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

IDS INDUSTRIES, INC.

(FORMERLY IDS SOLAR TECHNOLOGIES, INC.)

NOTES TO THE FINANCIAL STATEMENTS

May 31, 2013

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business and Basis of Presentation

IDS Industries, Inc. (“IDS” 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, development, manufacturing and distribution of renewable-energy based portable and mobile electrical generators and power stations under our own brand name, IDS Solar TechnologiesÔ.

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.”

On January 7, 2013 we launched our planned new product line on a limited basis; with the initial model, the Solar Survivor. The Company continues to design and development other models of electric generators and power stations based on customer input and feedback. As our plans and our new business develop, we will make appropriate additional disclosures.

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.  This event was reported in an 8K on February 4, 2013.

On February 11, 2013, we entered into a letter of agreement (the “Agreement”) with Emerging Growth, LLC (“Emerging”). Under the Agreement, Emerging has agreed to assist us as a consultant in the development of an online advertising program. The term of the Agreement commenced on February 15, 2013 and will run for one year. On August 15, 2013, either party may opt out of the final six months of the Agreement. In consideration for Emerging’s services, we have agreed to pay $4,500 immediately, $1,500 on March 1, 2013, and $3,000 per month on the 15 ^th of each month through December 15, 2013. In addition, we have agreed to issue 300,000 shares of common stock to Emerging. The foregoing is a summary of the material terms of the Agreement, which should be reviewed in full for additional information.   This agreement was reported in an 8K on February 27, 2013.

On February 15, 2013, we entered into a Consulting Agreement with Patrick Gaynes. Under the Consulting Agreement, Mr. Gaynes will assist and advise us as a consultant with regard to investor relations and other financial matters for a term of 180 days. Mr. Gaynes will be paid a monthly fee of $2,500 and will be issued 900,000 shares of common stock as compensation for his services. The foregoing is a summary of the material terms of the Consulting Agreement, which should be reviewed in full for additional information.   This agreement was reported in an 8K on February 27, 2013.

On February 19, 2013 Randy Sindelar was hired as Vice President for Research and Development. It was announced that Mr. Sindelar was an authority in battery management and advanced material charging and energy storage, recently having served as Senior Research Engineer at a leading developer of advanced energy storage solutions. The focus of the Company’s development efforts expanded to include battery management systems and charge control technology due to its critical function in delivering affordable commercialized renewable energy to home and business for both portable and fixed applications.

Effective April 16, 2013, the board of directors appointed Scott Plantinga to serve on our board of directors. Mr. Plantinga currently serves as the President and CEO of Installing Dealer Supply, Inc. a leading distributer of garage doors, gate automation, and access control equipment based in Lake Elsinore, California.  This appointment was reported in an 8K on May 24, 2013.

Effective May 29, 2013, the board of directors authorized a change in the name of the company to “IDS Industries, Inc.” The new name reflects the direction and focus of the Company more accurately given the full slate of products in advanced development including the battery management and energy storage fields. The name change will take effect on June 10, 2013 with the OTC securities markets and the trading symbol will remain IDST.

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 on February 28, 2013 as it began planned principle operations.

Use of Estimates

Te 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 May 31, 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 May 31, 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 May 31, 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:

The following presents the gross value of assets and liabilities that were measured and recognized at fair value, as of May 31, 2013.

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 carry-forwards. 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 May 31, 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 May 31, 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) May 31, 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 July 2012, the FASB issued ASU 2012-02, "Intangibles -Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment" in Accounting Standards Update No. 2012-02. This update amends ASU 2011-08, Intangibles -Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment and permits an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles, Goodwill and Other General Intangibles, other than Goodwill. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity's financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. The adoption of ASU 2012-02 is not expected to have a material impact on our financial position or results of operations. 

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 – PROPERTY AND EQUIPMENT 

Property and equipment consisted of the following:

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 4 – 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 has been paid back in full.

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 May 31, 2013, $1,050 has been 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 May 31, 2013, $6,303 has been amortized to interest expense.

On March 20, 2013, the Company executed a convertible promissory note for $32,500 with an investor. The note bears interest at 8% per annum and is due on or before December 26, 2013. The note is convertible at a 49% discount any time during the period beginning 180 days following the date of the note.

On April 4, 2013, the Company executed a convertible promissory note for $15,500 with an investor. The note bears interest at 8% per annum and is due on or before January 8, 2014. The note is convertible at a 49% discount any time during the period beginning 180 days following the date of the note.

NOTE 5 – STOCK WARRANTS

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

NOTE 6 - 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.

On or about May 8, 2013, the Company issued 99,996 shares of common stock to its CFO, for services. The shares were valued using the closing stock price on the day of issuance of $0.093, for a total expense of $9,250.

The Company announced that in early May 2013 the approval by the Board of Directors of an investment of up to $400,000 by CEO and Chairman, Bruce Knoblich. Mr. Knoblich provided $183,000 in funding on February 28, 2013 and demonstrated his confidence in the Company by providing an additional $100,000 on May 3, 2013. The proceeds were earmarked to fund the advancement of the Company's proprietary battery management system development, enable an increase in the portable renewable generator inventory, and supply to the Company general working capital.

During the period ended May 31, 2013, the Company’s CEO, Bruce Knoblich and the Company executed a promissory note for $289,998. The note bears interest at 5% and is due within one year. Accrued interest on the note as of May 31, 2013 is $3,914.

NOTE 7 - COMMON STOCK

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

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.

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, $24,167 has been booked to prepaid expenses and will be allocated over the remaining three month term of the contract.

On or about May 8, 2013, the Company issued 99,996 shares of common stock to its CFO for services. The shares were valued using the closing stock price on the day of issuance of $0.093, for a total expense of $9,250.

On or about May 15, 2013, the Company issued 337,754 shares of common stock for services. The shares were valued using the closing stock price on the day of issuance of $0.09, for a total expense of $30,398.

During the period ended May 31, 2013, the Company sold 155,368 shares of common stock for cash proceeds of $15,998. 

NOTE 8 - GOING CONCERN

As of May 31, 2013, the Company has a working capital deficit of $523,928, limited revenue and an accumulated deficit of $1,050,925. 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 9 - 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 May 31, 2013, the Company executed a convertible promissory note for $32,500 with an investor. The note bears interest at 8% per annum and is due on or before March 5, 2014.

On June 19, 2013, the Company entered into a Promissory Note (the “Note”) with JMJ Financial (“JMJ”). The nominal principal sum of the Note is $300,000, with an original issue discount of ten percent (10%). Upon closing, JMJ will loan the Company $55,000 under the Note, with any additional advances up to the total principal sum to be made in the future and at the sole discretion of JMJ.

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. We have also begun development of an intregrated battery management and charge controller system for the optimization of electric power storage systems especially those that are lithium chemistry based.

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 the Company’s 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 were developing an online presence for both consumer and commercial sales with twelve (12) online businesses displaying our product line and have discovered that our sales efforts are better concentrated with a focus on the wholesale, commercial and government marketplaces. We are also developing a sales and distribution network through contracted dealers, energy system integrators, and OEMs nationwide to support our planned sales growth vertically and horizontally.

Products

We began production of our first (1) 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 became available for delivery on January 15, 2013. The Solar Survivor is a rugged solar power electrical generator originally housed in a durable hard plastic Styleworks container manufactured by Rubbermaid. The Solar Survivor has been redesigned to feature a customized metallic case with two (2) Inline wheels and telescoping handle that provide users extra easy mobility. The Solar Survivor is powered by a 50AH battery from Universal Power Supply, one of America’s premier battery manufacturers, with 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 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 planned to release were the Solar Tote, the Solar Rescue and the Solar Kart 420. We have discontinued the pursuit of the Solar Tote and have integrated some of its features into the Solar Survivor. The suggested retail price for the other two (2) models is not determined at this time.

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 some time early 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 have contracted with Global Results Marketing (GRM) on January 30, 2013 to lead this effort with over thirty-five (35) dealers having been signed as of the close of its third quarter FYE 2013. 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 nine months ended May 31, 2013 and May 31, 2012.

During the three months ended May 31, 2013, we earned $17,899 in revenue and incurred $26,772 in costs of sales. Our total operating expenses for the three (3) months ended May 31, 2013 were $288,891, consisting of general and administrative expenses of $194,506, salaries and wages of $77,331, and professional fees of $17,054. We incurred interest expense of $9,847 and generated $50 of other income during the quarter. Our net loss for the three months ended May 31, 2013 was therefore $307,561. By comparison, during the three months ended May 31, 2012, we earned no revenue and incurred operating expenses of $2,415 and interest expense of $30. Our net loss for the three months ended May 31, 2012 was $2,445. 

During the nine months ended May 31, 2013, we earned $34,729 in revenue and incurred $64,151 in costs of sales. Our total operating expenses for the nine months ended May 31, 2013 were $972,385, consisting of general and administrative expenses of $691,347, salaries and wages of $184,935, and professional fees of $96,103. We incurred interest expense of $15,715 and generated $50 of other income during the nine month period. Our net loss for the nine months ended May 31, 2013 was therefore $1,017,472. By comparison, during the nine months ended May 31, 2012, we earned no revenue and incurred operating expenses of $6,415 and interest expense of $80. Our net loss for the nine months ended May 31, 2012 was $6,550. 

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 May 31, 2013, we had total current assets of $187,689 consisting of cash in the amount of $16,724, prepaid expenses of $24,167, inventory of 30,023, accounts receivable of $12,004 and a related party receivable of $104,771. Our total current liabilities as of May 31, 2013 were $705,165, and consisted of accounts payable of $174,358, accrued interest of $8,306, notes payable of $232,403, and notes payable to related parties of $290,098. Our working capital deficit as of May 31, 2013 was therefore $517,476. During the nine months ended May 31, 2013, we used net cash of $544,895 in operations and were provided with cash of $536,399 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.

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 May 31, 2013, we have borrowed the total sum of $289,997.72 from our President and CEO, Bruce R. Knoblich. Our obligations regarding this loan are currently memorialized in a Promissory Note dated May 31, 2013. The note bears interest at an annual rate of five percent (5%), with all principal and interest due on or before November 30, 2013.

4. We have received financing under a series of Convertible Promissory Notes (the “Notes”) issued to Asher Enterprises, Inc. (“Asher”). The Notes bear interest at an annual rate of 8%, with principal and interest coming due approximately nine (9) months from the respective dates of issue. The Notes may be converted in whole or in part, at the option of the holder, to shares of our common stock, par value $0.001, at any time following 180 days after the issuance dates of the Notes. The conversion price under the Note is 51% of the Market Price of our common stock on the conversion dates. For purposes of the Notes, “Market Price” is defined as the average of the 3 lowest closing prices for our common stock on the 30 trading days immediately preceding the conversion dates. The number of shares issuable upon conversion is limited so that the Holder’s total beneficial ownership of our common stock may not exceed 9.99% of the total issued and outstanding shares. This condition may be waived at the option of the holder upon not less than 61 days notice.

Upon conversion of the Notes in whole or in part, we will be obligated to deliver the conversion stock to the holder within 3 business days of our receipt of notice of conversion. Failure to timely deliver conversion stock will cause us to incur daily penalties. The conversion price will be subject to adjustment in the event of certain dilutive issuances of securities, distributions of stock or assets to shareholders, mergers, consolidations, and certain other events. Pre-payment of the Notes will result in certain penalties depending on the time of pre-payment, and will not be allowed after 180 days.

The amounts and respective due dates of the Notes are as follows:

                5. On June 19, 2013, we entered into a Promissory Note (the “Note”) with JMJ Financial (“JMJ”). The nominal principal sum of the Note is $300,000, with an original issue discount of ten percent (10%). Upon closing, JMJ will loan us the sum of $55,000 under the Note, with any additional advances up to the total principal sum to be made in the future and at the sole discretion of JMJ. All unpaid principal and interest due under the Note must be paid within one (1) year of the effective date of each advance made by JMJ under the Note. If we repay the Note in full on or before ninety (90) days after the effective date, no interest will be due. If we do not repay the Note in full on or before ninety (90) days after the effective date, a one-time interest charge of twelve percent (12%) will be added to the principal balance of the Note. We may also pre-pay the Note between 90 and 140 days after the effective date, but any pre-payment during this period must be in an amount equal to 150% of the principal amount being re-paid, plus any unpaid interest and fees due at that time. The Note may be converted in whole or in part, at the option of the holder, to shares of our common stock, par value $0.001. The conversion price under the Note is 60% of the lowest trading price for our common stock in the twenty-five (25) trading days prior to the conversion. In the event that conversion shares are not issuable to the holder by DWAC, an additional 10% discount will apply. The number of shares issuable upon conversion is limited so that the holder’s total beneficial ownership of our common stock may not exceed 4.99% of the total issued and outstanding shares. Upon conversion of the Note in whole or in part, we will be obligated to deliver the conversion stock to the holder within 3 business days of our receipt of notice of conversion. Failure to timely deliver conversion stock will cause us to incur daily penalties.

We will require significant additional financing in order to move forward effectively with the development of our new portable solar power generator business and our battery management and charge controller products line. 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 of $1,044,473.   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 May 31, 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 May 31, 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 May 31, 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 May 31, 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

Through May 31, 2013, we have borrowed the total sum of $289,997.72 from our President and CEO, Bruce R. Knoblich. Our obligations regarding this loan are currently memorialized in a Promissory Note dated May 31, 2013, which supercedes and replaces all prior promissory notes issued to Mr. Knoblich. The note bears interest at an annual rate of five percent (5%), with all principal and interest due on or before November 30, 2013.

Item 6. Exhibits

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.