
stock could, if they choose to do so, elect all of the Directors of the
Company.




On
November 14, 2008, the Company acquired, through the Merger all of the
outstanding shares of common stock of DSI, and the former stockholders of DSI
were issued an aggregate of 16,793,401 shares of the Company’s common stock (a
ratio of 2.3163 shares of common stock of the Company for each share of common
stock of DSI) in exchange for their shares of DSI common stock.  As a
result of the Merger, the former stockholders of DSI became the majority
stockholders of the Company.  This transaction was accounted for as a
reverse merger and reorganization of capital, with the assets and liabilities of
the entities being brought over at their historical cost
bases.  Expenses of the reorganization were expensed as
incurred.





On
November 14, 2008, in connection with the Merger, a former officer and Director
of the Company surrendered 32,074,000 shares of common stock of the Company for
cancellation.





In
November 2008, the Company commenced a capital formation activity through a
Private Placement Offering (“PPO”) to raise capital through the issuance of up
to 3,500,000 shares of common stock, par value $0.001 per share.  At
or about the time of the closing of the Merger, the Company completed the
initial closing of the PPO pursuant to which it sold to subscribers 125,000
shares of its common stock for an aggregate purchase price of $250,000, or $2.00
per share.  The Company sold an additional 75,000 shares in connection
with the PPO in December 2008 and received proceeds of $150,000 in connection
with such sale.  As of March 31, 2009, the 200,000 shares of common
stock sold In the PPO had not been issued, and the proceeds received by the
Company are reflected as common stock subscribed in the accompanying financial
statements.  The Company is continuing with the capital formation
activity under the PPO.






- 13
-
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DEFENSE
SOLUTIONS HOLDING, INC.
 (FORMERLY
FLEX RESOURCES CO. LTD.)
 NOTES
TO INTERIM FINANCIAL STATEMENTS
 MARCH
31, 2009, AND 2008
 (Unaudited)


In June
2007, DSI entered into a one-year consulting agreement with an unrelated third
party for strategic, analytic, and advocacy services before the U.S. government,
various foreign governments, and commercial businesses.  Terms of the
agreement called for the payment of consulting fees amounting to $15,000 per
month, with one-half of the monthly fee paid in cash, and the other half paid in
the form of 7,500 shares of common stock of the Company value at $1 per
share.  For the three months ended March 31, 2008, the Company
recorded 22,500 shares of common stock subscribed but unissued under the
agreement.  The subscribed shares of common stock were issued to the
third party prior to the completion of the Merger in November 2008.




On
November 12, 2008, the Company entered into a stock subscription agreement with
a third party entity for the purchase of 500,000 shares of common stock for
proceeds of $1,000,000 in connection with the PPO.  The third party
entity paid $250,000 under the subscription agreement for the purchase of
125,000 shares of common stock on or about November 14, 2008.  In
addition, on July 9, 2008, DSI also issued to the same entity an unsecured
convertible promissory note in the amount of $500,000 as described in Note 4
above.  On April 23, 2009, the Company agreed to convert the unsecured
convertible promissory note and related accrued interest into 250,000 shares of
common stock of the Company, and release the third party lender from any further
obligation under its subscription agreement with the Company to buy additional
shares of common stock.  The accompanying financial statements present
as of March 31, 2009, the cancellation of the stock subscription agreement to
purchase an additional 375,000 shares of common stock for proceeds of $750,000
that was effected on April 23, 2009.




On
November 12, 2008, the Company entered into a stock subscription agreement with
a separate third party entity for the purchase of 750,000 shares of common stock
for proceeds of $1,500,000.  As of March 31, 2009, the Company had
received $150,000 in proceeds as partial payment under the subscription
agreement.


Effective
November 1, 2007, the Board of Directors of DSI and its stockholders adopted the
Defense Solutions, Inc. 2007 Equity Incentive Plan (the “Plan”) and set aside
2,000,000 shares of common stock to provide eligible persons an opportunity to
acquire a proprietary interest in DSI and as an incentive to remain in the
service of DSI.  The Plan provides for the issuance of two types of
stock options:  (i) Incentive Stock Options (“ISO’s”); and (ii)
Non-Qualified Stock Options (“NSO’s”) to certain employees, Directors and
consultants of DSI.  Options that are forfeited or cancelled are added
back into the Plan.




On the
same date, DSI granted 1,975,000 options to purchase a like number of shares of
common stock (1,275,000 ISO’s and 700,000 NSO’s) to employees and a consultant
at a price of $0.75 per share.  1,475,000 of the options granted
vested immediately on the date of grant.  The remaining 500,000 NSO’s
either vested or will vest to purchase a like number of shares of common stock
as follows:




December 31,
2007                                                                           100,000
shares


December 31,
2008                                                                           200,000
shares


December 31,
2009                                                                           200,000
shares




The fair
value of the stock options granted is recognized as compensation over the
requisite service period as described above using the Black-Scholes option
pricing model.  For the periods ended March 31, 2009, and 2008, the
amounts of $21,489 and $42,978, respectively, were recognized as stock option
compensation expense.






- 14
-
 Table of Contents




DEFENSE
SOLUTIONS HOLDING, INC.
 (FORMERLY
FLEX RESOURCES CO. LTD.)
 NOTES
TO INTERIM FINANCIAL STATEMENTS
 MARCH
31, 2009, AND 2008
 (Unaudited)


Effective
October 31, 2008, the Board of Directors and stockholders of the Company adopted
the Defense Solutions Holding, Inc. Equity Incentive Plan (the “Equity Plan”)
and set aside 13,850,000 shares of common stock to provide eligible persons an
opportunity to acquire a proprietary interest in the Company and as an incentive
to remain in the service of the Company.  The Equity Plan provides for
the issuance of two types of stock options:  (i) Incentive Stock
Options; and (ii) Non-Qualified Stock Options to certain employees, Directors
and consultants of the Company.  Options that are forfeited or
cancelled are added back to the Equity Plan.




On
November 14, 2008, the holders of 1,975,000 options granted pursuant to a stock
option plan adopted by DSI prior to the Merger exchanged their options to
acquire 5,246,520 shares of common stock at an exercise price of $0.32 per share
under the Company Equity Plan.  As of March 31, 2009, a total of
8,553,500 shares of common stock were available for grant under the Equity
Plan.  See Note 10.




The
Company had no stock option activity during the three months ended March 31,
2009, and 2008.




The
Company used the average historical stock price volatility of several publicly
traded entities in the same industry to value stock options under SFAS No.
123R.  The forfeiture rate was estimated at zero for the stock option
grant as the award has immediate vesting terms or has a low probability of
forfeiture.




(6)Commitments and
Contingencies




On June
15, 2007, DSI entered into a one-year consulting agreement with an unrelated
third party for strategic, analytic, and advocacy services before the U.S.
government, various foreign governments, and commercial
businesses.  Terms of the agreement call for the payment of consulting
fees amounting to $15,000 per month, with one-half of the monthly fee paid in
cash, and the other half paid in the form of 7,500 shares of common stock of the
Company value at $1 per share.  For the three months ended March 31,
2008, DSI paid the consultant fees $22,500 in cash.  In addition, DSI
recorded 22,500 shares of common stock subscribed but unissued valued at
$22,500, under the agreement.  Prior to the Merger in November 2008,
DSI issued the subscribed shares to the unrelated third party.




Effective
February 1, 2007, DSI entered into a consulting agreement with an unrelated
third party for strategic planning services related to business development and
tactical planning to attract new clients, capital formation activities, and to
position DSI for additional revenue generation and sustained
growth.  Terms of the agreement call for the payment of consulting
fees of $8,000 per month for approximately 50 hours of consulting time plus
bonuses and reimbursement of expenses.  In addition, on November 1,
2007, the consultant was granted 700,000 options to purchase a like number of
shares of common stock at an option price of $0.75 per share.  The
agreement may be terminated upon 3-months notice to the consultant unless such
termination is for cause.  For the three months ended March 31, 2009,
and 2008, DSI paid $16,000 and $32,000, respectively, to the consultant for
services rendered.




Effective
March 15, 2007, DSI entered into a consulting agreement with a third party
entity for governmental affairs representation and lobbying services before the
United States government.  The term of the agreement was for 12
months, with an automatic renewal for an additional one-year period unless
terminated by either party.  Fees for services were in the amount of
$20,000 per month.  For services rendered to DSI in 2007, the third
party entity agreed to accept as partial payment in lieu of fees 160,000 shares of
common stock.  During 2008, no fees were paid to the third party
entity for services rendered, and DSI accrued $240,000 for services related to
the contract.




- 15
-
 Table of Contents




DEFENSE
SOLUTIONS HOLDING, INC.
 (FORMERLY
FLEX RESOURCES CO. LTD.)
 NOTES
TO INTERIM FINANCIAL STATEMENTS
 MARCH
31, 2009, AND 2008
 (Unaudited)


Effective
January 1, 2008, DSI established the Defense Solutions Inc. 401(k) Plan (the
“Retirement Plan”) for the benefit of its employees in saving for
retirement.  Employees may enroll in the Retirement Plan as eligible
participants as of the first day of their employment.  The Retirement
Plan is funded immediately at each payroll payment date through amounts withheld
from employees.  DSI may make, but is not obligated to make,
contributions to the Retirement Plan, and there were no unfunded liabilities
determined as of the date the Retirement Plan was established.  For
the three months ended March 31, 2009, a total of $300 in pension expenses was
incurred related to the Retirement Plan.





Effective
September 1, 2008, DSI entered into an employment agreement with its Chief
Executive Officer.  The initial annual base salary is $240,000, with
an annual review by the Board of Directors.  The agreement also
includes provisions for benefits and an annual performance bonus.  The
initial term of employment under the agreement is three years.  After
the initial term of employment, the term of the agreement shall automatically
renew for successive one-year periods, unless otherwise terminated.





Effective
September 1, 2008, DSI entered into an employment agreement with its President
and Chief Operating Officer.  The initial annual base salary is
$185,000, with an annual review by the Board of Directors.  The
agreement also includes provisions for benefits and an annual performance
bonus.  The initial term of employment under the agreement is three
years.  After the initial term of employment, the term of the
agreement shall automatically renew for successive one-year periods, unless
otherwise terminated.




(7) Income
Taxes




The
provision (benefit) for income taxes for the three months ended March 31, 2009,
and 2008, is as follows (assuming a 23.7 effective tax rate):




2009
              
              
              2008Current
      Tax Provision:Federal-Taxable
      income
              
              $
              —
              
              
              $
              —Total
      current tax provision
              
              $
              —
              
              
              $
              —Deferred
      Tax Provision:Federal-Loss
      carryforwards
              
              $
              176,506
              
              
              $
              175,109Change
      in valuation allowance
              
              
              (176,506
              )
              
              
              (175,109
              )Total
      deferred tax provision
              
              $
              —
              
              
              $
              —


The
Company had deferred income tax assets as of March 31, 2009, and December 31,
2008, as follows:




2009
              
              
              2008Loss
      carryforwards
              
              $
              1,259,858
              
              
              $
              1,083,352Less
      - Valuation allowance
              
              
              (1,259,858
              )
              
              
              (1,083,352
              )Total
      net deferred tax assets
              
              $
              —
              
              
              $
              —




- 16
-
 Table of Contents




DEFENSE
SOLUTIONS HOLDING, INC.
 (FORMERLY
FLEX RESOURCES CO. LTD.)
 NOTES
TO INTERIM FINANCIAL STATEMENTS
 MARCH
31, 2009, AND 2008
 (Unaudited)


The
Company provided a valuation allowance equal to the deferred income tax assets
for the periods ended March 31, 2009, and 2008, because it is not presently
known whether future taxable income will be sufficient to utilize the loss
carryforwards.




As of
March 31, 2009, and 2008, the Company had approximately $5,315,800 and
$4,571,000, respectively in tax loss carryforwards that can be utilized in
future periods to reduce taxable income, and expire in the year
2029.




(8) Significant
Customers




For the
three months ended March 31, 2009, and 2008, the Company had certain customers
that accounted for more than 10 percent of total revenues, as
follows:




2009
              
              
              2008Customer
      A
              
              $
              257,764
              
              
              $
              —Customer
      B
              
              
              82,145
              
              
              
              23,215Customer
      C
              
              
              —
              
              
              
              38,228


(9) Recent
Accounting Pronouncements





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial
Assets and Liabilities—Including an amendment of FASB Statement No. 115”
(“SFAS No. 159”), which permits entities to measure many financial instruments
and certain other items at fair value that are not currently required to be
measured at fair value.  An entity would report unrealized gains and
losses on items for which the fair value option had been elected in earnings at
each subsequent reporting date.  The objective is to improve financial
reporting by providing entities with the opportunity to mitigate volatility in
reported earrings caused by measuring related assets and liabilities differently
without having to apply complex hedge accounting provisions.  The
decision about whether to elect the fair value option is applied instrument by
instrument, with a few exceptions; the decision is irrevocable; and it is
applied only to entire instruments and not to portions of
instruments.  The statement requires disclosures that facilitate
comparisons (a) between entities that choose different measurement attributes
for similar assets and liabilities and (b) between assets and liabilities in the
financial statements of an entity that selects different measurement attributes
for similar assets and liabilities.  SFAS No. 159 is effective for
financial statements issued for fiscal years beginning after November 15,
2007.  Early adoption is permitted as of the beginning of a fiscal
year provided the entity also elects to apply the provisions of SFAS No.
157.  Upon implementation, an entity shall report the effect of the
first re-measurement to fair value as a cumulative-effect adjustment to the
opening balance of retained earnings.  Since the provisions of SFAS No. 159
are applied prospectively, any potential impact will depend on the instruments
selected for fair value measurement at the time of
implementation.  The management of the Company is of the opinion that
the adoption of this new pronouncement will not have an impact on its financial
statements.




- 17
-
 Table of Contents




DEFENSE
SOLUTIONS HOLDING, INC.
 (FORMERLY
FLEX RESOURCES CO. LTD.)
 NOTES
TO INTERIM FINANCIAL STATEMENTS
 MARCH
31, 2009, AND 2008
 (Unaudited)


In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51”(“SFAS
No. 160”),which
establishes accounting and reporting standards to improve the relevance,
comparability, and transparency of financial information in its consolidated
financial statements.  This is accomplished by requiring all entities,
except not-for-profit organizations, that prepare consolidated financial
statements to:





a)
            clearly
      identify, label, and present ownership interests in subsidiaries held by
      parties other than the parent in the consolidated statement of financial
      position within equity, but separate from the parent’s
    equity;




b)
            clearly
      identify and present both the parent’s and the noncontrolling’s interest
      attributable consolidated net income on the face of the consolidated
      statement of income;




c)
            consistently
      account for changes in parent’s ownership interest while the parent
      retains it controlling financial interest in subsidiary and for all
      transactions that are economically similar to be accounted for
      similarly;




d)
            measure
      of any gain, loss, or retained noncontrolling equity at fair value after a
      subsidiary is deconsolidated; and




e)
            provide
      sufficient disclosures that clearly identify and distinguish between the
      interests of the parent and the interests of the noncontrolling
      owners.





This
statement also clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements.  SFAS No. 160 is effective
for fiscal years and interim periods on or after December 15,
2008.  The management of the Company does not expect the adoption of
this pronouncement to have a material impact on its financial
statements.





In March
2008, the FASB issued FASB Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities – an amendment of FASB Statement 133”
(“SFAS No. 161”).  SFAS No. 161 enhances required disclosures
regarding derivatives and hedging activities, including enhanced disclosures
regarding how:  (a) an entity uses derivative instruments; (b)
derivative instruments and related hedged items are accounted for under SFAS No.
133, “Accounting for
Derivative Instruments and Hedging Activities”; and (c) derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows.  Specifically, SFAS No. 161
requires:





●
            Disclosure
      of the objectives for using derivative instruments be disclosed in terms
      of underlying risk and accounting
designation;


●
            Disclosure
      of the fair values of derivative instruments and their gains and losses in
      a tabular format;






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DEFENSE
SOLUTIONS HOLDING, INC.
 (FORMERLY
FLEX RESOURCES CO. LTD.)
 NOTES
TO INTERIM FINANCIAL STATEMENTS
 MARCH
31, 2009, AND 2008
 (Unaudited)


●
            Disclosure
      of information about credit-risk-related contingent features;
      and


●
            Cross-reference
      from the derivative footnote to other footnotes in which
      derivative-related information is
disclosed.





SFAS No.
161 is effective for fiscal years and interim periods beginning after November
15, 2008.  Earlier application is encouraged.  The
management of the Company does not expect the adoption of this pronouncement to
have a material impact on its financial statements.





In May
2008, the FASB issued FASB Statement No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS No. 162”).  SFAS No. 162
identifies the sources of accounting principles and the framework for selecting
the principles used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with generally
accepted accounting principles in the United States of America.  The
sources of accounting principles that are generally accepted are categorized in
descending order as follows:





a)
            FASB
      Statements of Financial Accounting Standards and Interpretations, FASB
      Statement 133 Implementation Issues, FASB Staff Positions, and American
      Institute of Certified Public Accountants (AICPA) Accounting Research
      Bulletins and Accounting Principles Board Opinions that are not superseded
      by actions of the FASB.





b)
            FASB
      Technical Bulletins and, if cleared by the FASB, AICPA Industry Audit and
      Accounting Guides and Statements of
Position.





c)
            AICPA
      Accounting Standards Executive Committee Practice Bulletins that have been
      cleared by the FASB, consensus positions of the FASB Emerging Issues Task
      Force (EITF), and the Topics discussed in Appendix D of EITF Abstracts
      (EITF D-Topics).





d)
            Implementation
      guides (Q&As) published by the FASB staff, AICPA Accounting
      Interpretations, AICPA Industry Audit and Accounting Guides and Statements
      of Position not cleared by the FASB, and practices that are widely
      recognized and prevalent either generally or in the
    industry.





SFAS No.
162 is effective 60 days following the SEC’s approval of the Public Company
Accounting Oversight Board amendment to its authoritative
literature.  It is only effective for nongovernmental entities;
therefore, the GAAP hierarchy will remain in SAS 69 for state and local
governmental entities and federal governmental entities.  The
management of the Company does not expect the adoption of this pronouncement to
have a material impact on its financial statements.





On May
26, 2008, the FASB issued FASB Statement No. 163, “Accounting for Financial Guarantee
Insurance Contracts—an interpretation of FASB Statement No. 60” (“SFAS
No. 163”).  SFAS No. 163 clarifies how FASB Statement No. 60, “Accounting and Reporting by
Insurance Enterprises” (“SFAS No. 60”), applies to financial guarantee
insurance contracts issued by insurance enterprises, including the recognition
and measurement of premium revenue and claim liabilities.  It also
requires expanded disclosures about financial guarantee insurance
contracts.




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DEFENSE
SOLUTIONS HOLDING, INC.
 (FORMERLY
FLEX RESOURCES CO. LTD.)
 NOTES
TO INTERIM FINANCIAL STATEMENTS
 MARCH
31, 2009, AND 2008
 (Unaudited)




The
accounting and disclosure requirements of SFAS No. 163 are intended to improve
the comparability and quality of information provided to users of financial
statements by creating consistency.  Diversity exists in practice in
accounting for financial guarantee insurance contracts by insurance enterprises
under SFAS No. 60, “Accounting
and Reporting by Insurance Enterprises.”  That diversity
results in inconsistencies in the recognition and measurement of claim
liabilities because of differing views about when a loss has been incurred under
FASB Statement No. 5, “Accounting for Contingencies”
(“SFAS No. 5”).  SFAS No. 163 requires that an insurance enterprise
recognize a claim liability prior to an event of default when there is evidence
that credit deterioration has occurred in an insured financial
obligation.  It also requires disclosure about (a) the risk-management
activities used by an insurance enterprise to evaluate credit deterioration in
its insured financial obligations and (b) the insurance enterprise’s
surveillance or watch list.





SFAS No.
163 is effective for financial statements issued for fiscal years beginning
after December 15, 2008, and all interim periods within those fiscal years,
except for disclosures about the insurance enterprise’s risk-management
activities.  Disclosures about the insurance enterprise’s
risk-management activities are effective the first period beginning after
issuance of SFAS No. 163.  Except for those disclosures, earlier
application is not permitted.  The management of the Company does not
expect the adoption of this pronouncement to have material impact on its
financial statements.





(10) Subsequent
Events





On April
13, 2009, the Company granted 5,075,000 options to purchase a like number of
shares of common stock under the Equity Plan to employees and a
consultant.  With respect to the options granted, 3,275,000 options
have an exercise price of $0.12 per share, and 1,800,000 options have an
exercise price of $0.13 per share.  Further, 1,650,000 of the options
granted vested on the date of grant, and one half of the 3,425,000 options will
vest on each of December 31, 2009 and December 31, 2010,
respectively.  Of the options granted, 3,725,000 are ISO’s, and
1,350,000 are NSO’s.





On April
23, 2009, the Company agreed to convert the unsecured convertible promissory
note for $500,000 and related accrued interest into 250,000 shares of common
stock of the Company, and release the third party lender from any further
obligation under its subscription agreement with the Company to buy additional
shares of common stock.




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Item 2.  Management’s Discussion and Analysis of Financial
Condition and Results of Operation.





Forward-Looking
Information





You
should read the following discussion and analysis together with the unaudited
financial statements and related notes appearing elsewhere in this Report. This
discussion and analysis contains forward-looking statements that involve risks,
uncertainties, and assumptions. The actual results may differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including, but not limited to, those presented under "Risk Factors" in
our Report on form 10-K for the fiscal year ended December 31, 2008 or elsewhere
in this Report.




You
should read the following discussion in conjunction with our
unaudited financial statements and related notes.  In addition to
historical financial information, the following discussion contains
forward-looking statements that reflect our plans, estimates and
beliefs.  Our actual results could differ
materially.





Overview




On
November 14, 2008, we acquired all of the outstanding capital stock of Defense
Solutions, Inc. in connection with the merger (the “Merger”) of our wholly owned
subsidiary with and into Defense Solutions, Inc.  The former
stockholders of Defense Solutions, Inc. were issued an aggregate 16,793,401
shares of our Common Stock, one of our principal stockholders surrendered
32,074,000 shares to us for cancellation at the effective time of the Merger,
and certain other stockholders agreed to surrender shares if we did not raise
$3,000,000 in connection with a proposed private placement; however, no such
shares have yet been surrendered.  In connection with the Merger, we
changed our name to Defense Solutions Holding, Inc.  In addition, our
Board of Directors was reconstituted at the effective time of the Merger with
designees of Defense Solutions, Inc. replacing our then current Board of
Directors.  Further, at the effective time of the Merger, we abandoned
our prior business plan and the operations of Defense Solutions, Inc. acquired
as a result of the Merger became our sole line of business. Simultaneously with
the closing of the Merger, we completed the initial closing of a private
placement and issued an aggregate of 125,000 shares of Common Stock for gross
proceeds of $250,000 and net proceeds to us, after deduction of offering
expenses of approximately $180,000.





The
shares of Common Stock issued to the former stockholders of Defense Solutions,
Inc in connection with the Merger represented approximately 51 percent of our
outstanding Common Stock after giving effect to the Merger and the cancellation
of shares described above.  As a result, the Merger transaction was
accounted for as a reverse acquisition with Defense Solutions, Inc. as the
acquiring party and Defense Solutions Holding, Inc. (formerly Flex Resources Co.
Ltd. ) as the acquired party.  Accordingly, when we refer to our
business and financial information relating to periods prior to the Merger, we
are referring to the business and financial information of Defense Solutions,
Inc., unless the context otherwise requires.  The following discussion
and analysis should be read in conjunction with the financial statements,
including the notes thereto and other information presented in this
Report.




We are an
international project management, executive consulting, and business development
firm with branch offices on four continents.  We began operations in
2001, and since that time have built a reputation as a leader in the
refurbishment and upgrade of armored vehicles, as well as the provisioning of
spare parts and equipment for military and police forces
worldwide.  In addition, we conduct program management, business
development, and strategic studies in the Defense and Homeland Security
markets.




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We
achieved revenues for the three months ended March 31, 2009 of
$401,856.  This represents an increase of $323,471 over revenues for
the three months ended March 31, 2008.  These revenues were primarily
generated from the sale of optical devices used to calibrate military vehicles
and other equipment.  We believe that we are well positioned in the
project management and business development segments of our business to take
advantage of significant opportunities that are unfolding in
Iraq.  Specifically, the withdrawal of United States and coalition
forces is necessitating the re-armament of the Iraqi military.  Having
supplied refurbished military equipment previously to Iraq, we believe that we
are uniquely positioned to address their ongoing military equipment
requirements.  In the coming years, management will endeavor to
leverage this expertise and provide a wide variety of military and non-military
products to the government of Iraq and other Middle Eastern, African and Asian
countries.




Results
of Operations





Three
months ended March 31, 2009 compared to three months ended March 31,
2008




For the
three months ended March 31, 2009, we reported revenues of $401,856 compared to
$78,385 for the three months ended March 31, 2008, an 413%
increase.  This increase growth was primarily the result of revenue
from a contract to provide optical calibration devices for use in military
vehicles and other equipment which was not in effect during 2008.




Operating
expenses for the three months ended March 31, 2009 increased to $1,096,570, or
273% of revenues, from $769,975, or 982% of revenues for the three months ended
March 31, 2008.  The increase in  operating expenses in
total dollars was primarily due to an increase in labor costs associated with
the higher revenue level as well as increased sales and marketing
activities.




Other
expenses, net for the three months ended March 31, 2009, were $50,035
compared to $47,265 during the three months ended March 31,
2008.  This increase was primarily due to higher interest expense
caused by higher borrowing levels offset by slightly lower short-term
rates.




In that
we are in an accumulated loss position, no provision for income taxes is
reflected in the financial statements.




Net loss
for the three months ended March 31, 2009 increased by 1% to $744,749, or 185%
of revenues, from $738,855, or 943% of revenues, during the three months ended
March 31, 2008 as a result of the factors described above.




Seasonality
and Quarterly Periods





Our
business is not seasonal in nature.




Liquidity
and Capital Resources





We have
historically relied on cash flow from operations, borrowings under credit
facilities and loans from related parties to support our
operations.  Our financial statements are prepared on a going concern
basis, which assumes that we will realize our assets and discharge our
liabilities in the normal course of business.  At March 31, 2009, we
had limited liquid resources.  Current liabilities were $4,587,304 and
current assets were $406,750.  The difference of $4,180,554 is a
working capital deficit, which is primarily the result of losses incurred during
the last several years.  These conditions raise doubt as to our
ability to continue normal business operations as a going
concern.  The financial statements do not include
any adjustments to reflect the possible future effect on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.




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Our
continuation of existence is dependent upon the continued cooperation of our
creditors, our ability to generate sufficient cash flow to meet our continuing
obligations on a timely basis and fund our operating and capital needs, and our
ability to obtain additional financing as may be necessary.  We are
currently seeking to raise up to $7,000,000 in a private placement of common
stock to support our operations.  The private placement offering will
be made within the United States only to accredited investors and outside the
United States to only non-US investors.  The securities offered have
not been registered under the Securities Act of 1933, or applicable state laws,
and may not be offered or sold in the United States absent registration or an
applicable exemption from the registration requirements of the Securities Act of
1933 and applicable state laws.  This report shall not constitute an
offer to sell or a solicitation of an offer to buy the securities.





Cash used
in operating activities for the three months ended March 31, 2009 was $112,197
compared to $465,298 for the three months ended March 31, 2008.  The
decrease in cash used is primarily attributable to the fact that $761,000 of
deferred revenue was recognized during the three months ended March 31,
2008.




There was
no cash used in investing activities during either the three months ended March
31, 2009 or March 31, 2008.




Cash
provided by financing activities decreased to $234,661 in the three months ended
March 31, 2009 compared to $447,910 in the three months ended March 31, 2008,
primarily as a result of the receipt of $1,021,894 in bank loans and lines of
credit received in the three months ended March 31, 2008.




There can
be no assurance that we will be successful in raising additional capital through
additional borrowings, private placements (including the private placement
currently being conducted) or otherwise. Even if we are successful in raising
capital through the sources specified, there can be no assurances that any such
financing would be available in a timely manner or on terms acceptable to
us.  Additional equity financing could be dilutive to shareholders,
and any debt financing could involve restrictive covenants with respect to
future capital raising activities and other financial and operational
matters.




Future
Commitments





We
currently have capital lease commitments for computer and office equipment,
furniture and fixtures, and inventory.  As of March 31, 2009, the
total cost of capitalized leases presented in the accompanying balance sheet
amounted to $168,524 for computer and office equipment, and furniture and
fixtures, and $260,178 (reduced for impairment to $100,000) for
inventory.  Amortization of the capital lease costs, except inventory,
is included in depreciation and amortization expense.




In
addition, we currently have an operating lease commitment for office space with
an unrelated party for the period of five years through November
2010.  Lease expense related to the office space for the three months
ended March 31, 2009, and 2008, was $46,885 and $32,335,
respectively.




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Future
noncancellable minimum rental commitments for leases as of March 31, 2009 were
as follows:




March
      31,
              
              Operating
      Lease
              
              
              Capital
      Leases2009
              
              $
              94,787
              
              
              $
              64,7512010
              
              
              91,406
              
              
              
              33,273Total
              
              $
              166,193
              
              
              $
              98,024Less
      – Amount representing interest
              
              
              
              
              
              
              (7,017
              )Present
      value of net minimum lease payments
              
              
              
              
              
              
              91,007Less
      – Current portion
              
              
              
              
              
              
              (57,559
              )Capital
      lease obligations, less current portion
              
              
              
              
              
              $
              33,448




We have
bank lines of credit, third-party short-term debt, and related party notes and
loans.  As of March 31, 2009, short-term and long-term debt consisted
of the following:




March
      31,
              2009Lines
      of credit with Banks, monthly payments of interest only; interest ranging
      from prime – 0.75% to prime + 8.%; due on demand; generally insecured, or
      collateralized by personal residential real estate of
      director.
            
            $
            773,513Short-term
      promissory notes with unrelated parties; 12% interest; principal and
      interest due on 10/31/08; collateralized by additional terms of a loan
      agreement or subordinated secured promissory note, including all assets of
      the Company subordinated to existing debt, as necessary, EBITDA premium
      payments also due.
            
            
            1,010,000Convertible
      note – 6% interest; convertible into 250,000 shares of common stock; due
      October 31, 2008, unsecured; extended to April 23,
    2009.
            
            
            500,000Short-term
      promissory notes with related parties; no interest rate or 12% interest;
      due at various dates through 10/31/09, unsecured or secured by a
      subordinated lien on assets of the Company; EBITDA premium payments also
      due.
            
            
            40,000Loan
      from related party, monthly payments of principal and interest; 8.5%
      interest; due March 2014, unsecured.Loans
      from related parties; non-interest bearing; no terms for repayment;
      unsecured.
            
            
            147,068Capital
      lease obligations, secured.
            
            
            91,007Total
            
            
            2,561,588Less
      – Current portion
            
            
            (2,528,140)Long-term
      portion
            
            $
            33,448






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On
November 1, 2007, we entered into a loan agreement with the Mikal Group (the
“Lender”) to borrow up to $1,000,000.  As of March 31, 2009 and
December 31, 2008, we had borrowed $1,000,000 under the loan
agreement.  The interest rate on amounts borrowed is 12% per
annum.  The total amount of principal and accrued interest was due and
payable on October 31, 2008; however, we have elected to extend the due date for
up to an additional 12 months to October 31, 2009 and accrued but did not pay
as required an extension fee of six percent of the principal
outstanding plus accrued interest.  The loan is secured by a first
lien on all assets of Defense Solutions, subordinated to existing debt, as
necessary.




In
addition to the loan amounts, accrued interest, and extension fees, and subject
to an election made by the Lender, we are required pay to the Lender 25%, up to
a maximum of one times the aggregate total amount advanced under the loan
agreement by the Lender, of our earnings before interest, taxes, depreciation
and amortization (“EBITDA”) realized through December 31, 2009 (the “Revenue
Stream Payments”).  We were not obligated to make any Revenue Stream
Payments on or prior to October 31, 2008.  No EBITDA had been earned
through March 31, 2009 and thus no Revenue Stream Payments were owed through
such date.  The Revenue Stream Payments are required to be made to the
Lender no later than June 30, 2010, based on the audited financial statements
from the relevant calendar year.  As an alternative to the Revenue
Stream Payments, the Lender had the right to elect, at its sole discretion at
any time prior to October 31, 2008, to receive a warrant which would entitle the
Lender to purchase 2,710,071 shares of our Common Stock at an exercise price of
$0.0001 per share.  We expect to extend the date by which the election
to receive the warrant was required to be made in connection with negotiating a
restructuring of the terms of the loan agreement with the Lender; however, as of
March 31, 2009, no formal agreement had been reached with respect to the terms
of any such restructuring.  Under the terms of the loan agreement, the
warrant will be exercisable for a period of seven years from the date of
issuance, by means of cash or cancellation of all or a part of the indebtedness
under the loan agreement, on a dollar for dollar basis.  The loan
agreement grants to the Lender the right to appoint one member of our Board of
Directors until the latest of (i) not less than $200,000 is owed in principal
under the loan agreement; or (ii) the Lender holds not less than five percent of
outstanding Common Stock, on a fully diluted basis.




In
November 2007, we issued two subordinated secured promissory notes to
lenders to borrow an aggregate of $40,000 for working capital
purposes.  The interest rate on the amount borrowed is 12% per
annum.  The total amount of principal and accrued interest was due and
payable on October 31, 2008, however, we obtained an extension on these notes to
October 31, 2009. We also accrued but did not pay as required an extension fee
of six percent of the principal outstanding plus accrued
interest.  The promissory notes are secured by a subordinated lien on
our assets.  In addition, the promissory notes entitle the lenders to
receive a percentage of our EBITDA earned from the date of the promissory note
through December 31, 2009 (regardless of whether the other amounts owed under
the promissory notes have been paid) as determined by our Board of Directors,
equal to 25% multiplied by the aggregate amount
borrowed under the promissory notes, payable in arrears (the “EBITDA
payment”).  The first EBITDA payment was due to be made on October 31,
2008 for the period ended September 30, 2008; however, no payment was required
as a result of the absence of EBITDA during such period.  No EBITDA
payments were due through March 31, 2009 as a result of the absence of positive
EBITDA.  Subsequent EBITDA payments are required within thirty days
after the end of each successive calendar quarter in respect of the EBITDA
earned from the last day on which the prior payment was calculated and ending on
the last day of such calendar quarter, and continue until the lenders have
received an amount equal to the maximum amount of principal outstanding under
the subordinated secured promissory notes.




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Item 3.Quantitative and
Qualitative Disclosure About Market Risk




We
believe that our business operations are not exposed to market risk relating to
interest rate, foreign currency exchange risk or commodity price
risk.




Item 4.  Controls and Procedures




Disclosure
Controls and Procedures





Under the
supervision and with the participation of management, including our Chief
Executive Officer and our Chief Financial Officer, we have evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures.  Disclosure controls and procedures are controls and
procedures that are designed to ensure that information required to be disclosed
in our reports filed or submitted under the 1934 Act is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and
forms.  Based on this evaluation, our Chief Executive Officer and
Chief Financial Officer have concluded that our disclosure controls and
procedures were not effective as of the end of the period covered by this
Report.





Internal
Control over Financial Reporting





Our
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.  Under the supervision and with the participation
of our management, which consists of our President and Chief Financial Officer,
we conducted an evaluation of the effectiveness of its internal control over
financial reporting based on criteria established in the framework in Internal Control-Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission.  Based on their evaluation, our Chief Executive
Officer and Chief Financial Officer identified a number of significant
deficiencies in our internal control over financial reporting as of December 31,
2008.  These significant deficiencies included:





·
            A
      lack of sufficient resources and an insufficient level of monitoring and
      oversight, which restricts our ability to gather, analyze and report
      information relative to the financial statement assertions in a timely
      manner; and





·
            A
      lack of sufficient resources and an insufficient level of monitoring and
      oversight, which restricts our ability to gather, analyze and report
      information relative to the financial statement assertions in a timely
      manner; and





As a
result of the deficiencies described above, we have concluded that, as of March
31, 2009, our internal control over financial reporting was not
effective.




Remediation
of Significant Deficiencies




We intend
to take action to hire additional staff, implement stronger financial reporting
systems and software and develop adequate policies and procedures with the
expanded staff to ensure all noted significant deficiencies are addressed and
resolved.  However, due to our cash flow constraints, the timing of
implementing the changes has not yet been determined.




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Notwithstanding
the significant deficiencies described above, our management, including our
Chief Executive Officer and Chief Financial Officer, believes that the financial
statements included in this Report fairly present in all material respects our
financial condition, results of operations and cash flows for the periods
presented.




Change
in Internal Control over Financial Reporting




During
the quarter ended March 31, 2009, there were no changes in our internal controls
that have materially affected or are reasonably likely to have materially
affected our internal controls over financial reporting.





Our
management, including the Chief Executive Officer and Chief Financial Officer,
does not expect that our disclosure controls and procedures or our internal
control over financial reporting will prevent all error and all
fraud.  A control system, no matter how well designed and operated,
can provide only reasonable, not absolute, assurance that the objectives of the
control system are met.  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.




Part II.  Other Information




Item 1.Legal
Proceedings.




We are
not aware of any pending or threatened litigation against us that we expect will
have a material adverse effect on our business, financial condition, liquidity,
or operating results.  However, legal claims are inherently uncertain
and we cannot assure you that we will not be adversely affected in the future by
legal proceedings.




Item 1A.  Risk Factors




There has
been no material changes to the risk factors disclosed in our Report on Form
10-K for the year ended December 31, 2008.




Item 2.  Unregistered Sales of Equity Securities and Use of
Proceeds




In April
2009, we issued 250,000 shares of Common Stock in connection with the conversion
of a convertible note in the principal amount of $500,000.  We relied
upon the exemption provided by Section 4(2) of the Securities Act of 1933, as
amended, in connection with making such issuance.




In April
2009, we issued options to purchase 5,075,000 shares of Common Stock to
employees and a consultant.  Of these options, options with respect to
3,275,000 shares have an exercise price of $0.12 per share and options with
respect to 1,800,000 shares have an exercise price of $0.13 per
share.  We relied upon the exemption provided by Section 4(2) of the
Securities Act of 1933 in connection with this issuance.




Item 3.  Defaults upon Senior Securities




None




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Item 4.  Submission of Matters To A Vote Of Security
Holders




None




Item 5.  Other Information




None




Item 6.  Exhibits




Exhibit
            Description of
      Exhibit31.1
            Certification
      of Principal Executive Officer Pursuant to Exchange Act Rule
      13A-14(A)/15D-14(A) as Adopted Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002




31.2
            Certification
      of Principal Financial Officer Pursuant to Exchange Act Rule
      13A-14(A)/15D-14(A) as Adopted Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002




32.1
            Certification
      of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as
      Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002




32.2
            Certification
      of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as
      Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002










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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




Defense Solutions Holdings,
      Inc.Dated:
      May 19, 2009
            By:
            /s/ Timothy
      D. RinggoldName:
      Timothy D. RinggoldTitle:
      Chief Executive Officer




Dated:
      May 19, 2009
              By:
              /s/
      David DiFeliceName:
      David DiFeliceTitle:
      Chief Financial Officer