Item 1. Business
Company Overview
We were incorporated as Step Out, Inc. on May 2, 2011 in the State of Nevada for the purpose of developing a chain of flotation tank therapy spas. On September 19, 2012, we 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, we 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, we are no longer pursuing our former business plan. Under the direction of new management, we intend to develop a business focused on the design, manufacturing, and distribution solar-based portable power stations. On November 8, 2012, we entered into an Exclusive License / Royalty Agreement (the “Agreement”) with SP Innovations, Inc. (“SP”). Under the Agreement, we have been granted the exclusive right to manufacture, import, use, and sell a line of portable, solar-powered generators developed by SP. In exchange for the license, we have committed to pay SP a royalty of five percent (5%) of our total wholesale price for all of the licensed products sold by us. We are required to keep books of account regarding sales of the licensed products and must account and render payment to SP on a monthly basis. In addition, a minimum fee of $35,000 must be paid to SP in series of payments to be made over the next 90 days. The initial term of the Agreement is two years, and it may be renewed in successive two year terms at our option.
As additional consideration to SP under the Agreement, we have agreed to issue SP ten thousand shares of our common stock. Also, on the anniversary of the Agreement, SP will be entitled to receive warrants to purchase our common stock at $1.75 per share, exercisable for three years. The number of warrants issued to SP will be equal to 25,000 warrants for each $1,000,000 in gross revenues generated from sales of the licensed products.
As a result of the Agreement with SP, we are now preparing to produce and soon release the Solar Survivor, our first portable solar-based power generation station. Management expects that the Solar Survivor model will be available soon for purchase and will begin to ship by the beginning of 2013. We intend to market the Solar Survivor model as a clean, portable electrical energy solution for every American household.
As our plans and our new business develop, we will make appropriate additional disclosures.
Item 2.
Item 2. Properties
We do not currently own or lease any real property.
Item 3.
Item 3. 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 4.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5.
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is quoted under the symbol “IDST” on the OTCBB operated by the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the OTCQB operated by OTC Markets Group, Inc. Few market makers continue to participate in the OTCBB system because of high fees charged by FINRA. Consequently, market makers that once quoted our shares on the OTCBB system may no longer be posting a quotation for our shares. As of the date of this report, however, our shares are quoted by several market makers on the OTCQB. The criteria for listing on either the OTCBB or OTCQB are similar and include that we remain current in our SEC reporting. Our reporting is presently current and, since inception, we have filed our SEC reports on time.
A trading market for our securities did not begin to develop until after the fiscal year ended August 31, 2012.
The following tables set forth the range of high and low prices for our common stock for the each of the periods indicated as reported by the OTCQB. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
As of November 26, 2012, the last trading price of our common stock was $2.50 per share.
Penny Stock
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.
Holders of Our Common Stock
As of November 27, 2012, we had 2,583,333 shares of our common stock issued and outstanding, held by ninety-eight (98) shareholders of record.
Dividends
There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where after giving effect to the distribution of the dividend:
1. we would not be able to pay our debts as they become due in the usual course of business, or;
2. our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.
We have not declared any dividends and we do not plan to declare any dividends in the foreseeable future.
Item 6.
Item 6. Selected Financial Data
A smaller reporting company is not required to provide the information required by this Item.
Item 7.
Item 7. 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.
Results of Operations for the Years Ended August 31, 2012 and August 31, 2011, and the Period From Inception (May 2, 2011) to August 31, 2012
We have had no revenue for the years ended August 31, 2012 and August 31, 2011, or for the period from Inception (May 2, 2011) through August 31, 2012. Our total expenses and net loss for the year ended August 31, 2012 were $70,667, and consisted of professional fees of $68,605, filing and registration fees of $1,915, and bank charges of $147. By comparison, our total expenses and net loss for the year ended August 31, 2011 were $7,845, and consisted of professional fees of $7,777 and bank charges of $68. Our total expenses and net loss for the period from Inception (May 2, 2011) through August 31, 2012 were $78,512.
Our results of operation for the fiscal year ended August 31, 2012 and prior periods relate to our former business of developing flotation tank therapy spas. 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 increase significantly and that we will begin to generate revenues from the sale of our products.
Liquidity and Capital Resources
As of August 31, 2012, we had total current assets of $15,140, consisting entirely of cash. Our total current liabilities as of August 31, 2012 were $66,842, and consisted of accrued expenses of $66,632, accrued interest of $110, and a shareholder advance of $100. Our working capital deficit as of August 31, 2012 was therefore $51,702.
Subsequent to the reporting period, on September 19, 2012, we 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, we 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 subsequent to the reporting period, we received short term loan financing under three promissory notes as follows:
1.	On September 30, 2012, we borrowed the sum of $1,900 from Charles J. Kalina under the terms of a Promissory Note. This note bears interest at an annual rate of ten percent (10%), with interest payable monthly. All principal and interest is due within ninety (90) days of funding.
2.	On October 12, 2012, we borrowed the sum of $20,000 from Argent Offset, LLC under the terms of a Promissory Note. The note balance includes a service fee of $1,500. This note bears interest at an annual rate of eighteen percent (18%), with interest payable monthly. All principal and interest is due within ninety (90) days of funding.
3.	From October 17, 2012 through November 27, 2012, we borrowed the total sum of $51,800 from our President and CEO, Bruce R. Knoblich. Our obligations regarding this loan were memorialized in a Promissory Note dated November 27, 2012. The note bears interest at an annual rate of five percent (5%), with all principal and interest due on or before May 27, 2013.
We will require significant additional financing in order to move forward effectively with the development of our new portable solar power generator business. We intend to fund the development of our new business through debt and/or equity financing arrangements. We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional financing will be available to us on acceptable terms, in amounts sufficient to fund our planned acquisitions and other activities, or at all.
Off Balance Sheet Arrangements
As of August 31, 2012, there were no off balance sheet arrangements.
Going Concern
We have yet to achieve profitable operations, have accumulated losses of $78,622 since our inception and expect to incur further losses in the development of our business, all of which casts substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing from shareholders or other sources to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that we will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available or on acceptable terms, if at all.
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. At this time, management does not believe that any of our accounting policies fit this definition.
Recently Issued Accounting Pronouncements
The Company has reviewed issued accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any other pronouncements to have an impact on its results of operations or financial position.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
A smaller reporting company is not required to provide the information required by this Item.
Item 8.
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements Required by Article 8 of Regulation S-X:
Silberstein Ungar, PLLC CPAs and Business Advisors
Phone (248) 203-0080
Fax (248) 281-0940
30600 Telegraph Road, Suite 2175
Bingham Farms, MI 48025-4586
www.sucpas.com
Report of Independent Registered Public Accounting Firm
To the Board of Directors of
Step Out, Inc.
Reno, Nevada
We have audited the accompanying balance sheets of Step Out, Inc. as of August 31, 2012 and 2011, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the year ended August 31, 2012 and the periods from May 2, 2011 (date of inception) through August 31, 2011 and 2012. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Step Out, Inc. as of August 31, 2012 and 2011, and the results of its operations and its cash flows for the year ended August 31, 2012 and the periods from May 2, 2011 (date of inception) through August 31, 2011 and 2012 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 6 to the financial statements, the Company has negative working capital, has not yet received revenue from sales of products or services, and has incurred losses from operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with regard to these matters are described in Note 6. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Silberstein Ungar, PLLC
Bingham Farms, Michigan
November 26, 2012
STEP OUT, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
AS OF AUGUST 31, 2012 AND 2011
The accompanying notes are an integral part of these financial statements.
STEP OUT, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 2012 AND
FOR THE PERIODS FROM MAY 2, 2011 (DATE OF INCEPTION) TO AUGUST 31, 2011
AND FROM MAY 2, 2011 (DATE OF INCEPTION) TO AUGUST 31, 2012
The accompanying notes are an integral part of these financial statements.
STEP OUT, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
AS OF AUGUST 31, 2012
The accompanying notes are an integral part of these financial statements.
STEP OUT, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED AUGUST 31, 2012 AND
FOR THE PERIODS FROM MAY 2, 2011 (DATE OF INCEPTION) TO AUGUST 31, 2011
AND FROM MAY 2, 2011 (DATE OF INCEPTION) TO AUGUST 31, 2012
The accompanying notes are an integral part of these financial statements.
STEP OUT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2012
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business and Basis of Presentation
Step Out, Inc. (“Step Out” or the “Company”) was incorporated in Nevada on May 2, 2011. Step Out is a Development stage company and has not yet realized any revenues from its planned operations. Step Out is currently in the business of opening spas featuring salt water isolation flotation tanks. See Note 8.
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.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, SOI Nevada, LLC. All significant intercompany transactions and balances have been eliminated in consolidation.
Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.
Accounting Basis
The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting). The Company has adopted an August 31 fiscal year end.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheet. Actual results could differ from those estimates.
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 August 31, 2012.
Dividends
The Company has not adopted any policy regarding payment of dividends. No dividends have been paid during the periods shown.
STEP OUT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2012
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. At August 31, 2012 and August 31, 2011, respectively, the Company had $15,140 and $10,032 of unrestricted cash to be used for future business operations.
Fair Value of Financial Instruments
The Company's financial instruments consist of cash, accrued expenses, and amounts due to a related party. The carrying amount of these financial instruments approximates fair value due to either length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.
Stock-Based Compensation
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. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. It is the Company’s policy to classify interest and penalties on income taxes as interest expense or penalties expense. As of August 31, 2012, there have been no interest or penalties incurred on income taxes.
STEP OUT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2012
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Development Stage Company
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles related to accounting and reporting by development-stage companies. A development-stage company is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenues therefrom.
Revenue Recognition
The Company is in the development stage and has yet to realize revenues from operations. Once the Company has commenced operations, it will recognize revenues when delivery of goods or completion of services has occurred provided there is persuasive evidence of an agreement, acceptance has been approved by its customers, the fee is fixed or determinable based on the completion of stated terms and conditions, and collection of any related receivable is probable.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and will be depreciated on a straight-line basis over their estimated useful lives.
The Company reviews the carrying value of long-lived assets, including property and equipment, for impairments whenever events or changes in circumstances dictate that the carrying value may not be fully recoverable. There have been no such impairments.
Property and equipment at August 31, 2012 and 2011 consisted of the following:
No depreciation expense was taken for the year ended August 31, 2012 as the asset acquired had not yet been placed into service.
NOTE 3 - RELATED PARTY TRANSACTIONS
During the period ended August 31, 2011 the director made advances to the Company totaling $100. These advances are non-interest bearing and have no specified terms of repayment.
During the period ended August 31, 2012 the director made a loan to the Company of $2,000. This loan bears interest at 6% and is due October 4, 2013. Interest of $110 has been recorded in these financial statements.
STEP OUT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2012
NOTE 4 - COMMON STOCK
The Company has 10,000,000 preferred shares authorized at par value of $0.001 per share. The Company has 90,000,000 common shares authorized at a par value of $0.001 per share.
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 transaction was recorded at $15,000, the book value of the membership interests.
On February 25, 2012, the Company issued 2,000,000 common shares for cash of $20,000 to unrelated third parties.
NOTE 5 - INCOME TAXES
The provision for Federal income tax consists of the following:
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
As of August 31, 2012, Step Out had an unused net operating loss carryover approximating $78,622 that is available to offset future taxable income; it expires beginning in 2031. Due to the change in ownership provisions of the Tax Reform Act of 1986, the use of net operating loss carry forwards for tax reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may be limited as to use in future years.
STEP OUT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2012
NOTE 6 - GOING CONCERN
Step Out has limited working capital and has a deficit accumulated during the development stage of $78,622 as of August 31, 2012. Step Out's 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. However, Step Out has no current source of revenue. Without realization of additional capital, it would be unlikely for Step Out to continue as a going concern. Step Out'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 7 - COMMITMENTS AND CONTINGENCIES
Step Out neither owns nor leases any real or personal property. An officer has provided office services without charge. There is no obligation for the officer to continue this arrangement. Such costs are immaterial to the financial statements and accordingly are not reflected herein. The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.
NOTE 8 - SUBSEQUENT EVENTS
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, we are no longer pursuing our former business plan. Under the direction of our newly appointed officers and directors, as set forth below, we intend to develop a business focused on the design, manufacturing, and distribution solar-based portable power stations. We plan to offer a line of portable solar power generators under the brand name MySolarGenerators.Ô Our planned new product line product line will be available initially in four models based on customer needs. As our plans and our new business develop, we will make appropriate additional disclosures.
Effective October 12, 2012, our board of directors approved a merger with our wholly-owned subsidiary, IDS Acquisition, Inc., pursuant to NRS 92A.180. 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 September 30, 2012, the Company entered into a promissory note payable in the amount of $1,900, bearing interest at 10% per annum and due 90 days after funding was received.
On October 15, 2012, the Company entered into a promissory note payable in the amount of $20,000, bearing interest at 18% per annum and due 90 days after funding was received.
STEP OUT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2012
NOTE 8 - SUBSEQUENT EVENTS (continued)
On November 27, 2012, the Company entered into a promissory note payable in the amount of $51,800 bearing interest at 5% per annum and due May 27, 2013.
The Company has analyzed its operations subsequent to August 31, 2012 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 those discussed above.
Item 9.
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A.
Item 9A. Controls and Procedures
As required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report, being August 31, 2012. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.
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 Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Based upon that evaluation, including our Chief Executive Officer and Chief Financial Officer, we have concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this annual report.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Management has assessed the effectiveness of our internal control over financial reporting as of August 31, 2012 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of this assessment, management concluded that, as of August 31, 2012, our internal control over financial reporting was not effective. Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.
We plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this annual report on Form 10-K, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we hope to implement the following changes during our fiscal year ending August 31, 2012: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out in (i) and (ii) are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to an exemption for non-accelerated filers set forth in Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Item 9B.
Item 9B. Other Information
None
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance
Our sole executive officer and director is as follows:
Set forth below is a brief description of the background and business experience of each of our current executive officers and directors.
Bruce R. Knoblich is our President, Chief Executive Officer, and a Director. Mr. Knoblich is currently the President of Installing Dealer Supply, Inc., a company he founded in December of 1989. Installing Dealer Supply is a leading distributer of garage doors, gate automation, and access control equipment based in Lake Elsinore, California. Prior to his founding of Installing Dealer Supply, Inc., Mr. Knoblich served as General Manager of Frantz Manufacturing Company, a garage door manufacturer with divisions that produced bearings for different industries, at their Temecula California distribution center from 1984 to 1989. In this role, Mr. Knoblich was responsible for overseeing the company’s entire local operation. From 1977 to 1984, Mr. Knoblich served as a sales representative for Frantz Manufacturing Company. From 1974 to 1977, Mr. Knoblich worked for Heiwig Industrial Sales, a manufacturer’s representative that specialized in iron castings and screw machine products. In 1977, Mr. Knoblich graduated from Western Illinois University with a bachelor’s degree in business.
Pamela J. McKeown is our Chief Financial Officer, Secretary, and Treasurer. For the past 11 years, Ms. McKeown has been the Controller for Installing Dealer Supply, Inc. She has been responsible for developing and managing the finances and accounting of Installing Dealer Supply along with the company’s operations, inclusive of sales, customer service, purchasing, inventory and credit management. Ms. McKeown has prior experience with large corporations, including DLS Constructors, a noted provider of underground piping for highways to the State of California, and with Air Control Management, Inc. (ACM), a supplier to the tract home industry.
George Rodriguez is our Vice President. Since 2011, Mr. Rodriguez has been the developer and operator of a personal and professional website focused on book reviews and leveraging the knowledge found in non-fiction works. From 1994 to 2011, Mr. Rodriguez had a 17-year career with Amarr Garage Door, the nation’s leading garage door manufacturer. During his time at Amarr, Mr. Rodriguez’s positions included General Manager for the Albuquerque Distribution Center, General Manager for the Bay Area Distribution Center in California, General Manager of the Southern California Distribution Center, Sales Manager for Southern California, District Sales Manager, and Director of Sales for the West Coast. Mr. Rodriguez’s final position with Amarr was Director of Retail Sales. In this position, he was responsible for all of Amarr’s nationwide retail accounts. Mr. Rodriguez graduated from Stanford University with a bachelor’s degree in political science in 1994.
Anthony Hama is one of our Directors. From February 2010 through May 2012, Mr. Hama served as the Chief Financial Officer for Land Baron Investments, a real estate investment company in Nevada (“Land Baron”). Mr. Hama was responsible for financial management and oversight of Land Baron. Prior to joining Land Baron, from January 2005 through January 2010, Mr. Hama worked as a director of investment with TREC Investment Realty. With TREC Investment Realty, Mr. Hama was responsible for the acquisition and management of commercial real estate nationwide. Mr. Hama’s other notable work includes working for Bank of America Securities from 2002 through 2003, Equity Office Properties Trust from 1999 through 2002, KPMG Peat Marwick from 1996 through 1997, and Smith Barney, Inc. from 1993 through 1995. Mr. Hama graduated with a Bachelors of Arts in economics from UCLA and from Cornell University with a Masters of Business Administration.
Term of Office
Our Directors are appointed for a one year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.
Family Relationships
There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.
Involvement in Certain Legal Proceedings
To the best of our knowledge, during the past ten years, none of the following occurred with respect to a present or former director, executive officer, or employee: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended, vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
Committees of the Board
We do not currently have a compensation committee, executive committee, or stock plan committee.
Audit Committee
We do not have a separately-designated standing audit committee. The entire Board of Directors performs the functions of an audit committee, but no written charter governs the actions of the Board when performing the functions of what would generally be performed by an audit committee. The Board approves the selection of our independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting. In addition, the Board reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor. Our Board of Directors, which performs the functions of an audit committee, does not have a member who would qualify as an “audit committee financial expert” within the definition of Item 407(d)(5)(ii) of Regulation S-K. We believe that, at our current size and stage of development, the addition of a special audit committee financial expert to the Board is not necessary.
Nomination Committee
Our Board of Directors does not maintain a nominating committee. As a result, no written charter governs the director nomination process. Our size and the size of our Board, at this time, do not require a separate nominating committee.
When evaluating director nominees, our directors consider the following factors:
- The appropriate size of our Board of Directors;
- Our needs with respect to the particular talents and experience of our directors;
- The knowledge, skills and experience of nominees, including experience in finance, administration or public service, in light of prevailing business conditions and the knowledge, skills and experience already possessed by other members of the Board;
- Experience in political affairs;
- Experience with accounting rules and practices; and
- The desire to balance the benefit of continuity with the periodic injection of the fresh perspective provided by new Board members.
Our goal is to assemble a Board that brings together a variety of perspectives and skills derived from high quality business and professional experience. In doing so, the Board will also consider candidates with appropriate non-business backgrounds.
Other than the foregoing, there are no stated minimum criteria for director nominees, although the Board may also consider such other factors as it may deem are in our best interests as well as our stockholders. In addition, the Board identifies nominees by first evaluating the current members of the Board willing to continue in service. Current members of the Board with skills and experience that are relevant to our business and who are willing to continue in service are considered for re-nomination. If any member of the Board does not wish to continue in service or if the Board decides not to re-nominate a member for re-election, the Board then identifies the desired skills and experience of a new nominee in light of the criteria above. Current members of the Board are polled for suggestions as to individuals meeting the criteria described above. The Board may also engage in research to identify qualified individuals. To date, we have not engaged third parties to identify or evaluate or assist in identifying potential nominees, although we reserve the right in the future to retain a third party search firm, if necessary. The Board does not typically consider shareholder nominees because it believes that its current nomination process is sufficient to identify directors who serve our best interests.
Code of Ethics
As of August 31, 2012, we had not adopted a Code of Ethics for Financial Executives, which would include our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.
Item 11.
Item 11. Executive Compensation
Compensation Discussion and Analysis
At this time, we do not have any written employment agreements or other formal compensation agreements with our officers and directors. We currently plan to pay our President and CEO, Bruce R. Knoblich, a salary of $100,000 per year. We currently plan to pay our Vice President, George Rodriguez, a salary of $70,000 per year. Compensation arrangements with our officers and directors are the subject of ongoing development and we will make appropriate additional disclosures as they are further developed and formalized.
Summary Compensation Table
The table below summarizes all compensation awarded to, earned by, or paid to our former or current executive officers for the fiscal years ended 2012 and 2011.
Narrative Disclosure to the Summary Compensation Table
We did not pay our former sole officer, Sterling Hamilton, any compensation for his services as an officer. Our current executive officers did not serve during the fiscal years ended August 31, 2012 and August 31, 2011.
Outstanding Equity Awards at Fiscal Year-End
The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer as of August 31, 2012.
Director Compensation
The table below summarizes all compensation of our directors for the year ended August 31, 2012.
Narrative Disclosure to the Director Compensation Table
We do not compensate our directors for their service at this time.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth, as of November 27, 2012, the beneficial ownership of our common stock by each executive officer and director, by each person known by us to beneficially own more than 5% of the our common stock and by the executive officers and directors as a group:
(1) As used in this table, "beneficial ownership" means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). In addition, for purposes of this table, a person is deemed, as of any date, to have "beneficial ownership" of any security that such person has the right to acquire within 60 days after such date.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Except as stated herein, none of our directors or executive officers, nor any proposed nominee for election as a director, nor any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to all of our outstanding shares, nor any members of the immediate family (including spouse, parents, children, siblings, and in-laws) of any of the foregoing persons has any material interest, direct or indirect, in any transaction over the last two years or in any presently proposed transaction which, in either case, has or will materially affect us.
On September 19, 2012, we 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, we 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.
From October 17, 2012 through November 27, 2012, we borrowed the total sum of $51,800 from our President and CEO, Bruce R. Knoblich. Our obligations regarding this loan were memorialized in a Promissory Note dated November 27, 2012. The note bears interest at an annual rate of five percent (5%), with all principal and interest due on or before May 27, 2013.
Director Independence
We are not a “listed issuer” within the meaning of Item 407 of Regulation S-K and there are no applicable listing standards for determining the independence of our directors. Applying the definition of independence set forth in Rule 4200(a)(15) of The Nasdaq Stock Market, Inc., we believe that Anthony Hama is an independent director.
Item 14.
Item 14. Principal Accounting Fees and Services
Below is the table of Audit Fees (amounts in US$) billed by our auditor in connection with the audit of the Company’s annual financial statements for the years ended:
PART IV
Item 15.
Item 15. Exhibits, Financial Statements Schedules
(a) Financial Statements and Schedules
The following financial statements and schedules listed below are included in this Form 10-K.
Financial Statements (See Item 8)
(b) Exhibits
Exhibit Number Description
3.1 Articles of Incorporation(1)
3.2 Bylaws(1)
10.1 Agreement of Conveyance, Transfer and Assignment of Membership Interests and Assumption of Obligations(2)
10.2 Exclusive License / Royalty Agreement with SP Innovations, Inc.(3)
10.3 Promissory Note issued to Charles J. Kalina dated September 30, 2012
10.4 Promissory Note issued to Argent Offset, LLC dated October 12, 2012
10.5 Promissory Note issued to Bruce R. Knoblich date November 27, 2012
31.1 Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of 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).
(1) Incorporated by reference to Registration Statement on Form S-1 filed October 26, 2011.
(2) Incorporated by reference to Current Report on Form 8-K filed September 19, 2012.
(3) Incorporated by reference to Current Report on Form 8-K filed November 14, 2012.
**Provided herewith
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the 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.
By: /s/ Bruce R. Knoblich
Bruce R. Knoblich
Title: Chief Executive Officer, President and Director
Date: November 29, 2012
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ Bruce R. Knoblich
Bruce R. Knoblich
Title: Chief Executive Officer, President and Director
Date: November 29, 2012
By: /s/ Pamela J. McKeown
Pamela J. McKeown
Title: Chief Financial Officer, Secretary, and Treasurer
Date: November 29, 2012
By: /s/ Anthony Hama
Anthony Hama
Title: Director
Date: November 29, 2012