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 November 30, 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 Industries, 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: 38,723,370 common shares as of January 9, 2014. 

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 [X] No [ ]

	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	8
Item 4:	Controls and Procedures	8
PART II - OTHER INFORMATION
Item 1:	Legal Proceedings	9
Item 1A:	Risk Factors	9
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	9
Item 3:	Defaults Upon Senior Securities	9
Item 4:	Mine Safety Disclosures	9
Item 5:	Other Information	9
Item 6:	Exhibits	9

 

PART I - FINANCIAL INFORMATION 

Item 1. Financial Statements 

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

TABLE OF CONTENTS

F-1	Balance Sheets as of November 30, 2013 and August 31, 2013
F-2	Statements of Operations for the Three Months ended November 30, 2013 and  2012
F-3	Statements of Cash Flows for the Three Months ended November 30, 2013 and  2012
F-4	Notes to Financial Statements

 

IDS INDUSTRIES, INC.

(FORMERLY IDS SOLAR TECHNOLOGIES, INC.)

BALANCE SHEETS

(Unaudited)

			November 30, 2013				August 31, 2013
ASSETS
Current Assets:
Cash		$	—			$	1,960
Accounts receivable, net of allowance of $4,950			4,950				4,950
Prepaids and other current assets			49,211				80,196
Inventory			32,682				32,682
Other receivable – related party			38,418				77,307
Interest receivable – related party			5,419				2,612
Total Assets		$	130,680			$	199,707
LIABILITIES AND STOCKHOLDERS’ DEFICIT
LIABILITIES:
Current Liabilities:
Cash overdraft		$	25,918			$	12,413
Accounts payable			195,782				159,596
Derivative liability			182,149				148,870
Accrued expenses			—				10,159
Accrued interest			31,482				19,990
Convertible notes payable, net of discount of $97,876 and $93,858, respectively			300,474				265,992
Notes payable – related party			295,348				290,098
Other notes payable			40,555				30,000
Total Current Liabilities			1,071,708				937,118
Total Liabilities			1,071,708				937,118
STOCKHOLDERS’ DEFICIT:
Preferred stock, par value $.001, 10,000,000 authorized, no shares issued and outstanding			—
Common stock, $.001 par value, 90,000,000 common shares authorized, 34,313,114 and 34,313,114  shares issued and outstanding, respectively			34,313				34,313
Additional paid in capital			639,889				639,889
Accumulated deficit			(1,615,230	)			(1,411,613	)
Total Stockholders’ Deficit			(941,028	)			(737,411	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT		$	130,680			$	199,707

 

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

 

IDS INDUSTRIES, INC.

(FORMERLY IDS SOLAR TECHNOLOGIES, INC.)

STATEMENTS OF OPERATIONS

(Unaudited)

 

		For the Three Months Ended November 30,				For the Three Months Ended November 30,
		2013				2012
Revenue		$	—			$	4,000
Cost of revenue			—				17,955
Gross margin			—				(13,955	)
Operating expenses:
Professional fees			25,494				35,488
Salaries and wages			85,733				41,985
Marketing and advertising			23,850				—
General and administrative			105,018				52,391
Total operating expenses			240,095				129,864
Loss from operations			(240,095	)			(143,819	)
Other income and (expense):
Amortization of debt discount			(81,482	)			—
Change in fair value of derivative liability			126,960				—
Interest expense			(11,807	)			(536	)
Interest income			2,807				—
Total other income (expense)			36,478				(536	)
Loss before provision for income taxes			(203,617	)			(144,355	)
Provision for income taxes			—				—
Net Loss		$	(203,617	)		$	(144,355	)
Loss per share:
Basic and diluted		$	(0.01	)		$	(0.00	)
Weighted average shares outstanding: basic  and diluted			34,313,114				54,622,416

 

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

 IDS INDUSTRIES, INC.

(FORMERLY IDS SOLAR TECHNOLOGIES, INC.)

STATEMENTS OF CASH FLOWS

(Unaudited)

		For the Three Months Ended November 30,				For the Three Months Ended November 30,
		2013				2012
Cash flows from operating activities:
Net loss		$	(203,617	)		$	(144,355	)
Adjustments to reconcile net loss to net cash used in operations:
Common stock for services							25,000
Deemed dividend							57,147
Change in fair value of derivatives			(126,960	)			—
Amortization of discounts			81,482				—
Derivative expense			74,738				—
Change in assets and liabilities:
Increase in accounts receivable			—				(4,000	)
Increase in inventory			—				(8,000	)
Decrease in prepaids and other current assets			33,485				—
Increase (decrease) in note receivable - related party			38,889				(26,679	)
Increase in interest receivable - related party			(2,807	)			—
Increase in accounts payable			49,692				43,792
Increase in customer deposits			—				12,500
Increase (decrease) in accrued expenses			1,333				(66,206	)
Net cash used in operating activities			(53,765	)			(110,801	)
Cash flows from investing activities
Property and equipment			—				10,080
Net cash provided by (used) in investing activities			—				10,080
Cash flows from financing activities:
Proceeds from convertible debt			35,000				—
Repayment of shareholder loan			—				(2,100	)
Increase in note payable - related party			5,250				51,800
Increase in other notes payable			11,555				21,900
Advances from officers			—				14,298
Net cash provided by financing activities			51,805				85,898
Net increase (decrease) in cash			(1,960	)			(14,823	)
Cash at beginning of period			1,960				15,140
Cash at end of period		$	—			$	317
Supplemental Cash Flow Information:
Cash paid for interest		$	—			$	—
Cash paid for taxes		$	—			$	—

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

IDS INDUSTRIES, INC.

(FORMERLY IDS SOLAR TECHNOLOGIES, INC.)

NOTES TO THE FINANCIAL STATEMENTS

November 30, 2013

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

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 also offer a line of ‘Stationary” Energy Storage systems for residential application as well as commercial and light industrial applications. Both the stationary and portable solar power generators will be under our Company brand name, Charge! Energy Storage.

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. 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 its 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.

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

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.

Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"). In the opinion of management, all adjustments necessary in order for the financial statements to be not misleading have been reflected herein. Operating results for the interim period ended November 30, 2013 are not necessarily indicative of the results that can be expected for the full year. The Company has adopted an August 31 year end.

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 November 30, 2013 and August 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 November 30, 2013 and August 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.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method; market value is based upon estimated replacement costs.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts for estimated losses that result from the failure or inability of our customers to make required payments. When determining the allowance, we consider the probability of recoverability of accounts receivable based on past experience. Accounts receivable may also be fully reserved for when specific collection issues are known to exist. The analysis of receivables is performed quarterly, and the allowances are adjusted accordingly.

Fair Value of Financial Instruments

For certain of the Company’s non-derivative financial instruments, including cash and cash equivalents, receivables, prepaids, inventory, accounts payable, accrued liabilities, and notes payable, 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 November 30, 2013.

		Level I				Level II				Level III				Fair Value
Derivative liability		$	—			$	182,149			$	—			$	182,149

 

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 equity based transactions with non-employees under the provisions of ASC Topic No. 505-50, “Equity-Based Payments to Non-Employees” (“Topic No. 505-50”). Topic No. 505-50 establishes that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The fair value of common stock issued for payments to non-employees is measured at the market price on the date of grant. The fair value of equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. In general, the Company recognizes an asset or expense in the same manner as if it was to pay cash for the goods or services instead of paying with or using the equity instrument. During the year ended August 31, 2013, the Company issued 3,157,750 shares of common stock valued at $467,448 to non-employees. As of November 30, 2013 a total of $428,724 has been expensed, and $38,724 remains in prepaid consulting.

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.

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 November 30 and August 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.

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.

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 2 – NOTE RECEIVABLE

On August 15, 2013, the Company executed a Note Receivable for $77,307 for funds that it had advanced to another company owned by the former CEO. The note bears interest at 8% and was to mature in ninety days. During the three months ended November 30, 2013, $38,889 was paid back on this loan. As of November 30, 2013, the note has accrued $5,419 in interest. The repayment terms on this note are currently being renegotiated.

NOTE 3 – PREPAIDS AND OTHER CURRENT ASSETS

Prepaids and other current assets consisted of the following at November 30, 2013:

		November 30, 2013				August 31, 2013
Prepaid consulting		$	38,725			$	64,824
Unamortized original issue discount			6,850				6,762
Deferred financing costs			3,636				8,610
Total prepaids and other current assets		$	49,211			$	80,196

 

NOTE 4 – NOTES PAYABLE

On October 12, 2012, the Company executed a promissory note with Argent Offset, LLC for $20,000. The note bears interest at 18% and was due on or before January 10, 2013. On February 27, 2013, a new convertible promissory note was executed for $33,850. The note bears interest at 18% compounded monthly and is due August 26, 2013. The new note amends and replaces in its entirety the note dated October 12, 2012. Pursuant to the terms of the note, it is convertible into shares of the Company’s common stock at the option of the holder at any time in whole or in part at a conversion rate of $0.11. On the commitment date, management evaluated the conversion feature with respect to the benefit of the holder and determined the value of the conversion feature to be $18,464. This amount has been recorded as a discount against the outstanding balance of the note. The discount was amortized to interest expense over the life of the debt using the effective interest method. Interest charged to operations relating to the amortization of the debt discount for the year ended August 31, 2013 amounted to $18,464. 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 valued the warrant and recorded a debt discount to additional paid in capital in the amount of $3,690 based on the discount to market available at the time of issuance. The discount was to be amortized over the life of the loan to interest expense. As of August 31, 2013, $3,690 has been amortized to interest expense. As of November 30, 2013, the note has accrued interest of $4,943. On November 26, 2013, an agreement of temporary forbearance was executed in which for a $1,000 fee the lender agreed to waive any default until December 15, 2013. The repayment terms on this note are currently being renegotiated.

On December 3, 2012, the Company executed a convertible promissory note with Steven J. Caspi (“Caspi”) for $125,000. The note bears interest at 5% and was due on or before November 30, 2013. Pursuant to the terms of the note, it is convertible into shares of the Company’s common stock at the option of the holder at any time in whole or in part at a conversion rate of $1.25. On the commitment date, management evaluated the conversion feature with respect to the benefit of the holder and determined the value of the conversion feature to be $60,000. This amount has been recorded as a discount against the outstanding balance of the note. The discount is being amortized to interest expense over the life of the debt using the effective interest method. 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 $16,455 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 November 30, 2013, $16,365 has been amortized to interest expense. As of November 30, 2013, this note is still outstanding and has accrued interest of $6,395. The note is shown net of a debt discount of $419 at November 30, 2013. This note is currently in default with the parties renegotiating the terms of repayment.

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. As of November 30, 2013 this note is still outstanding and has accrued interest of $1,816. The Company recorded a debt discount in the amount of $32,500 in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized an initial derivative liability of $49,939 based on the Black Scholes Merton pricing model.. As of November 30, 2013, $24,375 of the debt discount has been amortized to interest expense and the derivative liability was revalued at $35,600.

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. As of November 30, 2013 this note is still outstanding and has accrued interest of $815. The Company recorded a debt discount in the amount of $15,500 in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the interest method of accretion over the term of the note. Further, the Company recognized an initial derivative liability of $21,610 based on the Black Scholes Merton pricing model. As of November 30, 2013, $9,455 of the debt discount has been amortized to interest expense and the derivative liability was revalued at $17,286.

On June 3, 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. The note is convertible at a 49% discount any time during the period beginning 180 days following the date of the note. As of November 30, 2013 this note is still outstanding and has accrued interest of $1,282.

On June 12, 2013, the Company executed a promissory note for $15,000. The loan was due August 12, 2013. The note does not bear interest but its principal balance includes a loan fee of $5,000. Subsequent to November 30, 2013, the loan was extended with no specific terms of repayment.

On June 15, 2013, the Company executed a promissory note for $15,000 with a shareholder. The note bears interest at 10% and was due within ninety days. As of November 30, 2013 this note is still outstanding and has become past due. Accrued interest as of November 30, 2013 is $686. On October 15, 2013 the shareholder loaned the Company and additional $8,755. Accrued interest on this loan as of November 30, 2013 is $108.

On June 19, 2013, the Company executed a Convertible 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%). The note matures one year from the effective date of each payment, which are made at the sole discretion of JMJ. The Note is convertible into common stock in whole or in part at a variable conversion price equal to a 60% discount to the lowest trade price in the twenty five trading days prior to conversion.

On August 5, 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 May 7, 2014. The note is convertible at a 49% discount any time during the period beginning 180 days following the date of the note. As of November 30, 2013 this note is still outstanding and has accrued interest of $841.

The Company received its first payment from JMJ towards the loan of $55,000 on June 19, 2013. The Company recorded a debt discount in the amount of $60,500 (payment plus 10% original discount) in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $75,507 based on the Black Scholes Merton pricing model using the following attributes: .13% risk free rate, 134% volatility and a one year term to maturity.

As of November 30, 2013, $27,349 of the discount has been amortized to interest expense. In addition, the Company fair valued the derivative at $52,576 resulting in a gain on the change in fair value of the derivative. Accrued interest totaled $1,790 due to a onetime 12% interest charge incurred if the loan was not repaid within ninety days. The note is shown net of a debt discount of $33,151 at November 30, 2013.

The Company received its second payment from JMJ towards the loan of $25,000 on August 14, 2013. The Company recorded a debt discount in the amount of $27,500 (payment plus 10% original discount) in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $62,569 based on the Black Scholes Merton pricing model using the following attributes: .12% risk free rate, 144% volatility and a one year term to maturity.

As of November 30, 2013, $8,212 of the discount has been amortized to interest expense. In addition, the Company fair valued the derivative at $23,771 resulting in a gain on the change in fair value of the derivative. Accrued interest totaled $814 due to a onetime 12% interest charge incurred if the loan was not repaid within ninety days. The note is shown net of a debt discount of $19,288 at November 30, 2013.

The Company received its third payment from JMJ towards the loan of $25,000 on September 30, 2013. The Company recorded a debt discount in the amount of $27,500 (payment plus 10% original discount) in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $70,390 based on the Black Scholes Merton pricing model using the following attributes: .10% risk free rate, 261% volatility and a one year term to maturity.

As of November 30, 2013, $4,596 of the discount has been amortized to interest expense. In addition, the Company fair valued the derivative at $37,947 resulting in a gain on the change in fair value of the derivative. The note is shown net of a debt discount of $22,904 at November 30, 2013.

On September 16, 2013, the Company executed a convertible promissory note for $10,000 with Robert Hendrickson. The note bears interest at 10% per annum and is due on or before September 15, 2014. The Note is convertible into common stock in whole or in part at a variable conversion price equal to a 49% discount to the VWAP price for the ten trading days prior to conversion. The Company recorded a debt discount in the amount of $10,000 in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized an initial derivative liability of $18,300 based on the Black Scholes Merton pricing model. As of November 30, 2013, $2,055 of the debt discount has been amortized to interest expense and the derivative liability was revalued at $14,698. The note is shown net of a debt discount of $2,055 at November 30, 2013.

A summary of the status of the Company’s debt discounts, derivative liabilities and original issue discounts, and changes during the periods is presented below:

Debt Discount		August 31, 2013				Additions				Amortization				November 30, 2013
Asher – 3/20/13			—				32,500				(24,374	)			8,126
Asher – 4/4/13			—				15,500				(9,455	)			6,045
Caspi		$	19,480			$	—			$	(19,061	)		$	419
Hendrickson – 9/16/13			—				10,000				(2,055	)			7,945
JMJ – 6/19/13			48,234				—				(15,084	)			33,150
JMJ – 8/14/13			26,144				—				(6,856	)			19,288
JMJ – 9/30/13			—				27,500				(4,596	)			22,904
		$	93,858			$	85,500			$	(81,481	)		$	97,876

Derivative Liabilities		August 31, 2013				Initial Valuation				Revaluation on 11/30/2013				Change in fair value of Derivative
Asher – 3/20/13			—				49,939				35,600				(14,339	)
Asher – 4/4/13			—				21,610				17,286				(4,324	)
Hendrickson – 9/16/13			—				18,300				14,968				(3,332	)
JMJ – 6/19/13		$	102,245			$	—			$	52,576			$	(49,669	)
JMJ – 8/14/13			46,625				—				23,771				(22,854	)
JMJ – 9/30/13			—				70,390				37,948				(32,442	)
		$	148,870			$	160,239			$	182,149			$	(126,960	)

Original Issue Discount		August 31, 2013				Additions				Amortization				November 30, 2013
JMJ – 6/19/13		$	4,385			$	—			$	(1,371	)		$	3,014
JMJ – 8/14/13			2,377				—				(623	)			1,754
JMJ – 9/30/13			—				2,500				(418	)			2,082
		$	6,762			$	2,500			$	(2,412	)		$	6,850

 

NOTE 5 – 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, 2013				65,625			$	0.63			$	0.23
	Issued				—				—				—
	Exercised				—				—				—
	Forfeited				—				—				—
	Expired				—				—				—
	Outstanding, November 30, 2013				65,625			$	0.63			$	0.23
	Exercisable, November 30, 2013				65,625			$	0.63			$	0.23

Range of Exercise Prices				Number Outstanding at 11/30/13				Weighted Average Remaining Contractual Life				Weighted Average Exercise Price
	$0.20 - $2.00				65,625				2.7 years			$	0.63

 

NOTE 6 - RELATED PARTY TRANSACTIONS

On 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.

Notes Payable

On May 31, 2013, the Company’s former CEO, Bruce Knoblich and the Company executed a promissory note for $289,998. The note bears interest at 5% and was due November 30, 2013. As of November 30, 2013 the due date on the note was extended to February 28, 2014. Total accrued interest on the note is $11,184.

On June 15, 2013, the Company executed a promissory note for $15,000 with a shareholder. The note bears interest at 10% and was due within ninety days. As of November 30, 2013 this note is still outstanding and is now past due. Accrued interest as of November 30, 2013 is $686. On October 15, 2013 the shareholder loaned the Company and additional $8,755. Accrued interest on this loan as of November 30, 2013 is $108.

During the three months ended November 30, 2013, shareholders advanced the Company $5,300. The loan accrues interest at 8% per annum and is due on demand.

NOTE 7 - GOING CONCERN

As of November 30, 2013, the Company has a working capital deficit of $941,028, limited revenue and an accumulated deficit of $1,615,230. 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 8 - SUBSEQUENT EVENTS

Subsequent to November 30, 2013, the Company sold 1,333,333 shares of common stock to its CEO for cash proceeds of $20,000.

Subsequent to November 30, 2013, the Company converted $12,500 of the amount due to Asher Enterprises into 3,076,923 shares of common stock.

Effective December 1, 2013, Pamela McKeown resigned as our Chief Financial Officer. Going forward, our current President and CEO, Scott Plantinga, will also serve as our Chief Financial Officer. Ms. McKeown will continue to serve the company as Controller.

In accordance with ASC 855-10, the Company has analyzed its operations subsequent November 30, 2013 through the date these financial statements were issued and has determined that it does not have any material subsequent events to disclose in these financial statements other than the events described above.

 

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. We incorporate these technologies into the manufacturing and distribution of solar-based portable power stations and devices. We also offer a line of ‘Stationary” Energy Storage systems that will be adapted for residential solar applications.

We completed our due diligence on the option to acquire our long standing supplier, Installing Dealer Supply. We have decided to discontinue the pursuit of this as an option at this time. Going forward, we plan to market our products under the brand name Charge! Energy Storage. Our image is a renewable driven product developer creating energy storage solutions for portable, mobile and stationary applications for every American household. Our industry changing technology will be our lead in to expanding into Stationary Energy Storage for residential, commercial and light industrial based on the development of a patent-pending integrated battery management and control system. We believe this development will allow Charge! Energy Storage customers the ability to optimize electric utility savings through the use of power storage systems based on lithium iron based chemistries.

Randy Sindelar, our Vice President of Research and Development, continues to advance our Lithium Iron phosphate and advanced battery management system technologies. 

We have continued to develop a sales and distribution network through contracted dealers, energy system integrators, and OEMs nationwide to support our planned sales growth vertically and horizontally as our new Lithium Iron chemistry based units emerge. 

Products

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 safer source of power. 

Production on the Solar Survivor was placed on hold to focus on the re-tool to switch from the old technology of Lead Acid to our newly developed Lithium Iron product suite.

Our new generation of products has been redesigned to feature a customized metallic case with two inline wheels and telescoping handle that provide users extra easy mobility. It is powered by a 60A Lithium Iron battery and utilizes our own in-house developed, patent-pending Battery Management System (BMS) technology. 

Our next product, planned for release in the second quarter of calendar 2014, will initiate a supplier partnership and launch a private labeled product under the Charge! Energy Storage branding. It will be an established, award winning product embraced by government agencies that will be modified to suit our market application program. The new product will be a premier model that has a customized Pelican Rescue resin case with telescoping handles and two inline wheels featuring four receptacle outlets with AC or DC power capabilities which is capable of charging from solar, AC wall or 12V DC vehicle outlet. The power supply is offered in two different sizes of 1.25KWh or 2.5KWh of storage via a maintenance-free Lithium Iron battery system. It includes four AC receptacles and digital read out on battery system status / performance.

Suppliers and Manufacturers

 

Our exciting Private Label program has an established MOU with this domestic supplier however we are withholding any further information until a contract is completed.

 

IDS Industries has entered into an agreement utilizing the efforts of Cross Click Media Inc., a twenty seat call center to begin to promote the solar generator product suite coming from Charge! Energy Storage. The call center will be able to create specific portable product sales opportunities.

 

The IDS Industries patent pending Battery Management System technology (referenced as project Eclipse) is now completing the development stage and is going in to a bank of performance testing. Simultaneously, it is being quoted from multiple potential suppliers.

 

Expansion and Development Plan

Our portable products will be marketed through our developed distributor channels nationwide. Our strategy includes initially building an independent dealer base throughout the U.S. for which we already have over thirty-five dealers signed up.

This will be augmented with the recent partnership of a call center focused on targeted niche markets that we believe will be readily receptive to our product line, including the off-road vehicle community and hiking, RV, 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 Months ended November 30, 2013 compared to the Three Months Ended November 30, 2012.

Revenue

During the three months ended November 30, 2013, revenue was $0 compared to $4,000 for the three months ended November 30, 2012. There were no sales in the current quarter because we discontinued production of lead acid products. As a renewable focused-company it became apparent that lead acid technology did not align with our company mission. More compelling was that lead acid performance was inferior and not robust enough to support our requirements for portable generators. This also allowed us to focus all resources on expediting the transformation to Lithium Iron technologies.

Operating Expenses

Professional fees for the three months ended November 30, 2013 were $25,494, as compared to $35,488 for the three months ended November 30, 2012, a decrease of $9,994 or 28%.  Professional fees mainly consist of legal, auditor and other fees associated with the Company’s quarterly filings and year end audit. The decrease in the current period is attributed to a decrease in legal fees that were incurred.

Salaries and wage expense for the three months ended November 30, 2013 increased $43,748 or 104% to $85,733, as compared to $41,985 for the prior comparable period.  The increase in the current period is attributed to the hiring of management personnel.

Marketing and advertising expense for the three months ended November 30, 2013 was $23,850, as compared to $0 for the three months ended November 30, 2012. The increase is in conjunction with marketing our new products.

General and administrative expense for the three months ended November 30, 2013 increased $52,627 or 101% to $105,018, as compared to $52,391 for the prior comparable period.  The increase in the current period can largely be attributed to derivative expense that was incurred for the issuance of convertible debt.

Overall there was a $815,952 decrease in operating expenses from September 30, 2012 to September 30, 2013.

Other income and expense

During the three months ended November 30, 2013 we incurred $81,482 of expense for amortization of debt discount and had a gain on the change in fair value of our derivative liability, neither of which we had in the prior year. These new gains and losses are a result of the derivative accounting required for the issuance of convertible debt. We also had an increase in interest expense of $11,271 to $11,807 from $536 in the prior period and had an increase interest income of $2,807.

Net Loss

Overall we recorded a net loss of $203,617 for the three months ended November 30, 2013, as compared to a net loss of $144,355 for the three months ended November 30, 2012, an increase of $59,262.  

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 and that we will also begin to generate increasing revenues from the sale of our products.   

Liquidity and Capital Resources

As of November 30, 2013, we had an accumulated deficit of $1,615,230 and a working capital deficit of $941,028. For the three months ended November 30, 2013, net cash used in operating activities was $53,765 and we received $51,805 from financing activities.

We have received short term loan financing to fund operations under various promissory notes. Our promissory note obligations currently issued and outstanding are as follows:

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.

We owe the principle sum of $33,850 to Argent Offset, LLC. The note bears interest at 18% and was due on or before August 26, 2013. As of November 30, 2013, the note has accrued interest of $4,943. On November 26, 2013, an agreement of temporary forbearance was executed in which for a $1,000 fee the lender agreed to waive any default until December 15, 2013. This note is currently in default.

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. As of November 30, 2013, this note is still outstanding and has accrued interest of $6,395. This note is currently in default with the parties renegotiating the terms of repayment.

 

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 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. As of November 30, 2013, the total principle and interest due under these notes is $113,000 and $4,755, respectively.

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. As of November 30, 2013, the total principle and interest due under this notes is $115,500 and $3,155, respectively.

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 deficit of $1,615,230.   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 November 30, 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 November 30, 2013. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of November 30, 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 November 30, 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

Effective December 1, 2013, Pamela McKeown resigned as our Chief Financial Officer. Going forward, our current President and CEO, Scott Plantinga, will also serve as our Chief Financial Officer. Ms. McKeown will continue to serve the company as Controller.

 Item 6. Exhibits

Exhibit Number	Description
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 August 31, 2012 formatted in Extensible Business Reporting Language (XBRL)

 

 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:	January 16, 2014
By:	/s/ Scott Plantinga
	Scott Plantinga
Title:	Chief Executive Officer and Chief Financial Officer