UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

[X]	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended February 28, 2013
[  ]	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from __________ to __________
	Commission File Number:  333-177518

 

IDS Solar Technologies Inc.

(Exact name of registrant as specified in its charter)

 

Nevada	45-2758994
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
533 Birch Street, Lake Elsinore, CA 92530
(Address of principal executive offices)
(951) 674-1554
(Registrant’s telephone number)
_______________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)

 

Indicated by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days [X] Yes [ ] No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

[ ] Large accelerated filer [ ] Non-accelerated filer

[ ] Accelerated filer [X] Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No

 

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 32,375,364 common shares as of April 11, 2013.

 

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 (§ 229.405 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 [  ] No [X]

 

	TABLE OF CONTENTS	Page
PART I – FINANCIAL INFORMATION
Item 1:	Financial Statements	3
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	7
Item 4:	Controls and Procedures	7
PART II – OTHER INFORMATION
Item 1:	Legal Proceedings	8
Item 1A:	Risk Factors	8
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	8
Item 3:	Defaults Upon Senior Securities	8
Item 4:	Mine Safety Disclosures	8
Item 5:	Other Information	8
Item 6:	Exhibits	8

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Our financial statements included in this Form 10-Q are as follows:

 

F-1	Balance Sheets as of February 28, 2013 and August 31, 2012 (unaudited)
F-2	Statements of Operations for the three and six months ended February 28, 2013 and February 29, 2012 (unaudited)
F-3	Statements of Cash Flows for the six months ended February 28, 2013 and February 29, 2012 (unaudited)
F-4	Notes to Financial Statements

 

These unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended February 28, 2013 are not necessarily indicative of the results that can be expected for the full year.

IDS SOLAR TECHNOLOGIES, INC.
(FORMERLY STEP OUT, INC.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS (unaudited)

 

		February 28, 2013				August 31, 2012
ASSETS
Current assets:
Cash		$	1,012			$	15,140
Prepaids			96,667				—
Inventory			31,269				—
Other receivable – related party			81,906				—
Total current assets			210,854				15,140
Property & equipment, net			—				10, 080
Total assets		$	210,854			$	25,220
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
LIABILITIES
Current Liabilities:
Accounts payable		$	135,905			$	—
Customer deposit			1,075				—
Accrued expenses			—				66,632
Accrued interest			2,721				110
Notes payable			147,117				—
Notes payable – related party			183,598				—
Advances from director			—				2,000
Loan from shareholder			—				100
Total Current Liabilities			470,416				68,842
Total liabilities			470,416				68,842
STOCKHOLDERS’ EQUITY (DEFICIT):
Preferred stock, 10,000,000 authorized, no shares issued and outstanding			—				—
Common stock, $.001 par value, 90,000,000 common shares authorized, 33,575,365 and 144,000,000 shares issued and outstanding, respectively			33,575				144,000
Additional paid in capital			330,775				(109,000	)
Treasury stock at par, 113,000,004 shares			113,000				—
Deficit accumulated during the development stage			(736,912	)			(78,622	)
Total stockholders’ equity (deficit)			(259,562	)			(43,622	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)		$	210,854			$	25,220

 

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

IDS SOLAR TECHNOLOGIES, INC.

(FORMERLY STEP OUT, INC.)

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS

(unaudited)

 

		For the Six Months Ended,								For the Three Months Ended
		February 28, 2013				February 29, 2012				February 28,  2013				February 29,  2012
Sales		$	16,830			$	—			$	12,830			$	—
Cost of sales			37,379				—				19,424				—
Gross margin			(20,549	)			—				(6,594	)			—
Expenses:
Professional fees			79,049				3,000				43,561				1,500
Salaries and wages			107,604				—				65,619				—
General and administrative			496,841				1,055				444,450				1,000
Total operating expenses			683,494				4,055				553,630				2,500
Net loss from operations		$	(704,043	)		$	(4,055	)		$	(560,224	)		$	(2,500	)
Other income and (expense):
Interest expense			(5,868	)			(50	)			(5,332	)			(30	)
Total other expense			(5,868	)			(50	)			(5,332	)			(30	)
Net loss		$	(709,911	)		$	(4,105	)		$	(565,556	)		$	(2,530	)
Loss per share
Basic		$	(0.09	)		$	(0.00	)		$	(0.05	)		$	(0.00	)
Weighted average shares outstanding basic			7,987,145				127,999,992				11,460,593				123,999,996

  

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

IDS SOLAR TECHNOLOGIES, INC.

(FORMERLY STEP OUT, INC.)

(A DEVELOPMENT STAGE COMPANY

STATEMENTS OF CASH FLOWS

(unaudited)

 

		For the Six Months Ended February 28, 2013				For the Six Months Ended February 29, 2012
Cash flows from operating activities:
Net loss		$	(709,911	)		$	(4,105	)
Adjustments to reconcile net loss to total cash used in operations:
Deemed dividend			51,621				—
Common stock for services			416,000				—
Treasury stock			20,351				—
Change in assets and liabilities:
Purchase of inventory			(31,269	)			—
Increase in prepaids			(96,667	)			—
Increase in note receivable – related party			(81,906	)			—
Increase in accounts payable			135,906				—
Increase in customer deposits			1,075				5,000
Increase (decrease) in accrued expenses			(64,021	)			(2,200	)
Net cash used in operating activities			(358,821	)			(1,305	)
Cash flows from investing activities
Property and equipment			10,080				(10,080	)
Net cash provided by (used) in investing activities			10,080				(10,080	)
Cash flows from financing activities:
Net assets acquired			—				—
Loan from shareholder			(2,100	)			2,000
Increase in note payable			147,117				—
Increase in note payable – related party			183,598				—
Proceeds from the sale of common stock			5,998				20,000
Net cash provided by financing activities			334,613				22,000
Net increase (decrease) in cash			(14,128	)			10,615
Cash at beginning of period			15,140				10,032
Cash at end of period		$	1,012			$	20,647
Cash paid for:
Interest		$	—			$	—
Taxes		$	—			$	—

 

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

 IDS SOLAR TECHNOLOGIES, INC.

(FORMERLY STEP OUT, INC.)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

February 28, 2013

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Nature of Business and Basis of Presentation

 

IDS Solar Technologies, Inc. (“IDS Solar” or the “Company”) is a GIIRS-rated “green” energy company that designs and develops solar and power management technologies and incorporates these into its manufacturing and distribution of solar-based portable power stations and other solar-based products for consumer, business, government, and disaster relief applications. We offer a line of portable solar power generators under our Company brand name, IDS Solar TechnologiesÔ.

 

The Company was formed as Step Out, Inc., a Nevada corporation on May 2, 2011. On July 18, 2011 Step Out issued 10,000,000 common shares to acquire 100% membership interest in SOI Nevada, LLC, a Nevada limited liability corporation from the sole shareholder of Step Out, Inc. The membership interest was acquired at book value from the shareholder. SOI Nevada, LLC became a wholly-owned subsidiary of Step Out, Inc.

 

On September 19, 2012, the Company entered into an Agreement of Conveyance, Transfer and Assignment of Membership Interests and Assumption of Obligations (the “Agreement”) with our sole officer and director, Sterling Hamilton. Pursuant to the Agreement, the Company transferred all membership interests in our operating subsidiary, SOI Nevada, LLC, to Mr. Hamilton. In exchange for this assignment of membership interests, Mr. Hamilton agreed to assume and cancel all liabilities relating to our former business of developing a chain of flotation tank therapy spas. In addition, Mr. Hamilton agreed to release all liability under a promissory note due and owing to him in the amount of $2,000.

 

As a result of the Agreement, the Company is no longer pursuing our former business plan. Under the direction of our newly appointed officers and directors, as set forth below, we intend to develop a business focused on the design, manufacturing, and distribution solar-based portable power stations and designs and develops soalr and power management technologies. Our new product line will be available initially in four models. As our plans and our new business develop, we will make appropriate additional disclosures.

 

Effective October 12, 2012, the board of directors approved a merger with our wholly-owned subsidiary, IDS Acquisition, Inc., pursuant to NRS 92A.180. IDS Acquisition was incorporated in the state of Nevada on September 25, 2012. As part of the merger with our wholly-owned subsidiary, our board authorized a change in the name of the company to “IDS Solar” Technologies, Inc.”

 

Effective February 7, 2013, the board of directors approved a one for twelve forward split of the Company’s common stock. All shares throughout this Form 10-Q have been retroactively restated to reflect the forward split.

 

The accompanying unaudited interim financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these financial statements have been included. Such adjustments consist of normal recurring adjustments. These interim financial statements should be read in conjunction with the audited financial statements of the Company for the fiscal period ended August 31, 2012.

 

Development stage company

 

The Company is deemed to have exited the development stage at February 28, 2013 as it has began planned principle operations.

 

 

 

Use of Estimates

 

The presentation 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 and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. There were no cash equivalents as of February 28, 2013. 

 

Basic Loss per Share

 

Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There were no such common stock equivalents outstanding as of February 28, 2013.

 

Concentrations of Credit Risk

 

The Company maintains its cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. The Company continually monitors its banking relationships and consequently has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.

 

Property and Equipment

 

Property and equipment are stated at cost.  Depreciation and amortization are provided utilizing the straight-line method over the related asset’s estimated useful life. As of February 28, 2013 no property or equipment has been pledged as collateral or is restricted in any way.

 

Maintenance and repairs are charged to expense as incurred; renewals and improvements that extend the useful life of the assets are capitalized.  Upon retirement or disposal, the asset cost and the related accumulated depreciation and amortization are eliminated from the respective accounts and a resulting gain or loss, if any, is included in the results of operations.

 

Inventories

 

Inventories are stated at the lower of cost or market. Cost is computed on a weighted-average basis, which approximates the first-in, first-out method; market is based upon estimated replacement costs.

 

 Fair Value of Financial Instruments

 

For certain of the Company’s non-derivative financial instruments, including cash and cash equivalents, receivables, accounts payable, and other accrued liabilities, the carrying amount approximates fair value due to the short-term maturities of these instruments. The estimated fair value of long-term debt is based primarily on borrowing rates currently available to the Company for similar debt issues. The fair value approximates the carrying value of long-term debt.

 

ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures.  The carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

 

· Level 1. Observable inputs such as quoted prices in active markets;

· Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly;

· Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

 

The following presents the gross value of assets and liabilities that were measured and recognized at fair value, as of February 28, 2013.

 

· Level 1: none

· Level 1: none

· Level 1: none

 

Stock-Based Compensation

 

We account for equity instruments issued in exchange for the receipt of goods or services from non-employees. Costs are measured at the fair market value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of the date on which there first exists a firm commitment for performance by the provider of goods or services or on the date performance is complete. The Company recognizes the fair value of the equity instruments issued that result in an asset or expense being recorded by the company, in the same period(s) and in the same manner, as if the Company has paid cash for the goods or services.

 

The Company accounts for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation - Stock Compensation which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values.  The fair value of the equity instrument is charged directly to compensation expense and credited to additional paid-in capital over the period during which services are rendered. There has been no stock-based compensation issued to employees.

 

The Company follows ASC Topic 505-50, formerly EITF 96-18, “Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling Goods and Services ,” for stock options and warrants issued to consultants and other non-employees.  In accordance with ASC Topic 505-50, these stock options and warrants issued as compensation for services provided to the Company are accounted for based upon the fair value of the services provided or the estimated fair market value of the option or warrant, whichever can be more clearly determined.   There has been no stock-based compensation issued to non-employees.

 

Income Taxes

 

Income taxes are computed using the asset and liability method of accounting. Under the asset and liability method, a deferred tax asset or liability is recognized for estimated future tax effects attributable to temporary differences and carryforwards. The measurement of deferred income tax assets is adjusted by a valuation allowance, if necessary, to recognize future tax benefits only to the extent, based on available evidence; it is more likely than not such benefits will be realized. The Company’s deferred tax assets were fully reserved at February 28, 2013.

 

The Company accounts for its income taxes using the Income Tax topic of the FASB ASC 740, which requires the recognition of deferred tax liabilities and assets for expected future tax consequences of events that have been included in the financial statements or tax returns.  Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. It is the Company’s policy to classify interest and penalties on income taxes as interest expense or penalties expense. As of February 28, 2013, there have been no interest or penalties incurred on income taxes.

 

Revenue Recognition

 

Sales of products and related costs of products sold are recognized when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the price is fixed or determinable, and (iv) collectability is reasonably assured. These terms are typically met upon the prepayment or invoicing, and shipment of products.

 

Reclassification

 

Certain reclassifications have been made to the August 31, 2012 financial information to conform to the presentation used in the (unaudited) February 28, 2013 financial information.

 

NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS

 

In October 2012, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2012-04, ''Technical Corrections and Improvements" in Accounting Standards Update No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations.

 

In August 2012, the FASB issued ASU 2012-03, "Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)" in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The adoption of ASU 2012-03 is not expected to have a material impact on our financial position or results of operations.

 

In May 2011, FASB issued Accounting Standards Update No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This ASU clarifies the board's intent of current guidance, modifies and changes certain guidance and principles, and adds additional disclosure requirements concerning the 3 levels of fair value measurements. Specific amendments are applied to FASB ASC 820-10-35, Subsequent Measurement and FASB ASC 820-10-50, Disclosures. This ASU is effective for interim and annual periods beginning after December 15, 2011.

 

In December 2010, the FASB Accounting Standards Update 2010-29 Business Combinations Topic 805, which requires a public entity to disclose pro forma information for business combinations that occurred in the current reporting period. The disclosures include pro forma revenue and earnings of the combined entity for the current reporting period as though the acquisition date for all business combinations that occurred during the year had been as of the beginning of the annual reporting period. If comparative financial statements are presented, the pro forma revenue and earnings of the combined entity for the comparable prior reporting period should be reported as though the acquisition date for all business combinations that occurred during the current year had been as of the beginning of the comparable prior annual reporting period. Effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010.

 

The Company has implemented all new accounting pronouncements that are in effect.  These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued, that might have a material impact on its financial position or results of operations.

 

NOTE 3 - INCOME TAXES

 

Net deferred tax assets consist of the following components as of: 

 

		February 28,				February 29,
		2013				2012
Deferred tax asset attributable to:
Net operating loss carryover		$	287,300			$	4,063
Deferred tax liabilities:
None			—				—
Less: valuation allowance			(287,300	)			(4,063	)
Net deferred tax asset		$	—			$	—

 

The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations due to the following:

 

		February 28,				February 29,
		2013				2012
Book income (loss)		$	(276,865	)		$	(1,601	)
Less: valuation allowance			276,865				1,601
Net provision for Federal income taxes		$	—			$	—

 

  

At February 28, 2013, IDS Solar had an unused net operating loss carryover of approximately $737,000 that is available to offset future taxable income; it begins to expire in 2031. Due to the change in ownership provisions of the Tax Reform Act of 1986, the use of net operating loss carry forwards for tax reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may be limited as to use in future years.

 

NOTE 4 – PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following:

 

		February 28, 2013				August 31, 2012
Property and equipment		$	—			$	10,080
Less: accumulated depreciation			—				—
Property and equipment, net		$	—			$	10,080

 

 

No depreciation expense was taken for the year ended August 31, 2012 or thereafter, as the asset acquired had not yet been placed into service. The asset as of August 31, 2012 was owned by the Company’s prior subsidiary, SOI Nevada, LLC, of which full ownership was transferred to the sole officer and director on September 19, 2012; therefore, the asset is no longer owned by the company.

NOTE 5 – NOTES PAYABLE

 

On September 30, 2012, the Company executed a promissory note with an individual for $1,900. The note bears interest at 10% and is due on or before December 29, 2012. This note was paid back in full during the quarter.

 

On October 12, 2012, the Company executed a promissory note with Argent Offset, LLC for $20,000. The note bears interest at 18% and is due on or before January 10, 2013. On February 27, 2013, a new promissory note was executed for $33,850. The note bears interest at 18% and is due August 26, 2013. In addition, the note included one warrant giving the holder the right to purchase 50,000 shares of common stock at a price of $0.20 per share for a period of three years. As required by ASC 470-20 the Company recorded a debt discount to additional paid in capital in the amount of $2,044 based on the discount to market available at the time of issuance. The discount is to be amortized over the life of the loan to interest expense. As of February 28, 2013, $11 was amortized to interest expense. The new note amends and replaces in its entirety the note dated October 12, 2012.

 

On December 3, 2012, the Company executed a promissory note with an individual for $125,000. The note bears interest at 5% and is due on or before November 30, 2013. The note also issued one warrant giving the holder the right to purchase 15,625 shares of common stock at a price of $2.00 per share for a period of five years. As required by ASC 470-20 the Company recorded a debt discount to additional paid in capital in the amount of $12,781 based on the discount to market available at the time of issuance. The discount is to be amortized over the life of the loan to interest expense. As of February 28, 2013, $3,081 was amortized to interest expense.

 

NOTE 6 – STOCK WARRANTS

 

A summary of the status of the Company’s outstanding stock and changes during the periods is presented below:

 

				Shares available to purchase with warrants				Weighted Average Price				Weighted Average Fair Value
	Outstanding, August 31, 2012				—			$	—			$	—
	Issued				65,625				0.63				0.23
	Exercised				—				—				—
	Forfeited				—				—				—
	Expired				—				—				—
	Outstanding, February 28, 2013				65,625			$	0.63			$	0.23
	Exercisable, February 28, 2013				65,625			$	0.63			$	0.23

 

Range of Exercise Prices				Number Outstanding at 2/28/13				Weighted Average Remaining Contractual Life				Weighted Average Exercise Price
	$0.20 - $2.00				65,625				3.5 years			$	0.63

 

NOTE 7 - RELATED PARTY TRANSACTION

 

During the period ended August 31, 2012 a Director made advances to the company totaling $2,000. These advances bear interest at 6% and were due October 4, 2013. Interest of $110 was accrued as of August 31, 2012.

 

On September 19, 2012, the Company entered into an Agreement of Conveyance, Transfer and Assignment of Membership Interests and Assumption of Obligations (the “Agreement”) with our former sole officer and director, Sterling Hamilton. Pursuant to the Agreement, the Company transferred all membership interests in our operating subsidiary, SOI Nevada, LLC, to Mr. Hamilton. In exchange for this assignment of membership interests, Mr. Hamilton agreed to assume and cancel all liabilities relating to our former business of developing a chain of flotation tank therapy spas. In addition, Mr. Hamilton agreed to release all liability under a promissory note due and owing to him in the amount of $2,000.

 

Also on September 19, 2012, Mr. Hamilton agreed to transfer 583,333 of his shares of common stock to a group of four purchasers for a total purchase price of $20,000. The source of the consideration paid to Mr. Hamilton was the existing funds of the purchasers. The sale of these shares was exempt from registration under Section 4(2) of the Securities Act. Also, in connection with the sale of these shares, Mr. Hamilton cancelled 9,416,667 of his shares and returned them to treasury.

 

During the quarter ended February 28, 2013, the Company’s CEO, Bruce Knoblich and the Company executed a promissory note for $183,598. The note bears interest at 5% and is due within one year. Accrued interest on the note as of February 28, 2013 is $1,135.

 

NOTE 8 - COMMON STOCK

 

The Company has 10,000,000 preferred shares authorized at par value of $0.001 per share.

 

The Company has 90,000,000 common shares authorized as a par value of $0.001 per share.

 

On July 18, 2011 Step Out issued 120,000,000 common shares to acquire 100% membership interest in SOI Nevada, LLC, a Nevada limited liability corporation from the sole shareholder of Step Out, Inc. The transaction was recorded at $15,000, the book value of the membership interests.

 

On February 25, 2012, the Company issued 24,000,000 common shares for cash of $20,000.

 

Also on September 19, 2012, Mr. Hamilton, the Company’s former CEO and Director, cancelled 113,000,004 of his shares and returned them to treasury. The shares have been recorded as treasury stock at par value.

 

On or about November 8, 2012, the Company issued 120,000 shares of common stock for services. The shares were valued using the closing stock price on the day of issuance of $0.208, for a total expense of $25,000.

 

On or about January 4, 2013, the Company issued 100,000 shares of common stock for consulting services. The shares were valued using the closing stock price on the day of issuance of $1.45, for a total expense of $145,000.

 

During the quarter ended February 28, 2013, the Company sold 55,368 shares of common stock for cash proceeds of $5,998.

 

On or about February 15, 2013, the Company issued 1,200,000 shares of common stock for advertising and investor relation services. The shares were valued using the closing stock price on the day of issuance of $0.205, for a total expense of $246,000. Of the total expense $96,667 has been booked to prepaid expenses and will be allocated over the remaining six month term of the contract.

 

Effective February 7, 2013, the board of directors approved a one for twelve forward split of the Company’s common stock. All shares throughout this Form 10-Q have been retroactively restated to reflect the forward split.

 

 

NOTE 9 - GOING CONCERN

 

As of February 28, 2013, the Company has a working capital deficit of $259,562, limited revenue and a deficit accumulated during the Development stage of $736,912. The financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Without realization of additional capital, it would be unlikely for the Company to continue as a going concern. The Company’s management plans on raising cash from public or private debt or equity financing, on an as needed basis and in the longer term, upon achieving profitable operations through its business activities.

  

NOTE 10 - SUBSEQUENT EVENTS

 

The Company has performed an evaluation of subsequent events in accordance with ASC Topic 855, noting no additional subsequent events other than those noted below.

 

Subsequent to February 28, 2013, the Company’s CEO loaned an additional $11,000 to the Company.

 

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

 

Forward-Looking Statements

 

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Company Overview

 

Our business focuses on the design and development of solar and power management technologies and incorporates these into its manufacturing and distribution of solar-based portable power stations and devices. Under an Exclusive License/Royalty Agreement with SP Innovations, Inc. (“SP”), we hold the exclusive right to manufacture, import, export, use, and sell a line of portable, solar-powered generators developed by SP. Under the License Agreement, we pay SP a royalty of five percent (5%) of our total wholesale price for all of the licensed products sold by us. We have begun production and sale of our first portable solar-based power generation station, the Solar Survivor. We are currently marketing the Solar Survivor model as a clean, portable electrical energy solution for every American household.

 

On February 19, 2013, we hired Randy Sindelar as Vice President of Research and Development with the expressed purpose of furthering our manufacturing quality control systems and processes and to boost our technology development. Mr. Sindelar is spearheading our lithium iron phosphate and advanced battery management system technologies.

 

We received our first order from our distributor, American Portable Power, on October 12, 2012, which totaled $85,185.00 with a deposit of $12,500.00 paid. The first delivery of this order was made on January 15, 2013. We are currently developing an online presence for both consumer and commercial sales with twelve (12) online businesses currently displaying our product line. We are also developing a sales and distribution network through contracted dealers and independent area managers nationwide to support our planned sales growth vertically and horizontally.

 

Products

 

We began production of our first product this quarter and have scheduled the production of our next three (3) products in the third quarter of FYE 2013. Each product model features our innovative storage and charge design with the overall product line marketed as the economical, sturdy and reliable choice for portable solar energy as part of an emergency/disaster preparedness plan or for those seeking an off-grid, odorless, noiseless and non-flammable source of power.

 

The Solar Survivor was the first model released and it became available for delivery on January 15, 2013. The Solar Survivor is a rugged solar power electrical generator housed in a durable hard plastic Styleworks container manufactured by Rubbermaid. It features a 50AH battery from Universal Power Supply, one of America’s premier battery manufacturers. The Solar Survivor model features a 45W monocrystaline solar panel, a charge controller and a Windsor 1600 Watt Inverter with three (3) AC receptacles, a USB connection, and a remote control switch. The Solar Survivor configuration provides an efficient source of solar power collection and generation at a suggested retail price of $999.00.

 

The next three (3) models we plan to release are the Solar Tote, the Solar Rescue and the Solar Kart 420. The suggested retail price for these three models is not determined at this time. The Solar Tote features a customized metallic case with two (2) Inline wheels and telescoping handle that provide users extra easy mobility. The Solar Tote is powered by a 50AH battery from Universal Power Supply with solar power provided by a 45W monocrystaline solar panel, a Windsor 1600 Watt Inverter with three (3) AC receptacles, a USB connection, and a remote control switch.

 

The Solar Rescue is our premier model that has a water resistant customized Pelican Rescue resin case with telescoping handles and two (2) Inline wheels featuring a foldable 45W solar power film panel, a SunSaver Charge Controller with LVD, a 75AH battery from Universal Power Supply, a Windsor 1600 Watt Inverter with three (3) AC receptacles, a USB connection, and a remote control switch.

 

We are developing and testing our first model targeted for commercial use, the “Solar Kart 420”. The formal name of the unit will be determined in the near future. This portable unit is targeted to feature a Lithium Iron Phosphate battery system complete with a proprietary battery management. This model is scheduled to begin production sometime early this summer 2013 with distribution available shortly thereafter.

 

Suppliers and Manufacturers

 

We currently manufacture our product line through a contract manufacturer, Installing Dealer Supply, Inc. Installing Dealer Supply, Inc. is a Southern California business specializing in componentized manufacturing and assembling for the past 23 years. It provides use with procurement, assembly and inventory services for manufacturing and finished goods for our entire product line on a per piece cost-plus basis. With staff on-hand at the point of assembly, we work with our contract manufacturer to maintain a high product quality and assure continuity and consistency while managing and maintaining lower production costs. We pay our contract manufacturer monthly based on production.

 

Expansion and Development Plan

 

We have contracted with American Portable Power, an ID Brandz, Inc. company based in Santa Ana, CA as our distributor nationwide. Our strategy includes building an independent dealer base initially throughout the U.S. by attaining a dealer in every state within the third quarter of FYE 2013. To that end, we contracted with Global Results Marketing (GRM) on January 30, 2013 to lead this effort with five (5) dealers having been signed as of the close of its second quarter FYE 2013. Subsequently, we have signed 10 more dealers as of the filing of this report. We are also targeting niche markets that we believe will be readily receptive to our product line, including the off-road vehicle community and hiking, camping, boating and other recreational activities where a clean, quiet and portable electrical energy supply is needed in a remote or off-grid location. Other potential marketplaces include first responders and others that provide disaster relief or emergency services. Many consumers and businesses cannot utilize fossil-fuel based solutions. With our product line, they will have a choice for safe and “green” electricity from solar power generation.

 

Results of Operations for the three and six months ended February 28, 2013 and February 29, 2012.

 

During the three months ended February 28, 2013, we earned $12,830 in revenue and incurred $19,424 in costs of sales. Our total operating expenses for the three (3) months ended February 28, 2013 were $553,630, consisting of general and administrative expenses of $444,450, salaries and wages of $65,619, and professional fees of $43,561. We incurred interest expense of $5,332 during the quarter. Our net loss for the three months ended February 28, 2013 was therefore $565,556. By comparison, during the three months ended February 29, 2012, we earned no revenue and incurred operating expenses of $2,500 and interest expense of $30. Our net loss for the three months ended February 29, 2012 was $2,530.

 

During the six months ended February 28, 2013, we earned $16,830 in revenue and incurred $37,379 in costs of sales. Our total operating expenses for the six months ended February 28, 2013 were $683,494, consisting of general and administrative expenses of $496,841, salaries and wages of $107,604, and professional fees of $79,049. We incurred interest expense of $5,868 during the six month period. Our net loss for the six months ended February 28, 2013 was therefore $709,911. By comparison, during the six months ended February 29, 2012, we earned no revenue and incurred operating expenses of $4,055 and interest expense of $50. Our net loss for the six months ended February 29, 2012 was $4,105.

As we go forward with the development of our portable solar generator business during the current fiscal year, we expect that our operating expenses will continue to increase significantly and that we will also begin to generate increasing revenues from the sale of our products.

 

Liquidity and Capital Resources

 

As of February 28, 2013, we had total current assets of $210,854 consisting of cash in the amount of $1,012, prepaid expenses of $96,667, inventory of 31,269, and a related party receivable of $81,906. Our total current liabilities as of February 28, 2013 were $470,416, and consisted of accounts payable of $135,905, customer deposits of $1,075, accrued interest of $2,721, notes payable of $147,117, and notes payable to related parties of $183,598. Our working capital deficit as of February 28, 2013 was therefore $259,562. During the six months ended February 28, 2013, we used cash of $358,821 in operations and were provided with cash of $334,613 from financing activities.

 

We have received short term loan financing for the launch of our new portable solar power generator business under various promissory notes. Our promissory note obligations currently issued and outstanding are as follows:

 

1.  We owe the principal sum of $33,850 to Argent Offset, LLC under the terms of a Promissory Note dated February 27, 2013. This note bears interest at an annual rate of eighteen percent (18%), with interest payable monthly. All principal and interest is due August 26, 2013. The note is convertible to shares of our common stock at a price of $0.11 per share

 

2.  We owe the principal sum of $125,000 to Steven J. Caspi under the terms of a Convertible Promissory Note and Security Agreement (the “Note”) issued November 19, 2012. The Note bears interest at an annual rate of five percent (5%), with all principal and interest being due on or before November 30, 2013. The Note is convertible to shares of our common stock, in whole or in part at the option of Mr. Caspi, at a conversion price of $1.25 per share. The conversion rights under the Note are subject to a limitation under which Mr. Caspi may not, upon any conversion of the Note, own more that 4.99% of our issued and outstanding common stock. The amounts due under the Note are secured by a security interest in substantially all of our assets.

 

3. Through February 28, 2013, we have borrowed the total sum of $183,597.72 from our President and CEO, Bruce R. Knoblich. Our obligations regarding this loan are currently memorialized in a Promissory Note dated February 28, 2013. The note bears interest at an annual rate of five percent (5%), with all principal and interest due on or before August 27, 2013.

 

We will require significant additional financing in order to move forward effectively with the development of our new portable solar power generator business. We intend to fund the development of our new business through debt and/or equity financing arrangements. We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional financing will be available to us on acceptable terms, in amounts sufficient to fund our planned acquisitions and other activities, or at all.

 

Going Concern

 

As discussed in the notes to our financial statements, we have minimal revenue and an accumulated deficit during the development stage of $736,912.   This has raised substantial doubt for our auditors about our ability to continue as a going concern.  Without realization of additional capital, it would be unlikely for us to continue as a going concern.

 

Our activities to date have been supported by equity and debt financing.  Management continues to seek funding from its shareholders and other qualified investors to pursue its business plan.

 

Off Balance Sheet Arrangements

 

As of February 28, 2013, there were no off balance sheet arrangements.

Critical Accounting Policies

 

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Currently, we do not believe that any accounting policies fit this definition.

 

Recently Issued Accounting Pronouncements

 

We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 4. Controls and Procedures

 

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of February 28, 2013. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer, Bruce Knoblich, and Chief Financial Officer, Pamela McKeown. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of February 28, 2013, our disclosure controls and procedures are not effective. There have been no changes in our internal controls over financial reporting during the quarter ended February 28, 2013.

 

Management determined that the material weaknesses that resulted in controls being ineffective are primarily due to lack of resources and number of employees. Material weaknesses exist in the segregation of duties required for effective controls and various reconciliation and control procedures not regularly performed due to the lack of staff and resources.

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

Limitations on the Effectiveness of Internal Controls

 

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

 

Item 1A: Risk Factors

 

A smaller reporting company is not required to provide the information required by this Item.

 

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

 

None.

 

Item 3. Defaults upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

  

Exhibit Number	Description
10.1	Note issued to Argent Offset, LLC dated February 27, 2013
10.2	Note issued to Bruce R. Knoblich dated February 28, 2013
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101**	The following materials from the Company’s Annual Report on Form 10-K for the year ended February 28, 2013 formatted in Extensible Business Reporting Language (XBRL)

 

**Provided herein.

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.

 

	IDS Solar Technologies, Inc.
Date:	April 15, 2013
By:	/s/ Bruce Knoblich Bruce Knoblich
Title:	Chief Executive Officer and Director
Date:	April 15, 2013
By:	/s/ Pamela McKeown Pamela McKeown
Title:	Chief Financial Officer