1. Description of Business and Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2014

Accounting Policies [Abstract]

Formation of the Company

Formation of the Company

On December 31, 2013, Energie Holdings, Inc. (“we,” “us,” “our,” the “Company,” or “Holdings”) entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with OELC, LLC, a Delaware limited liability company, and its wholly-owned subsidiary, Energie LLC (hereinafter referred to as, “Energie”). The Share Exchange Agreement was effective until July 2, 2014, upon meeting or waiving a variety of conditions subsequent. Upon effectiveness, Holdings issued 33,000,000 “restricted” shares of its common stock, representing approximately 65% of the then issued and outstanding voting securities, in exchange for all of the issued and outstanding member interests of Energie. This transaction is considered to be a capital transaction, rather than a business combination, equivalent to the issuance of ownership interests by Energie for the net assets of Holdings, accompanied by a recapitalization (the “Share Exchange”). The accounting is identical to that resulting from a reverse acquisition, except that no goodwill or other intangible is recorded.

Thereafter, on January 27, 2014, Holdings entered into an Agreement and Plan of Merger (the “Merger Agreement”) with two of its then wholly owned subsidiaries, Energie Holdings and Alas Acquisition Company (“Alas”). The Merger Agreement effectively merged Alas with and into Holdings, with Holdings being the surviving corporation. The net effect of the Merger Agreement was to effectuate a name change from Alas Aviation Corp., to Energie Holdings, Inc. in order to provide a better understanding to investors of the Company’s entry into the LED lighting industry. The Company’s management also changed.

Description of Business

We are focused on acquiring and growing specialized LED lighting companies for the architecture and interior design markets for both commercial and residential applications. The lighting products include both conventional fixtures and advanced solid-state technology that can integrate with digital controls and day-lighting to create energy efficiencies and a better visual environment. Our objective is to grow, innovate, and fully capture the rapidly growing lighting market opportunities associated with solid state lighting.

Energie was founded in 2001 and is engaged in the import and sale of specialized interior lighting solutions to the architecture and interior design markets in North America. Our headquarters is located in Wheat Ridge, Colorado, and we also maintain a production and assembly facility in Zeeland, Michigan.

Basis of Presentation

Basis of Presentation

As a result of the Share Exchange, Energie is considered to be the “accounting acquirer” and, accordingly, is treated as the predecessor company. The consolidated financial statements include the results of operations and financial position of Energie for all periods, and the results of operations and financial position of Holdings as of and for the six months ended December 31, 2014.

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Although these estimates are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from these estimates and assumptions. Furthermore, when testing assets for impairment in future periods, if management uses different assumptions or if different conditions occur, impairment charges may result.

Going Concern

Going Concern

As shown in the accompanying financial statements, we had an equity deficit of $7,657,359 and a working capital deficit of $4,786,756 as of December 31, 2014, and have reported net losses of $3,713,292 and $1,619,469, respectively, for the years ended December 31, 2014 and 2013.  These factors raise substantial doubt regarding our ability to continue as a going concern. 

Our ability to continue as a going concern is dependent on our ability to further implement our business plan, attract additional capital and, ultimately, upon our ability to develop future profitable operations. We intend to fund our business development, acquisition endeavors and operations through equity and debt financing arrangements. However, there can be no assurance that these arrangements will be sufficient to fund our ongoing capital expenditures, working capital, and other cash requirements. The outcome of these matters cannot be predicted at this time. These matters raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. Additionally, current economic conditions in the United States and globally create significant challenges attaining sufficient funding

Although we are past due on our required payments under our debt agreements, the lenders have not made demand for repayment of the principal and interest due. If demand for payment is made by one or multiple vendors, we would experience a liquidity issue as we do not currently have the funds available to pay off these debts. While we have entered into extensions with several of our lenders, there can be no assurances that any of the lenders will be cooperative or that if they are willing to provide extensions or forbearances, that the terms under which they may be willing to provide them will be favorable to us.

Reclassifications

Reclassifications

Certain prior year amounts have been reclassified to conform with the current year presentation. Primarily, the consolidated balance sheet reclassifications relate to our factoring of accounts receivable and classifying unpaid interest as an accrued liability rather than as debt. Prior year presentation included factored accounts receivable balances in accounts receivable and an offsetting amount of debt to the factoring counterparty. Current year presentation eliminates accounts receivable balances that have been sold to the factoring counterparty, and a net receivable or liability with the factoring counterparty, representing the amount due from or due to the factoring counterparty. We have also updated the presentation of our statement of operations to include captions that better represent our operations.

Cash and Cash Equivalents

Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits with banks, and investments that are highly liquid and have maturities of three months or less at the date of purchase.

Accounts receivable

Accounts receivable

We record accounts receivable at net realizable value. This value includes an appropriate allowance for estimated uncollectible accounts to reflect any loss anticipated on the accounts receivable balances and is charged to Other income (expense) in the consolidated statements of operations. We calculate this allowance based on our history of write-offs, the level of past-due accounts based on the contractual terms of the receivables, and our relationships with, and the economic status of, our customers.

At our discretion, we may sell our accounts receivable with recourse in order to accelerate the receipt of cash. Upon the sale of selected accounts receivable, title transfers to the counterparty to the factoring agreement, we receive 85% of the face amount sold, and we remove the account receivable from our balance. We pay a commission and, if the balance is not collected by the counterparty within 30 days, a factoring fee. We are responsible for repaying the factoring counterparty for any amounts they are unable to collect. The factoring counterparty retains a reserve in the event the amount they ultimately collect is less than the amount paid to us. Depending on the volume of activity and uncollected accounts, therefore, we may have a receivable from or a liability to the factoring counterparty.

Inventory

Inventory

Inventory is stated at the lower of cost or market, using the first-in, first-out method (“FIFO”) to determine cost. We monitor inventory cost compared to selling price in order to determine if a lower of cost or market reserve is necessary. We also estimate and maintain an inventory reserve, as needed, for such matters as obsolete inventory, shrink and scrap.

Intangible assets

Intangible assets

Our intangible assets consist of the following:

UL Listings – Energie has over 20 United Laboratories^TM (“UL”) files, which include UL Listings for over 14,000 products for sale in the United States and Canada. UL is an independent safety testing laboratory. A UL Listing means that UL has tested representative samples of the product and determined that it meets UL’s requirements. These requirements are based primarily on UL’s published and nationally recognized standards for safety. UL’s testing certifies the design, construction and assembly of the certified products. UL Listings do not expire as long as the product certified is not materially changed. Ownership of a UL Listing may also be transferred between companies. Most customers in the lighting industry will only buy UL listed products.

Trademarks – Energie is a registered trademark.

Marketing and design – These consist of engineering and marketing materials covering the majority of our product offerings.

Intangible assets are recorded at the cost to acquire the intangible, net of amortization over their estimated useful lives on a straight-line basis. We determine the useful lives of our intangible assets after considering the specific facts and circumstances related to each intangible asset. Factors we consider when determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the asset, our long-term strategy for using the asset, any laws or other local regulations that could impact the useful life of the asset, and other economic factors, including competition and specific market conditions.

Property and equipment

Property and equipment

Property and equipment are stated at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of our assets, which are reviewed periodically.

Impairment of long-lived assets

Impairment of long-lived assets

When facts and circumstances indicate that the carrying value of long-lived assets may not be recoverable, management assesses the recoverability of the carrying value by preparing estimates of revenues and the resulting gross profit and cash flows. These estimated future cash flows are consistent with those we use in our internal planning. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, we recognize an impairment loss. The impairment loss recognized, if any, is the amount by which the carrying amount of the asset (or asset group) exceeds the fair value. We may use a variety of methods to determine the fair value of these assets, including discounted cash flow models, which are consistent with the assumptions we believe hypothetical marketplace participants would use.

We have the option to perform a qualitative assessment of long-lived assets prior to completing the impairment test described above. We must assess whether it is more likely than not that the fair value of the long-lived assets is less than their carrying amount. If we conclude that this is the case, we must perform the test described above. Otherwise, we do not need to perform any further assessment.

As a result of applying the above procedures, we fully impaired our long-lived assets during the year ended December 31, 2014.

Warranty reserve

Warranty reserve

We provide limited product warranty for one year on our products and, accordingly, accrue an estimate of the related warranty expense at the time of sale, included in Accrued liabilities on the consolidated balance sheets.

Convertible debt

Convertible debt

We first evaluate our convertible debt to determine whether the conversion feature is an embedded derivative that requires bifurcation and derivative treatment. Based on our analysis, we determined derivative treatment was not required. We then evaluate whether the conversion feature is a beneficial conversion feature. Our convertible debt is treated as a liability and permits settlement in cash. Accordingly, in order to determine the value of the conversion feature, we compared the estimated fair value of the convertible debt to the fair value of debt that did not have the conversion feature. Based on this analysis, we concluded that the value of the conversion feature was immaterial.

Equity

Equity

As a result of the Share Exchange, Energie is considered to be the “accounting acquirer” and, accordingly, is treated as the predecessor company. Accordingly, the equity presented prior to the effective date of the Share Exchange is that of Energie, LLC. Subsequent to the effective date of the Share Exchange, July 2, 2014, the equity presented represents the equity of Energie Holdings, Inc.

Revenue recognition

Revenue recognition

We recognize revenue when the four revenue recognition criteria are met, as follows:

• Persuasive evidence of an arrangement exists – our customary practice is to obtain written evidence, typically in the form of a sales contract or purchase order;

• Delivery – when custody is transferred to our customers either upon shipment to or receipt at our customers’ locations, with no right of return or further obligations, such as installation;

• The price is fixed or determinable – prices are typically fixed at the time the order is placed and no price protections or variables are offered; and

• Collectability is reasonably assured – we typically work with businesses with which we have a long standing relationship, as well as monitoring and evaluating customers’ ability to pay.

Refunds and returns, which are minimal, are recorded as a reduction of revenue. Payments received by customers prior to our satisfying the above criteria are recorded as unearned income in the consolidated balance sheets.

Shipping and handling

Shipping and handling

Payments by customers to us for shipping and handling costs are included in revenue on the consolidated statements of operations, while our expense is included in cost of revenues. Shipping and handling for inventory and materials purchased by us is included as a component of inventory on the consolidated balance sheets, and in cost of revenues in the consolidated statements of operations when the product is sold.

Research and development costs

Research and development costs

Internal costs related to research and development efforts on existing or potential products are expensed as incurred. External costs incurred for intangible assets, such as UL listing costs and attorney fees for patents, are capitalized.

Income taxes

Income taxes

We recognize deferred income tax assets and liabilities for the expected future tax consequences of temporary differences between the income tax and financial reporting carrying amount of our assets and liabilities. We monitor our deferred tax assets and evaluate the need for a valuation allowance based on the estimate of the amount of such deferred tax assets that we believe do not meet the more-likely-than-not recognition criteria. We also evaluate whether we have any uncertain tax positions and would record a reserve if we believe it is more-likely-than-not our position would not prevail with the applicable tax authorities. Our assessment of tax positions as of December 31, 2014 and 2013, determined that there were no material uncertain tax positions.

Prior to the Share Exchange, we were a limited liability company (“LLC”), which is treated as a partnership for income tax purposes, where all tax obligations flow through to the owners of the LLC during the period in which income taxes were incurred.

Concentration of credit risk

Concentration of credit risk

Financial instruments that potentially subject us to concentrations of credit risk consist of accounts receivable and the amount due, if any, from our factoring counterparty. For the years ended December 31, 2014 one customer represented more than 14% of our revenues, and as of December 31, 2014, one customer represented 27% of our gross accounts receivable balance.

Fair value of financial instruments

Fair value of financial instruments

Our financial instruments include cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, and long-term debt. The carrying value of these financial instruments is considered to be representative of their fair value due to the short maturity of these instruments. The carrying amount of our long-term debt approximates fair value, because the interest rates on these instruments approximate the interest rate on debt with similar terms available to us.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities.

Reportable segments

Reportable segments

We have identified our operating segments, our chief operating decision maker (“CODM”), and the discrete financial information reviewed by the CODM. After evaluating this information, we have determined that we have one reportable segment.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In August, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40), which now requires management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued. If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, and substantial doubt is not alleviated after consideration of management’s plans, additional disclosures are required. The amendments in this update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. These requirements were previously included within auditing standards and federal securities law, but are now included within U.S. GAAP. We have evaluated our disclosures regarding our ability to continue as a going concern and concluded that we are in compliance with the disclosure requirements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09). The standard is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. The amendment may be applied retrospectively to each prior period presented or retrospectively with the cumulate effect recognized as of the date of the initial application. ASU 2014-09 is effective for annual and interim periods beginning after December 15, 2016, and early adoption is not permitted. We are currently evaluating the impact of these amendments and the transition alternatives on our consolidated financial statements.

Other recent accounting pronouncements issued by the FASB and the SEC did not, or management believes will not, have a material impact on our present or future consolidated financial statements.