10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________.

Commission file number: 000-28562

EXELED HOLDINGS INC.

(Exact name of Registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	94-2857548 (I.R.S. Employer Identification No.)
4885 Ward Road, Suite 300, Wheat Ridge, CO (Address of principal executive offices)	80033 (Zip Code)

Registrant’s telephone number, including area code: (720) 963-8055

Indicate 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. Yes [X] No [ ]

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 (§232.405 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 [ ]

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]	Accelerated filer [ ]	Non-accelerated filer [ ]	Smaller reporting company [X]
		(Do not check if a 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 [ ] No [X]

As of May 23, 2016, there were 132,306,139 shares of common stock, $0.0001 par value, issued and outstanding.

EXELED HOLDINGS INC.

Table of Contents

Part I – FINANCIAL INFORMATION		Page
Item 1.	Financial Statements	2
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	13
Item 4.	Controls and Procedures	13
Part II – OTHER INFORMATION
Item 1.	Legal Proceedings	14
Item 1A.	Risk Factors	14
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	14
Item 3.	Defaults upon Senior Securities	14
Item 5.	Other Information	14
Item 6.	Exhibits	14

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon our current assumptions, expectations and beliefs concerning future developments and their potential effect on our business. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “approximately,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” or the negative of these terms or other comparable terminology, although the absence of these words does not necessarily mean that a statement is not forward-looking. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by any forward-looking statements.

Factors that may cause or contribute actual results to differ from these forward-looking statements include, but are not limited to, for example:

• adverse economic conditions;

• risks related to the construction market;

• risks related to the U.S. import market;

• the inability to attract and retain qualified senior management and technical personnel;

• other risks and uncertainties related to the changing lighting market and our business strategy.

All forward-looking statements speak only as of the date of this Report. We undertake no obligation to update any forward-looking statements or other information contained herein. Stockholders and potential investors should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements in this report are reasonable, we cannot assure stockholders and potential investors that these plans, intentions or expectations will be achieved.

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the Quarterly Report on Form 10-Q. All subsequent written and oral forward-looking statements concerning other matters addressed in this Quarterly Report on Form 10-Q and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Quarterly Report on Form 10-Q.

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

Table of Contents  1

PART I. Financial Information

Item 1. Financial Statements

EXELED HOLDINGS INC.

Condensed Consolidated Balance Sheets

	March 31, 2016 (Unaudited)			December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	20,487		$	17,987
Accounts receivable, net		7,748			8,551
Inventory		180,355			190,151
Prepaid expenses and other		52,400			52,759
Total current assets		260,990			269,448
Noncurrent assets:
Deposits		12,345			12,345
Total assets	$	273,335		$	281,793
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	2,806,233		$	2,505,397
Accrued liabilities		1,258,509			1,076,040
Debt, current portion, net of discount and debt issuance costs		5,865,572			5,156,305
Total current liabilities		9,930,314			8,737,742
Debt, long-term portion		1,256,748			1,593,003
Total liabilities		11,187,062			10,330,745
Commitments and contingencies (Note 5)		—			—
Equity:
Preferred stock, $.0001 par value; 5,000,000 shares authorized; no shares issued and outstanding at March 31, 2016 or December 31, 2015		—			—
Common stock, $.0001 par value; 250,000,000 shares authorized; 122,189,956 shares issued and outstanding at March 31, 2016		12,019			11,191
Additional paid-in capital		2,471,179			2,446,196
Accumulated deficit		(13,396,925	)		(12,506,339	)
Total deficit		(10,913,727	)		(10,048,952	)
Total liabilities and equity	$	273,335		$	281,793

See accompanying notes to condensed consolidated financial statements.

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EXELED HOLDINGS INC.

Condensed Consolidated Statements of Operations

(Unaudited)

	Three months ended March 31,
	2016			2015
Sales revenue	$	98,555		$	202,395
Cost of goods sold		(52,054	)		(98,006	)
Gross profit		46,501			104,389
Operating expenses:
Research and development		72,991			56,870
Sales and marketing		12,715			43,470
General and administrative		350,775			405,705
Total operating expenses		436,481			506,045
Loss from operations		(389,980	)		(401,656	)
Other income (expense):
Interest expense		(463,449	)		(200,360	)
Other		(37,157	)		(10,269	)
Other income (expense), net		(500,606	)		(210,629	)
Net loss	$	(890,586	)	$	(612,285	)
Net loss per common share
Basic and diluted	$	(0.01	)	$	(0.01	)
Weighted average common shares outstanding:
Basic and diluted		118,049,387			54,560,257

See accompanying notes to condensed consolidated financial statements

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EXELED HOLDINGS INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three months ended March 31,
	2016			2015
Operating Activities:
Net loss	$	(890,586	)	$	(612,285	)
Adjustments to reconcile net loss to net cash used in operating
activities:
Amortization of debt issuance costs		53,047			6,332
Amortization of debt discount		72,310			—
Common stock issued for services		—			5,000
Loss on conversion of debt		15,940			—
Changes in operating assets and liabilities (net of Share Exchange):
Accounts receivable		803			10,642
Inventory		9,796			(619	)
Prepaid expenses		359			15,503
Deposits		—			(650	)
Accounts payable		300,836			377,717
Accrued liabilities		182,840			109,620
Net cash used in operating activities		(254,655	)		(88,740	)
Financing Activities:
Proceeds from debt		351,685			263,250
Payments of debt		(94,530	)		(215,746	)
Net cash provided by financing activities		257,155			47,504
Net change in cash		2,500			(41,236	)
Cash, beginning of period		17,987			43,879
Cash, end of period	$	20,487		$	2,643
Cash paid for:
Interest	$	155,799		$	77,685
Taxes		—			—
Non-cash transactions:
Debt converted to common stock	$	9,500		$	15,000
Accrued liabilities converted to common stock		371			—

See accompanying notes to condensed consolidated financial statements.

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EXELED HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements

Note 1 — Description of Business and Summary of Significant Accounting Policies

ExeLED Holdings Inc. was incorporated in the State of Delaware on October 20, 1986 under the name “Verilink Corporation.” We have also been known as Energie Holdings, Inc. and Alas Aviation Corp. We have two wholly-owned subsidiaries, Energie LLC (hereinafter referred to as “Energie”), and OELC, LLC.

All references herein to “us,” “we,” “our,” “Holdings,” or the “Company” refer to ExeLED Holdings Inc. and its subsidiaries.

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. Our 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.

Énergie 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

The accompanying condensed consolidated balance sheet as of December 31, 2015, has been derived from audited financial statements. The accompanying unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual audited financial statements and in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. In the opinion of management, such unaudited information includes all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of this interim information. All intercompany transactions have been eliminated in consolidation. Operating results and cash flows for interim periods are not necessarily indicative of results that can be expected for the entire year. The information included in this report should be read in conjunction with our audited financial statements and notes thereto included in our Annual Report on Form 10-K for the period ended December 31, 2015.

Significant Accounting Policies

In accordance with the FASB’s issuance of ASU No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs (ASU 2015-03) and ASU No. 2015-15, Interest—Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements—Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting (SEC Update) (ASU 2015-15), we have changed our presentation of debt issuance costs. Consistent with the application of ASU 2015-03 and 2015-15, we now present debt issuance costs as a direct deduction from the carrying amount of that debt rather than as an asset on the condensed consolidated balance sheet. The impact of this change on the condensed consolidated financial statements for the three months ended March 31, 2016 was a decrease of total assets and a decrease of debt and total liabilities of $98,311. The impact of this change on the condensed consolidated financial statements for the year ended December 31, 2015 was a decrease of total assets and a decrease of debt and total liabilities of $101,358. The change had no impact on shareholders’ equity (deficit) or net loss in either period.

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Going Concern

As shown in the accompanying condensed consolidated financial statements, we had an equity deficit of $10,913,727 and a working capital deficit of $9,669,324 as of March 31, 2016, and have reported net losses of $890,586 and $612,285 for the three months ended March 31, 2016 and 2015, respectively.  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 condensed 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.

Reclassifications

Certain prior year amounts have been reclassified to conform with the current year presentation.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02). ASU 2016-02 requires that lessees will be required to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. ASU 2016-02 also will require disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative information. For public companies, the standard will take effect for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 with earlier application permitted. We are currently evaluating the impact of ASU 2016-02 on our financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09) which simplifies several aspects of accounting for share-based payment transactions including income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows and accounting for forfeitures. ASU 2016-09 is effective for financial statements issued for fiscal years beginning after December 15, 2016. We are currently evaluating the impact of ASU 2016-02 on our financial statements.

Note 2 — Accounts receivable

The following is a summary of accounts receivable:

	March 31, 2016			December 31, 2015
Customer receivables	$	20,628		$	21,431
Less:  Allowance for uncollectible accounts		(12,880	)		(12,880	)
	$	7,748		$	8,551

Table of Contents  6

Note 3 — Inventory

The following is a summary of inventory:

	March 31, 2016			December 31, 2015
Raw materials	$	338,546		$	348,342
Less: reserve		(158,191	)		(158,191	)
	$	180,355		$	190,151

Note 4 — Debt

Debt is comprised of the following:

Description	Note		March 31, 2016			December 31, 2015
Line of credit		A	$	47,000		$	47,000
Note payable to distribution partner		B		550,000			550,000
Investor debt		C		267,787			267,787
Related party debt		D		5,932,543			5,632,543
Other notes payable		E		64,619			66,786
Cash draw notes		F		213,745			204,423
Convertible promissory notes		G		144,937			154,437
Total				7,220,631			6,922,976
Less:  unamortized discount and debt issuance costs				(98,311	)		(173,668	)
Debt, net of unamortized discount and debt issuance costs				7,122,320			6,749,308
Less:  current portion				(5,865,572	)		(5,156,305	)
Debt, long-term portion			$	1,256,748		$	1,593,003

 A – Line of Credit – We utilized this entire bank line of credit for working capital purposes. The outstanding obligation is due on demand, has a stated initial interest rate of 10.5% that is subject to adjustment, and is guaranteed by our majority shareholder/CEO. Energie and our CEO (collectively, “the defendants”) were served with a summons and complaint, wherein the bank brought an action to collect the amount due, including interest, costs and attorney’s fees. As of April 4, 2016, the parties to this action have entered into a settlement whereby the defendants agreed to pay to the bank the sum of $59,177 on or before April 30, 2016. The defendants were not able to pay the amounts due and on May 11, 2016, Vectra Bank obtained a judgment in the amount of $61,501.53.

B – Note payable to distribution partner – Note payable to a significant European distribution partner, entered into in October 2014, bearing interest at 5% payable quarterly, with principal payable monthly through September 2019. The 2014 note payable aggregated the 2007 promissory note, accrued interest and accounts payable.

C – Investor Debt – Notes payable to lenders having an ownership interest in Holdings at March 31, 2016 and December 31, 2015. These loans are not collateralized. The following summarizes the terms and balances of the investor debt:

	March 31, 2016		December 31, 2015	Interest Rate
$	87,787	$	87,787	24	%
	50,000		50,000	24	%
	50,000		50,000	24	%
	25,000		25,000	8	%
	25,000		25,000	8	%
	20,000		20,000	2	%
	10,000		10,000	24	%
$	267,787	$	267,787

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D –Related Parties Debt – The following summarizes notes payable to related parties:

	March 31, 2016		December 31, 2015		Interest Rate
D1	$	4,420,465	$	4,120,465		various
D2		528,214		528,214		various
D3		34,888		34,888		12	%
D4		280,800		280,800		various
D5		668,176		668,176		18	%
Total	$	5,932,543	$	5,632,543

D1 – Notes payable to Symbiote, Inc. (“Symbiote”), entered into from December 2014 to March 2016, with monthly principal and interest payable through November 2017. The 2014 notes aggregated the previous notes payable, accrued interest and accounts payable. None of the notes are convertible. The previous note agreement gave Symbiote, at its option at any time after default, the right to convert any remaining balance of the notes to equity at a rate equal to the proportion of the remaining balance of the note divided by $4,000,000 enterprise value. Symbiote holds a large ownership percentage in Holdings, is the lessor of our manufacturing facility, and provides our payroll services.

We evaluated the agreement for derivatives and determined that it does not qualify for derivative treatment for financial reporting purposes, because the agreement relates to our own equity, and the debt and the equity are not closely related. We also determined this does not qualify as a beneficial conversion feature.

D2 – Notes payable to an executive vice president, entered into from December 2014 through December 2015, with monthly principal and interest payable through November 2017. The 2014 note aggregated previous notes payable, accrued interest and accounts payable.

D3 – Note payable to our chief executive officer (“CEO”), entered into in December 2014, with monthly principal and interest payable through December 2016.

D4 – Notes payable to the spouse of our CEO, entered into from September 2013 to October 2015, with principal and interest payments due upon a specific event or upon demand.

D5 – Notes payable to the consulting firm that employs our Chief Financial Officer, entered into in June 2015. These notes aggregated the previous accounts payable and accrued interest due to the consulting firm. Beginning January 1, 2016, the notes are convertible into shares of our common stock at a conversion rate of 75% of the volume weighted average market price of our stock over the 20 days preceding the notification of conversion. We determined that this conversion feature does not meet the requirements to be treated as a derivative; however, we did determine it was a beneficial conversion feature. Accordingly, we recorded a debt discount of $217,725, which was amortized through interest expense.

E – Other Notes Payable – Represents the outstanding principal balance on three separate notes bearing interest at approximately 12% annually. In the event we receive proceeds as the beneficiary of a life insurance policy covering our majority shareholder/CEO, repayment of principal and interest is due on these notes prior to using the proceeds for any other purpose.

F – Cash draw agreements – Under these agreements, the lender advances us the principal balance and then automatically withdraws a stated amount each business day. Accordingly, there is no stated interest rate. The total remaining daily payments due under these arrangements was $291,527 as of March 31, 2016. The maturity dates of the agreements range from May to July 2016.

Table of Contents  8

G – Convertible promissory notes – Represents the outstanding principal balance on two separate convertible promissory notes payable to an entity with interest of 8% annually, due in August 2016. During the third quarter of 2015, the current holder of the notes purchased all of our similar outstanding convertible notes from another entity and consolidated those notes into two new notes. At the option of the holder, the notes may be settled in cash or converted into shares of our common stock at any time beginning 180 days from the date of the notes at a price equal to 61% of the average closing bid price of our common stock during the 10 trading days immediately preceding the date of conversion. In the event we fail to pay the notes when they become due, the balance due under the notes incurs interest at the rate of 22% per annum. The notes contain additional terms and conditions normally included in instruments of this kind, including a right of first refusal wherein we have granted the holders the right to match the terms of any future financing in which we engage on the same terms and contemplated in such future financing. We estimate that the fair value of the conversion feature is minimal, so no value has been assigned to the beneficial conversion feature. During the three months ended March 31, 2016, $9,500 of principal and $371 of accrued interest was converted into 8,275,238 shares of common stock. We also recorded a loss on conversion of debt of $15,940 related to these transactions.

Debt issuance costs of $98,311 are being amortized over the life of the respective notes.

Note 5 — Commitments and Contingencies

Current management discovered that the Company’s former management recorded various obligations to itself and to third parties for expenditures not deemed benefitting the Company or authorized by the Company’s sole director, as required. The amount of these unauthorized expenditures totaled $91,172, including $60,000 in management fees. These expenditures were reversed and are not part of the accompanying financial statements.  While current management believes that none of the $91,172 is an obligation of ours, it is not known what representations were made to these vendors or whether we could, in fact, be eventually responsible to pay some or all of the indicated amount.

Note 6 — Subsequent Events

On April 15, 2016, one of the convertible debt holders converted $4,736 in exchange for 4,082,525 shares of our common stock, and on May 4, 2016, converted $5,600 in exchange for 6,034,159 shares of our common stock.

Note 7 — Net Loss Per Share

Basic net loss per share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period. Diluted net loss per share is computed similarly to basic net loss per share, except that it includes the potential dilution that could occur if dilutive securities are exercised. In a net loss position, however, potential securities are excluded, because they are considered anti-dilutive.

The following table presents a reconciliation of the denominators used in the computation of net loss per share – basic and diluted:

	Three months ended March 31,
		2016		2015
Net loss	$	(890,586	)	$	(612,285	)
Weighted average outstanding shares of common stock		118,049,387			54,560,257
Dilutive effect of stock options and warrants		—			—
Common stock and equivalents		118,049,387			54,560,257
Net loss per share – Basic and diluted	$	(0.01	)	$	(0.01	)

There are no dilutive instruments outstanding during the three months ended March 31, 2016.

Table of Contents  9

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

The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or on our behalf. We disclaim any obligation to update forward looking statements.

Overview

ExeLED Holdings Inc. was incorporated in the State of Delaware on October 20, 1986 under the name “Verilink Corporation.” We have also been known as Energie Holdings, Inc. and Alas Aviation Corp. On November 30, 2015, we filed a Certificate of Amendment to our Certificate of Incorporation with the State of Delaware to change our name from “Energie Holdings, Inc.” to “ExeLED Holdings Inc.” We have two wholly-owned subsidiaries, Energie LLC (hereinafter referred to as “Energie”), and OELC, LLC.

We are a holding company, with Energie acting as our operating subsidiary, engaged in the business of the import and sale of specialized interior lighting solutions to the architecture and interior design markets in North America. Our creative 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 current business objective is to become a leading provider of advanced LED lighting solutions by acquiring and growing complementary LED based lighting fixture companies. We are focused on acquiring specialized lighting companies for the architecture and interior design markets for both commercial and residential applications, with the intention to grow, innovate, and fully capture the rapidly growing lighting market opportunities associated with solid state lighting. These objectives are subject to our obtaining additional financing, of which there can be no assurance.

All references herein to “us,” “we,” “our,” “Holdings,” or the “Company” refer to ExeLED Holdings Inc. and its subsidiaries, and their respective business following the consummation of the Merger and Share Exchange Agreements, unless the context otherwise requires.

Our principal place of business is located at 4885 Ward Road, Suite 300, Wheat Ridge, Colorado, telephone (720) 963-8055. We also maintain a production and assembly facility in Zeeland, Michigan. Our website is www.exeledholdings.com.

We are focused on growing and acquiring specialized LED lighting companies for the architecture and interior design markets for both commercial and residential interiors. The lighting products will 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. Our management team and advisory board is comprised of experienced executives in the lighting industry with recent specific focus on the LED lighting industry. The group has over 300 years of combined experience in this industry.

Énergie 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. We have developed an end-to-end production and distribution platform for imported lighting products featuring HID, fluorescent, and LED technologies. Long term contracts with five European manufacturers and one in Taiwan provide us with exclusive North American distribution rights to over 270 total products in 37 categories. After processing any modifications necessary to meet UL standards and building code requirements, the products are sold to customers through a network of over 60 independent lighting sales agents. In addition to a highly competitive commission structure, we provide our sales force with promotional materials, product training, and technical support.

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Our independent accountants have expressed a “going concern” opinion. Our condensed consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.  The condensed consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.

Results of Operations

Comparison of results of operations for the three months ended March 31, 2016 and 2015

	Three months ended March 31,
	2016			2015			Change			%
Sales revenue	$	98,555		$	202,395		$	(103,840	)		(51	)%
Cost of revenue		(52,054	)		(98,006	)		45,952			47	%
Gross profit		46,501			104,389			(57,888	)		(55	)%
Total operating expenses		436,481			506,045			69,564			14	%
Interest expense		(463,449	)		(200,360	)		(263,089	)		131	%
Other		(37,157	)		(10,269	)		(26,888	)		262	%
Net loss	$	(890,586	)	$	(612,285	)	$	(278,301	)		45	%

Sales Revenue, Cost of Revenue and Gross Profit

Sales revenue decreased during the three months ended March 31, 2016 compared to 2015 due to an overall lack of funding necessary for development and product launch costs. Cost of revenue decreased proportionally to the decrease in revenues.

Operating expenses

	Three months ended March 31,
	2016		2015		Change			%
Research and development	$	72,991	$	56,870	$	16,121			28	%
Sales and marketing		12,715		43,470		(30,755	)		(71	)%
General and administrative		350,775		405,705		(54,930	)		(14	)%
	$	436,481	$	506,045	$	(69,564	)		(14	)%

The decrease in operating expenses was driven by our controlling spending due to a limitation of funding.

Other

During the three months ended March 31, 2016, interest expense increased due to additional debt of approximately $1,900,000.

Other income (expense) consists primarily of other expenses related to costs associated with debt and conversions of debt.

Table of Contents  11

Liquidity and Capital Resources

At March 31, 2016, we had $20,487 in cash. We have not generated positive cash flows from operations. Accordingly, our sources of liquidity may include potential debt and equity offerings. We believe that our principal difficulty in our inability to successfully generate positive cash flows has been the lack of available capital to operate and expand our business. We believe we need a minimum of approximately $2,000,000 in additional working capital to be utilized for (i) development and launching of new products for Energie; (ii) funding the business development efforts to identify, qualify and acquire other LED lighting companies; and (iii) the balance for working capital, and general and administrative expense. Other than as disclosed below, we have no other commitments from any investor or investment-banking firm to provide us with the necessary funding and there can be no assurances we will obtain such funding in the future. Failure to obtain this additional financing will have a material negative impact on our ability to generate profits in the future.

To fund our acquisition plan and fund working capital for our continuing operations, we continue to seek out and discuss financing with potential partners or lenders. While no assurances can be provided, we expect that we will be able to obtain financing to implement our plans.

In August 2015, LG Capital Funding LLC, (“LG”) purchased from KBM Worldwide, Inc., (“KBM”) all outstanding convertible notes and accrued interest payable to KBM under previous agreements with KBM. The outstanding amount due to KBM was restructured into two new convertible notes under a Securities Purchase Agreement, Convertible Notes and other ancillary documents. Under these agreements, we agreed to issue 8% convertible promissory notes in the principal amount of $188,684. These notes are convertible into shares of our common stock at a price ranging from 58% - 65% of the lowest closing bid price of our common stock during the 15 trading days immediately preceding the date of conversion. The notes contain additional terms and conditions normally included in instruments of this kind. During the three months ended March 31, 2016, LG converted $9,500 of principal and $371 of accrued interest into 8,275,238 shares of common stock.

On July 16, 2014 we entered into an Investment Agreement and Registration Rights Agreement with Dutchess Opportunity Fund, II, LP (“Dutchess”). Pursuant to the Investment Agreement, Dutchess committed to purchase, subject to certain restrictions and conditions, up to $5 million of our common stock upon issuance by us of a put to Dutchess at a price equal to ninety-four percent (94%) of the lowest daily VWAP (volume weighted average price) of our common stock during the five (5) consecutive Trading Days beginning on the Put Notice Date and ending on and including the date that is four (4) Trading Days after such Put Notice Date. The Put Amount shall be equal to up to either 1) two hundred percent (200%) of the average daily volume (U.S. market only) of the common stock for the three (3) Trading Days prior to the applicable Put Notice Date, multiplied by the average of the three (3) daily closing prices immediately preceding the Put Date or 2) one hundred thousand dollars ($100,000). The obligation of Dutchess to purchase our shares is contingent upon our filing of a registration statement registering the shares of our common stock with the US Securities and Exchange Commission and such registration statement being declared effective, as well as our common stock continuing to be listed for trading, among other things. We filed such a registration statement with the SEC on October 6, 2014 and it became effective on November 7, 2014.

Working Capital

Working capital is the amount by which current assets exceed current liabilities. We had negative working capital of $9,669,324 and $8,468,294, respectively, as of March 31, 2016 and December 31, 2015. The increase in negative working capital is due to the increase in debt of approximately $370,000 and a resulting increase in accrued liabilities of approximately $180,000 from interest expense. We also currently have insufficient cash flow to meet our debt obligations. This raises substantial doubt about our ability to continue as a going concern.

Cash Flows

Our cash flows from operating, investing and financing activities were as follows:

	Three months ended March 31,
	2016			2015
Net cash used in operating activities	$	(254,655	)	$	(88,740	)
Net cash provided by financing activities		257,155			47,504

Table of Contents  12

Net cash used in operating activities increased in 2016 by $165,915 compared to 2015.  We relied heavily on increased debt, accounts payable, and accrued liabilities to keep our operations running. We anticipate that overhead costs in current operations will increase in the future if we are successful in raising the capital described herein as a result of our anticipated increased marketing and operating activities.

During 2016, we relied on additional borrowings under both new and existing debt agreements. In 2016, net cash flows provided by financing activities were composed of $351,685 of additional borrowings and $94,530 of debt pay down. In 2015, we borrowed $263,250 of additional debt and paid down $215,746 of debt.

Inflation

Although our operations are influenced by general economic conditions, we do not believe that inflation had a material effect on our results of operations during the three-month period ended March 31, 2016.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of March 31, 2016 and December 31, 2015.

Critical Accounting Estimates

Our condensed consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect reported amounts of assets, liabilities, revenues and expenses. We continually evaluate the accounting policies and estimates used to prepare the condensed consolidated financial statements. The estimates are based on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management. Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position are discussed in our Annual Report on Form 10-K for the year ended December 31, 2015 in the Critical Accounting Policies section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

As a smaller reporting company, as that term is defined in Item 10(f)(1) of Regulation S-K, we are not required to provide information required by this Item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we have carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2016.   This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer.

Based on this evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were not effective as of March 31, 2016, because (a) we have limited entity-level controls, because of the time constraints for our management team; (b) we have a lack of segregation of duties due to limited personnel; and (c) we have not implemented adequate system-based and manual controls.  We have engaged consultants to evaluate our processes and procedures, and to implement, document and test additional internal controls. We can provide no assurance, however, that our internal controls will be effective in the near future.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the last quarterly period covered by this report that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.

Table of Contents  13

PART II. Other Information

Item 1. Legal Proceedings

In July 2015, Energie LLC and Harold Hansen, our CEO (collectively, “the defendants”), were served with a summons and complaint wherein Vectra Bank Colorado, National Association brought an action to collect monies due pursuant to a promissory note in the current principal balance of $47,000, plus interest, costs, and attorneys’ fees. The action was brought in the District Court for the City and County of Denver, Colorado (the “Court”). On April 4, 2016, the parties to this action entered into a settlement agreement whereby the defendants agreed to pay to Vectra Bank the sum of $59,177 on or before April 30, 2016. The defendants were not able to pay the amount due and on May 11, 2016, Vectra Bank obtained a judgment in the amount of $61,501.53.

Item 1A. Risk Factors

As a smaller reporting company, as that term is defined in Item 10(f)(1) of Regulation S-K, we are not required to provide information required by this Item.

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

During the three months ended March 31, 2016, one of our lenders converted $9,871 of principal and interest on convertible promissory notes into 8,275,238 of our common shares. This issuance was completed in accordance with Section 3(a)(9) of the Securities Act, as amended, in an offering without any public offering or distribution. These shares are restricted securities and include an appropriate restrictive legend.

Item 3. Defaults upon Senior Securities

None.

Item 5. Other Information

None.

Item 6. Exhibits

31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

32 Certifications of the Chief Executive and Financial Officers pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Table of Contents  14

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Date:  May 23, 2016	By:	/s/ Harold Hansen
		Harold Hansen
		Chief Executive Officer (Principal Executive Officer)
	By:	/s/ Richard Cole Dennard
		Richard Cole Dennard
		Chief Financial Officer (Principal Financial and Accounting Officer)

Table of Contents  15

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Harold Hansen, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of ExeLED Holdings Inc. (the “Registrant”) for the quarter ended March 31, 2016;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exhibit Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Dated: May 23, 2016
		/s/ Harold Hansen
	By:	Harold Hansen
		Chief Executive Officer (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Richard Cole Dennard, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of ExeLED Holdings Inc. (the “Registrant”) for the quarter ended March 31, 2016;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exhibit Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Dated: May 23, 2016
		/s/ Richard Cole Dennard
	By	Richard Cole Dennard
		Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO 18 USC, SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of ExeLED Holdings Inc. (the “Company”) on Form 10-Q for the three months ended March 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, the undersigned, in the capacities and on the date indicated below, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that, to the best of our knowledge:

(1) The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 23, 2016
		/s/ Harold Hansen
	By:	Harold Hansen
		Chief Executive Officer (Principal Executive Officer)

Dated: May 23, 2016
		/s/ Richard Cole Dennard
	By:	Richard Cole Dennard
		Chief Financial Officer (Principal Financial and Accounting Officer)

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	May. 23, 2016
Document And Entity Information
Entity Registrant Name	Energie Holdings, Inc.
Entity Central Index Key	0000774937
Document Type	10-Q
Document Period End Date	Mar. 31, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		55,123,858
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2016

XML

Balance Sheets - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 20,487	$ 17,987
Accounts receivable, net	7,748	8,551
Inventory	180,355	190,151
Prepaid expenses and other	52,400	52,759
Total current assets	260,990	269,448
Noncurrent assets:
Deposits	12,345	12,345
Total assets	273,335	281,793
Current liabilities:
Accounts payable	2,806,233	2,505,397
Accrued liabilities	1,258,509	1,076,040
Debt, current portion, net of discount and debt issuance costs	5,865,572	5,156,305
Total current liabilities	9,930,314	8,737,742
Debt, long-term portion	1,256,748	1,593,003
Total liabilities	$ 11,187,062	$ 10,330,745
Commitments and contingencies (Note 5)
Equity:
Preferred stock, $.0001 par value; 5,000,000 shares authorized; no shares issued and outstanding at March 31, 2016 or December 31, 2015
Common stock, $.0001 par value; 250,000,000 shares authorized; 122,189,956 shares issued and outstanding at	$ 12,019	$ 11,191
Additional paid-in capital	2,471,179	2,446,196
Accumulated deficit	(13,396,925)	(12,506,339)
Total deficit	(10,913,727)	(10,048,952)
Total liabilities and equity	$ 273,335	$ 281,793

XML

Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Preferred stock, par value	$ .0001	$ .0001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ .0001	$ .0001
Common stock, shares authorized	250,000,000	250,000,000
Common stock, shares issued	122,189,956	122,189,956
Common stock, shares outstanding	122,189,956	122,189,956

XML

Statements of Operations - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income Statement [Abstract]
Sales revenue	$ 98,555	$ 202,395
Cost of goods sold	(52,054)	(98,006)
Gross profit	46,501	104,389
Operating expenses:
Research and development	72,991	56,870
Sales and marketing	12,715	43,470
General and administrative	350,775	405,705
Total operating expenses	436,481	506,045
Loss from operations	(389,980)	(401,656)
Other income (expense):
Interest expense	(463,449)	(200,360)
Other	(37,157)	(10,269)
Other income (expense), net	(500,606)	(210,629)
Net loss	$ (890,586)	$ (612,285)
Net loss per common share Basic and diluted	$ (0.01)	$ (0.01)
Weighted average common shares outstanding: Basic and diluted	118,049,387	54,560,257

XML

Statements of Cash Flows - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Operating Activities:
Net loss	$ (890,586)	$ (612,285)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt issuance costs	53,047	$ 6,332
Amortization of debt discount	$ 72,310
Common stock issued for services		$ 5,000
Loss on conversion of debt	$ 15,940
Changes in operating assets and liabilities (net of Share Exchange):
Accounts receivable	803	$ 10,642
Inventory	9,796	(619)
Prepaid expenses	$ 359	15,503
Deposits		(650)
Accounts payable	$ 300,836	377,717
Accrued liabilities	182,840	109,620
Net cash used in operating activities	(254,655)	(88,740)
Financing Activities:
Proceeds from debt	351,685	263,250
Payments of debt	(94,530)	(215,746)
Net cash provided by financing activities	257,155	47,504
Net change in cash	2,500	(41,236)
Cash, beginning of period	17,987	43,879
Cash, end of period	20,487	2,643
Cash paid for:
Interest	$ 155,799	$ 77,685
Income taxes
Non-cash transactions:
Debt converted to common stock	$ 9,500	$ 15,000
Accrued liabilities converted to debt	$ 371

XML

1. Description of Business and Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

1. Description of Business and Summary of Significant Accounting Policies

Note 1 — Description of Business and Summary of Significant Accounting Policies

ExeLED Holdings Inc. was incorporated in the State of Delaware on October 20, 1986 under the name “Verilink Corporation.” We have also been known as Energie Holdings, Inc. and Alas Aviation Corp. We have two wholly-owned subsidiaries, Energie LLC (hereinafter referred to as “Energie”), and OELC, LLC.

All references herein to “us,” “we,” “our,” “Holdings,” or the “Company” refer to ExeLED Holdings Inc. and its subsidiaries.

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. Our 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.

Énergie 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

The accompanying condensed consolidated balance sheet as of December 31, 2015, has been derived from audited financial statements. The accompanying unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual audited financial statements and in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. In the opinion of management, such unaudited information includes all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of this interim information. All intercompany transactions have been eliminated in consolidation. Operating results and cash flows for interim periods are not necessarily indicative of results that can be expected for the entire year. The information included in this report should be read in conjunction with our audited financial statements and notes thereto included in our Annual Report on Form 10-K for the period ended December 31, 2015.

Significant Accounting Policies

In accordance with the FASB’s issuance of ASU No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs (ASU 2015-03) and ASU No. 2015-15, Interest—Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements—Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting (SEC Update) (ASU 2015-15), we have changed our presentation of debt issuance costs. Consistent with the application of ASU 2015-03 and 2015-15, we now present debt issuance costs as a direct deduction from the carrying amount of that debt rather than as an asset on the condensed consolidated balance sheet. The impact of this change on the condensed consolidated financial statements for the three months ended March 31, 2016 was a decrease of total assets and a decrease of debt and total liabilities of $98,311. The impact of this change on the condensed consolidated financial statements for the year ended December 31, 2015 was a decrease of total assets and a decrease of debt and total liabilities of $101,358. The change had no impact on shareholders’ equity (deficit) or net loss in either period.

Going Concern

As shown in the accompanying condensed consolidated financial statements, we had an equity deficit of $10,913,727 and a working capital deficit of $9,669,324 as of March 31, 2016, and have reported net losses of $890,586 and $612,285 for the three months ended March 31, 2016 and 2015, respectively.  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 condensed 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.

Reclassifications

Certain prior year amounts have been reclassified to conform with the current year presentation.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02). ASU 2016-02 requires that lessees will be required to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. ASU 2016-02 also will require disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative information. For public companies, the standard will take effect for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 with earlier application permitted. We are currently evaluating the impact of ASU 2016-02 on our financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09) which simplifies several aspects of accounting for share-based payment transactions including income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows and accounting for forfeitures. ASU 2016-09 is effective for financial statements issued for fiscal years beginning after December 15, 2016. We are currently evaluating the impact of ASU 2016-02 on our financial statements.

XML

2. Accounts receivable

3 Months Ended

Mar. 31, 2016

Receivables [Abstract]

2. Accounts receivable

Note 2 — Accounts receivable

The following is a summary of accounts receivable:

	March 31, 2016			December 31, 2015
Customer receivables	$	20,628		$	21,431
Less:  Allowance for uncollectible accounts		(12,880	)		(12,880	)
	$	7,748		$	8,551

XML

3. Inventory

3 Months Ended

Mar. 31, 2016

Inventory Disclosure [Abstract]

3 Inventory

Note 3 — Inventory

The following is a summary of inventory:

	March 31, 2016			December 31, 2015
Raw materials	$	338,546		$	348,342
Less: reserve		(158,191	)		(158,191	)
	$	180,355		$	190,151

XML

4. Debt

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

4. Debt

Note 4 — Debt

Debt is comprised of the following:

Description	Note		March 31, 2016			December 31, 2015
Line of credit		A	$	47,000		$	47,000
Note payable to distribution partner		B		550,000			550,000
Investor debt		C		267,787			267,787
Related party debt		D		5,932,543			5,632,543
Other notes payable		E		64,619			66,786
Cash draw notes		F		213,745			204,423
Convertible promissory notes		G		144,937			154,437
Total				7,220,631			6,922,976
Less:  unamortized discount and debt issuance costs				(98,311	)		(173,668	)
Debt, net of unamortized discount and debt issuance costs				7,122,320			6,749,308
Less:  current portion				(5,865,572	)		(5,156,305	)
Debt, long-term portion			$	1,256,748		$	1,593,003

 A – Line of Credit – We utilized this entire bank line of credit for working capital purposes. The outstanding obligation is due on demand, has a stated initial interest rate of 10.5% that is subject to adjustment, and is guaranteed by our majority shareholder/CEO. Energie and our CEO (collectively, “the defendants”) were served with a summons and complaint, wherein the bank brought an action to collect the amount due, including interest, costs and attorney’s fees. As of April 4, 2016, the parties to this action have entered into a settlement whereby the defendants agreed to pay to the bank the sum of $59,177 on or before April 30, 2016. In the event of a default on this settlement agreement, the bank may request entry of a judgment against both defendants jointly and severally for any amounts unpaid pursuant to the settlement agreement.

B – Note payable to distribution partner – Note payable to a significant European distribution partner, entered into in October 2014, bearing interest at 5% payable quarterly, with principal payable monthly through September 2019. The 2014 note payable aggregated the 2007 promissory note, accrued interest and accounts payable.

C – Investor Debt – Notes payable to lenders having an ownership interest in Holdings at March 31, 2016 and December 31, 2015. These loans are not collateralized. The following summarizes the terms and balances of the investor debt:

	March 31, 2016		December 31, 2015	Interest Rate
$	87,787	$	87,787	24	%
	50,000		50,000	24	%
	50,000		50,000	24	%
	25,000		25,000	8	%
	25,000		25,000	8	%
	20,000		20,000	2	%
	10,000		10,000	24	%
$	267,787	$	267,787

D –Related Parties Debt – The following summarizes notes payable to related parties:

	March 31, 2016		December 31, 2015		Interest Rate
D1	$	4,420,465	$	4,120,465		various
D2		528,214		528,214		various
D3		34,888		34,888		12	%
D4		280,800		280,800		various
D5		668,176		668,176		18	%
Total	$	5,932,543	$	5,632,543

D1 – Notes payable to Symbiote, Inc. (“Symbiote”), entered into from December 2014 to March 2016, with monthly principal and interest payable through November 2017. The 2014 notes aggregated the previous notes payable, accrued interest and accounts payable. None of the notes are convertible. The previous note agreement gave Symbiote, at its option at any time after default, the right to convert any remaining balance of the notes to equity at a rate equal to the proportion of the remaining balance of the note divided by $4,000,000 enterprise value. Symbiote holds a large ownership percentage in Holdings, is the lessor of our manufacturing facility, and provides our payroll services.

We evaluated the agreement for derivatives and determined that it does not qualify for derivative treatment for financial reporting purposes, because the agreement relates to our own equity, and the debt and the equity are not closely related. We also determined this does not qualify as a beneficial conversion feature.

D2 – Notes payable to an executive vice president, entered into from December 2014 through December 2015, with monthly principal and interest payable through November 2017. The 2014 note aggregated previous notes payable, accrued interest and accounts payable.

D3 – Note payable to our chief executive officer (“CEO”), entered into in December 2014, with monthly principal and interest payable through December 2016.

D4 – Notes payable to the spouse of our CEO, entered into from September 2013 to October 2015, with principal and interest payments due upon a specific event or upon demand.

D5 – Notes payable to the consulting firm that employs our Chief Financial Officer, entered into in June 2015. These notes aggregated the previous accounts payable and accrued interest due to the consulting firm. Beginning January 1, 2016, the notes are convertible into shares of our common stock at a conversion rate of 75% of the volume weighted average market price of our stock over the 20 days preceding the notification of conversion. We determined that this conversion feature does not meet the requirements to be treated as a derivative; however, we did determine it was a beneficial conversion feature. Accordingly, we recorded a debt discount of $217,725, which was amortized through interest expense.

E – Other Notes Payable – Represents the outstanding principal balance on three separate notes bearing interest at approximately 12% annually. In the event we receive proceeds as the beneficiary of a life insurance policy covering our majority shareholder/CEO, repayment of principal and interest is due on these notes prior to using the proceeds for any other purpose.

F – Cash draw agreements – Under these agreements, the lender advances us the principal balance and then automatically withdraws a stated amount each business day. Accordingly, there is no stated interest rate. The total remaining daily payments due under these arrangements was $291,527 as of March 31, 2016. The maturity dates of the agreements range from May to July 2016.

G – Convertible promissory notes – Represents the outstanding principal balance on two separate convertible promissory notes payable to an entity with interest of 8% annually, due in August 2016. During the third quarter of 2015, the current holder of the notes purchased all of our similar outstanding convertible notes from another entity and consolidated those notes into two new notes. At the option of the holder, the notes may be settled in cash or converted into shares of our common stock at any time beginning 180 days from the date of the notes at a price equal to 61% of the average closing bid price of our common stock during the 10 trading days immediately preceding the date of conversion. In the event we fail to pay the notes when they become due, the balance due under the notes incurs interest at the rate of 22% per annum. The notes contain additional terms and conditions normally included in instruments of this kind, including a right of first refusal wherein we have granted the holders the right to match the terms of any future financing in which we engage on the same terms and contemplated in such future financing. We estimate that the fair value of the conversion feature is minimal, so no value has been assigned to the beneficial conversion feature. During the three months ended March 31, 2016, $9,500 of principal and $371 of accrued interest was converted into 8,275,238 shares of common stock. We also recorded a loss on conversion of debt of $15,940 related to these transactions.

Debt issuance costs of $98,311 are being amortized over the life of the respective notes.

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5. Commitments and Contingencies

3 Months Ended

Mar. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

5. Commitments and Contingencies

Note 5 — Commitments and Contingencies

Current management discovered that the Company’s former management recorded various obligations to itself and to third parties for expenditures not deemed benefitting the Company or authorized by the Company’s sole director, as required. The amount of these unauthorized expenditures totaled $91,172, including $60,000 in management fees. These expenditures were reversed and are not part of the accompanying financial statements.  While current management believes that none of the $91,172 is an obligation of ours, it is not known what representations were made to these vendors or whether we could, in fact, be eventually responsible to pay some or all of the indicated amount.

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6. Subsequent events

3 Months Ended

Mar. 31, 2016

Subsequent Events [Abstract]

6. Subsequent events

Note 6 — Subsequent Events

On April 15, 2016, one of the convertible debt holders converted $4,736 in exchange for 4,082,525 shares of our common stock.

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7. Net Loss Per Share

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

7. Net Loss Per Share

Note 7 — Net Loss Per Share

Basic net loss per share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period. Diluted net loss per share is computed similarly to basic net loss per share, except that it includes the potential dilution that could occur if dilutive securities are exercised. In a net loss position, however, potential securities are excluded, because they are considered anti-dilutive.

The following table presents a reconciliation of the denominators used in the computation of net loss per share – basic and diluted:

	Three months ended March 31,
	2016
Net loss	$	(890,586	)	$	(612,285	)
Weighted average outstanding shares of common stock		118,049,387			54,560,257
Dilutive effect of stock options and warrants		—			—
Common stock and equivalents		118,049,387			54,560,257
Net loss per share – Basic and diluted	$	(0.01	)	$	(0.01	)

There are no dilutive instruments outstanding during the three months ended March 31, 2016.

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

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Descripton of Business

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. Our 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.

Énergie 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

The accompanying condensed consolidated balance sheet as of December 31, 2015, has been derived from audited financial statements. The accompanying unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual audited financial statements and in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. In the opinion of management, such unaudited information includes all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of this interim information. All intercompany transactions have been eliminated in consolidation. Operating results and cash flows for interim periods are not necessarily indicative of results that can be expected for the entire year. The information included in this report should be read in conjunction with our audited financial statements and notes thereto included in our Annual Report on Form 10-K for the period ended December 31, 2015.

Significant Accounting Policies

Significant Accounting Policies

In accordance with the FASB’s issuance of ASU No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs (ASU 2015-03) and ASU No. 2015-15, Interest—Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements—Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting (SEC Update) (ASU 2015-15), we have changed our presentation of debt issuance costs. Consistent with the application of ASU 2015-03 and 2015-15, we now present debt issuance costs as a direct deduction from the carrying amount of that debt rather than as an asset on the condensed consolidated balance sheet. The impact of this change on the condensed consolidated financial statements for the three months ended March 31, 2016 was a decrease of total assets and a decrease of debt and total liabilities of $98,311. The impact of this change on the condensed consolidated financial statements for the year ended December 31, 2015 was a decrease of total assets and a decrease of debt and total liabilities of $101,358. The change had no impact on shareholders’ equity (deficit) or net loss in either period.

Going Concern

Going Concern

As shown in the accompanying condensed consolidated financial statements, we had an equity deficit of $10,913,727 and a working capital deficit of $9,669,324 as of March 31, 2016, and have reported net losses of $890,586 and $612,285 for the three months ended March 31, 2016 and 2015, respectively.  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 condensed 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.

Reclassifications

Reclassifications

Certain prior year amounts have been reclassified to conform with the current year presentation.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02). ASU 2016-02 requires that lessees will be required to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. ASU 2016-02 also will require disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative information. For public companies, the standard will take effect for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 with earlier application permitted. We are currently evaluating the impact of ASU 2016-02 on our financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09) which simplifies several aspects of accounting for share-based payment transactions including income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows and accounting for forfeitures. ASU 2016-09 is effective for financial statements issued for fiscal years beginning after December 15, 2016. We are currently evaluating the impact of ASU 2016-02 on our financial statements.

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2. Accounts receivable (Tables)

3 Months Ended

Mar. 31, 2016

Receivables [Abstract]

Accounts receivable

	March 31, 2016			December 31, 2015
Customer receivables	$	20,628		$	21,431
Less:  Allowance for uncollectible accounts		(12,880	)		(12,880	)
	$	7,748		$	8,551

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3. Inventory (Tables)

3 Months Ended

Mar. 31, 2016

Inventory Disclosure [Abstract]

Inventory

	March 31, 2016			December 31, 2015
Raw materials	$	338,546		$	348,342
Less: reserve		(158,191	)		(158,191	)
	$	180,355		$	190,151

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4. Debt (Tables)

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

Debt

Description	Note		March 31, 2016			December 31, 2015
Line of credit		A	$	47,000		$	47,000
Note payable to distribution partner		B		550,000			550,000
Investor debt		C		267,787			267,787
Related party debt		D		5,932,543			5,632,543
Other notes payable		E		64,619			66,786
Cash draw notes		F		213,745			204,423
Convertible promissory notes		G		144,937			154,437
Total				7,220,631			6,922,976
Less:  unamortized discount and debt issuance costs				(98,311	)		(173,668	)
Debt, net of unamortized discount and debt issuance costs				7,122,320			6,749,308
Less:  current portion				(5,865,572	)		(5,156,305	)
Debt, long-term portion			$	1,256,748		$	1,593,003

Investor Debt

	March 31, 2016		December 31, 2015	Interest Rate
$	87,787	$	87,787	24	%
	50,000		50,000	24	%
	50,000		50,000	24	%
	25,000		25,000	8	%
	25,000		25,000	8	%
	20,000		20,000	2	%
	10,000		10,000	24	%
$	267,787	$	267,787

Related Party Debt

	March 31, 2016		December 31, 2015		Interest Rate
D1	$	4,420,465	$	4,120,465		various
D2		528,214		528,214		various
D3		34,888		34,888		12	%
D4		280,800		280,800		various
D5		668,176		668,176		18	%
Total	$	5,932,543	$	5,632,543

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7. Net Loss Per Share (Tables)

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Net Loss Per Share

	Three months ended March 31,
	2016
Net loss	$	(890,586	)	$	(612,285	)
Weighted average outstanding shares of common stock		118,049,387			54,560,257
Dilutive effect of stock options and warrants		—			—
Common stock and equivalents		118,049,387			54,560,257
Net loss per share – Basic and diluted	$	(0.01	)	$	(0.01	)

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1. Description of Business and Summary of Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Accounting Policies [Abstract]
Working Capital Deficit	$ 9,669,324
Net Income Loss	$ (890,586)	$ (612,285)

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2. Accounts receivable - Receivable (Details) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Receivables [Abstract]
Customer receivables	$ 20,628	$ 21,431
Less: Allowance for uncollectible accounts	(12,880)	(12,880)
Receivables, Net	$ 7,748	$ 8,551

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3. Inventory - Inventory (Details) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Inventory Disclosure [Abstract]
Raw materials	$ 338,546	$ 348,342
Less: Reserve	(158,191)	(158,191)
Inventory, Net	$ 180,355	$ 190,151

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4. Debt - Debt (Details) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Debt Disclosure [Abstract]
Line of credit	$ 47,000	$ 47,000
Note payable to distribution partner	550,000	550,000
Investor debt	267,787	267,787
Related party debt	5,932,543	5,632,543
Other notes payable	64,619	66,786
Cash draw agreements	213,745	204,423
Convertible promissory notes	144,937	154,437
Total	7,220,631	6,922,976
Less: unamortized discount and debt issuance costs	(98,311)	(173,668)
Debt, net of unamortized discount and debt issuance costs	7,122,320	6,749,308
Less: current portion	5,865,572	5,156,305
Debt, long-term portion	$ 1,256,748	$ 1,593,003

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4. Debt - Investor Debt (Details) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Investor Debt Balances	$ 7,220,631	$ 6,922,976
Investor Debt 1
Investor Debt Balances	87,787	$ 87,787
Investor Debt, Interest Rate		24.00%
Investor Debt 2
Investor Debt Balances	50,000	$ 50,000
Investor Debt, Interest Rate		24.00%
Investor Debt 3
Investor Debt Balances	50,000	$ 50,000
Investor Debt, Interest Rate		24.00%
Investor Debt 4
Investor Debt Balances	25,000	$ 25,000
Investor Debt, Interest Rate		8.00%
Investor Debt 5
Investor Debt Balances	25,000	$ 25,000
Investor Debt, Interest Rate		8.00%
Investor Debt 6
Investor Debt Balances	20,000	$ 20,000
Investor Debt, Interest Rate		2.00%
Investor Debt 7
Investor Debt Balances	10,000	$ 10,000
Investor Debt, Interest Rate		24.00%
Investor Debt Total
Investor Debt Balances	$ 267,787	$ 267,787

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4. Debt - Related Party Debt (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
D1
Related Party Debt	$ 4,420,465	$ 4,120,465
D2
Related Party Debt	528,214	528,214
D3
Related Party Debt	$ 34,888	$ 280,800
Related Party Debt, Interest Rate	12.00%	12.00%
D4
Related Party Debt	$ 280,800	$ 34,888
D5
Related Party Debt	$ 668,176	$ 668,176
Related Party Debt, Interest Rate	18.00%	18.00%
Related Party Total
Related Party Debt	$ 5,932,543	$ 5,632,543

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7. Net Loss Per Share - Net Loss Per Share (Details) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Earnings Per Share [Abstract]
Net loss available for stockholders	$ (890,586)	$ (612,285)
Weighted average outstanding shares of common stock	118,049,387	54,560,257
Dilutive effect of securities
Common stock and equivalents	$ 118,049,387	$ 54,560,257
Net loss per share - Basic and diluted	$ (0.01)	$ (0.01)