Forward-Looking Information

You should read the following discussion and analysis together with the audited 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 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% 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. Recently, we have been exploring opportunities to provide products and services necessary to rebuild the Iraqi infrastructure as well as other commodities for which there is a demonstrated demand. In addition, we conduct program management, business development, and strategic studies in the Defense and Homeland Security markets and have recently been engaged in discussions with representatives of the Iraqi State Oil Marketing Organization to obtain the right to purchase Iraqi oil for resale to refineries; however, no assurance can be given that we will be successful in entering into material agreements with respect to the oil and other opportunities that we are pursuing.

We achieved revenues for the six months ended June 30, 2009 of $1,088,100. This represents an increase of $779,860 over revenues for the six months ended June 30, 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

Six months ended June 30, 2009 compared to six months ended June 30, 2008

For the six months ended June 30, 2009, we reported revenues of $1,088,100 compared to $308,240 for the six months ended June 30, 2008, a 253% 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 six months ended June 30, 2009 increased to $2,147,968, or 197.4% of revenues, from $1,359,540, or 441.1% of revenues for the six months ended June 30, 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 six months ended June 30, 2009, were $132,269 compared to $107,536 during the six months ended June 30, 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 six months ended June 30, 2009 increased by 2.9% to $1,192,137, or 110% of revenues, from $1,158,836, or 376% of revenues, during the six months ended June 30, 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 June 30, 2009, we had limited liquid resources. Current liabilities were $4,436,692 and current assets were $306,397. The difference of $4,130,295 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.

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 additional capital through the issuance of securities in private transactions; however, no assurance can be given that we will be successful in raising additional capital No such securities will 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 six months ended June 30, 2009 was $315,038 compared to $600,938 for the six months ended June 30, 2008. The decrease in cash used is primarily attributable to the fact that $761,000 of deferred revenue was recognized during the six months ended June 30, 2008.

There was no cash used in investing activities during the six months ended June 30, 2009 compared to $7,850 used in investing activities during the six months ended June 30, 2008, which represented an advance to an employee.

Cash provided by financing activities decreased to $265,705 in the six months ended June 30, 2009 compared to $577,318 in the six months ended June 30, 2008, primarily as a result of the receipt of $882,158 in bank loans and lines of credit received, partially offset by $734,163 paid to bank loans and lines of credit, in the six months ended June 30, 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 June 30, 2009, the total cost of capitalized leases presented in the accompanying balance sheet amounted to $168,524 for computer and office equipment. 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 six months ended June 30, 2009 and 2008 was $95,798 and $50,730, respectively.

Future noncancellable minimum rental commitments for leases as of June 30, 2009 were as follows:

                     June 30,                         Operating Lease       Capital Leases

                       2010                          $          37,638     $         43,664
                       2011                                     70,175               22,991

                      Total                                    107,813               66,655

Less - Amount representing interest                                                  (5,453 )

Present value of net minimum lease payments                                          61,202

Less - Current portion                                                              (38,999 )

Capital lease obligations, less current portion                            $         22,202

We have bank lines of credit, third-party short-term debt, and related party notes and loans. As of June 30, 2009, short-term and long-term debt consisted of the following:

                                                                       2009

Lines of credit with Banks, monthly payments of
interest only; interest ranging from prime - 0.75%
to prime + 8%; due on demand; generally
personally guaranteed by officers and Directors, or
collateralized by personal residential real estate of Directors.     $  773,788

Short-term promissory notes with unrelated parties;
12% interest; principal and interest due on 10/31/09;
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.                 1,010,000

Convertible note - 6% interest; convertible into 250,000
shares of common stock; due October 31, 2008, unsecured;
  extended to April 23, 2009.                                                 -

Short-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.                                                              40,000

Convertible notes with related parties; 8% interest; convertible
at $0.15 per share of common stock                                       88,800

Loans from related parties; non-interest bearing;
no terms for repayment; unsecured.                                      135,637

Capital lease obligations, secured.                                      61,202

Total                                                                 2,109,427

Less - Current portion                                              (2,087,225)

Long-term portion                                                $       22,202

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 June 30, 2009, 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 June 30, 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 $.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 ofJune 30, 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. (See Note 4 for additional information).

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 June 30, 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.

Due to cash flow constraints, the Company terminated the employment of 8 employees during the three months ended June 30, 2009. These former employees are owed an aggregate of $467,000 in back pay and deferred compensation and the terminations triggered an obligation to pay an aggregate of $425,000 in severance to the former employees. The Company has been in negotiations with the employees with respect to an arrangement which would result in the grant of options in lieu of all amounts owed to the employees, and an extension of the period during which options held by the employees at the time of their termination may be exercised. No assurance can be given that the Company will be successful in reaching an agreement with the former employees.