10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2018

☐      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.)
5310 Ward Road, Suite 106, Arvada, CO (Address of principal executive offices)	80002 (Zip Code)

(720) 361-2056

Registrant’s telephone number, including area code

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 ☒     No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒     No ☐

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

Large accelerated filer  ☐	Accelerated filer  ☐
Non-accelerated filer  ☐	Smaller reporting company  ☒
	Emerging growth company☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of January 17, 2019, there were 249,447,433 shares of common stock, $0.0001 par value, issued and outstanding.

EXELED HOLDINGS INC.

Table of Contents

Part I – FINANCIAL INFORMATION
Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	17
Item 4.	Controls and Procedures	17
Part II – OTHER INFORMATION
Item 1.	Legal Proceedings	19
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3.	Defaults upon Senior Securities	20
Item 4.	Mine Safety Disclosures	20
Item 5.	Other Information	20
Item 6.	Exhibits	20

2

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, except as may be required under applicable securities laws. 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.

3

PART I. Financial Information

Item 1. Financial Statements

EXELED HOLDINGS INC.

Unaudited Condensed Consolidated Balance Sheets

	September 30, 2018			December 31, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	675		$	–
Accounts receivable, net		1,967			–
Inventory		–			69,498
Prepaid expenses and other		73,725			54,163
Total current assets		76,367			123,661
Noncurrent assets:
Deposits and other		35,167			14,627
Total assets	$	111,534		$	138,288
LIABILITIES AND EQUITY
Current liabilities:
Cash overdraft	$	–		$	11,118
Accounts payable		3,147,973			2,893,614
Accrued liabilities		4,571,284			2,628,335
Debt, current portion, net of discount and debt issuance costs		13,902,742			11,249,083
Total current liabilities		21,621,999			16,782,150
Debt, long-term portion		572,558			676,058
Total liabilities		22,194,557			17,458,208
Commitments and contingencies (Note 4)		–			–
Equity:
Preferred stock, $0.0001 par value; 5,000,000 shares authorized; no shares issued and outstanding at September 30, 2018 or December 31, 2017		–			–
Common stock, $0.0001 par value; 250,000,000 shares authorized; 249,447,433 shares issued and outstanding at September 30, 2018 and December 31, 2017		24,743			24,743
Additional paid-in capital		2,635,896			2,635,896
Accumulated deficit		(24,743,662	)		(19,980,559	)
Total deficit		(22,083,023	)		(17,319,920	)
Total liabilities and equity	$	111,534		$	138,288

See accompanying notes to condensed consolidated financial statements.

4

EXELED HOLDINGS INC.

Condensed Consolidated Statements of Operations

(Unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2018			2017			2018			2017
Sales revenue	$	1,706		$	5,167		$	25,107		$	49,721
Cost of goods sold		64,013			3,036			74,222			23,430
Gross profit (loss)		(62,307	)		2,131			(49,115	)		26,291
Operating expenses:
Research and development		48,214			60,535			214,598			204,292
Sales and marketing		230			79			4,014			2,341
General and administrative		334,754			201,201			692,978			580,690
Total operating expenses		383,198			261,815			911,590			787,323
Loss from operations		(445,505	)		(259,684	)		(960,705	)		(761,032	)
Other income (expense):
Interest expense		(1,192,194	)		(648,131	)		(2,950,490	)		(1,776,470	)
Other expense		(79,466	)		(101,486	)		(851,908	)		(156,698	)
Other income (expense), net		(1,271,660	)		(749,617	)		(3,802,398	)		(1,933,168	)
Provision for taxes on income		–			–			–			–
Net loss	$	(1,717,165	)	$	(1,009,301	)	$	(4,763,103	)	$	(2,694,200	)
Net loss per common share:
Basic and diluted	$	(0.01	)	$	(0.00	)	$	(0.02	)	$	(0.01	)
Weighted average common shares outstanding:
Basic and diluted		249,447,433			249,447,433			249,447,433			249,447,433

See accompanying notes to condensed consolidated financial statements

5

EXELED HOLDINGS INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine months ended September 30,
	2018			2017
Operating Activities:
Net loss	$	(4,763,103	)	$	(2,694,200	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt issuance costs and debt discount		826,380			502,481
Write-down of inventory		64,635			–
Changes in operating assets and liabilities:
Accounts receivable		(1,967	)		(2,394	)
Inventory		4,863			5,335
Due from related parties		–			(21,270	)
Prepaid expenses and other		(19,562	)		(11,269	)
Other assets		(20,540	)		250
Accounts payable		254,359			188,518
Accrued liabilities		1,103,877			625,564
Net cash used in operating activities		(2,551,058	)		(1,406,985	)
Investing Activities:
Net cash from investing activities		–			–
Financing Activities:
Proceeds from debt		3,778,825			1,891,283
Payments of debt		(1,215,974	)		(488,704	)
Net cash provided by financing activities		2,562,851			1,402,579
Net change in cash (overdraft)		11,793			(4,406	)
Cash (overdraft), beginning of period		(11,118	)		5,454
Cash, end of period	$	675		$	1,048
Cash paid for:
Interest	$	1,287,848		$	679,222
Taxes		–			–
Non-cash transactions:
Debt issuance costs	$	872,411		$	687,000
Debt reclassified as accrued liabilities		839,072			–

See accompanying notes to condensed consolidated financial statements.

6

EXELED HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements

For the Three and Nine Months Periods Ended September 30, 2018 and 2017

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. On December 31, 2013, we entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with OELC, LLC, a Delaware limited liability company, and its wholly-owned subsidiary, Énergie LLC (hereinafter referred to as, “Énergie”). The Share Exchange Agreement was not effective until July 2, 2014. We issued 33,000,000 shares of our common stock, representing approximately 65% of our then issued and outstanding voting securities, in exchange for all of the issued and outstanding member interests of Énergie. 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, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with two of our then wholly owned subsidiaries, Energie Holdings, Inc. and Alas Acquisition Company. 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 our entry into the LED lighting industry. Our management also changed.

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.

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.

Our headquarters is located in Arvada, Colorado, and we also maintain a production and assembly facility in Zeeland, Michigan.

Basis of Presentation

The accompanying unaudited condensed consolidated balance sheet as of September 30, 2018, has been derived from our 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 year ended December 31, 2017.

Significant Accounting Policy Updates

Revenue Recognition

During the first quarter of 2018, we adopted the following accounting principles related to revenue recognition: (a) FASB ASU 2016-12 “Revenue from Contracts with Customers (Topic 606);” (b) FASB ASU 2016-11 “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815);” and (c) FASB ASU 2016-10 “Revenue from Contracts with Customers (Topic 606).” Due to the nature of our contracts with customers, adopting the new accounting principles did not have a significant impact on our prior period results of operations, cash flows or financial position.

7

Our revenues arise from contracts with customers and consists of operations segment product sales.  The majority of our revenue is derived from distinct performance obligations, such as the delivery of a specific product.

We may also enter into contracts with customers that identify a single, or few, distinct performance obligations, but that also have non-distinct, underlying performance obligations.  These contracts are typically fulfilled within one to three months.  Only an insignificant portion of our revenue would be assessed for allocation between distinct (contractual) performance obligations and non-distinct deliverables between reporting periods and, accordingly, we do not record a contract asset for completed, non-distinct performance obligations prior to invoicing the customer.

We recognize revenue when the following criteria are met:

Identify the contracts with the customer – our customary practice is to obtain written evidence, typically in the form of a contract or purchase order.

Identify the performance obligations in the contract –  we have rights to payment 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.

Determine the transaction price – prices are typically fixed and no price protections or variables are offered.

Allocate the transaction price to the performance obligations – our contracts disclose exact products and therefor allocate the transaction price by individual product.

Recognize revenue when (or as) the performance obligation is satisfied –  payment terms are typically zero to fifteen days within delivery of the good.

Customer deposits are contract liabilities with customers that represent our obligation to either transfer goods or services in the future, or refund the amount received. Customer deposits are recognized as revenue as we perform under the contract.

Going Concern

As shown in the accompanying condensed consolidated financial statements, we had an equity deficit of $22,083,023 and a working capital deficit of $21,545,632 as of September 30, 2018, and have reported net losses of $4,763,103 and $2,694,200 for the nine months ended September 30, 2018 and 2017, 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.

Some of our debt agreements are due on demand. 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.

8

Prepaid Expenses and Other

We have created a joint venture with Kasper Consulting called Kas-Exe Parking Solutions LLC (“Kas-Exe”). The purpose of the joint venture is to capitalize on attractive business opportunities that present themselves. As of September 30, 2018, we have paid Kasper Consulting $43,148 in order to help launch Kas-Exe. At this point, the joint venture no longer seen as viable and we are in the process of being refunded the amounts paid to Kasper Consulting. The amount is included as prepaid expenses and other in the accompanying unaudited condensed consolidated financial statements.

Inventory

During the third quarter of 2018, we wrote down the full value of all inventory. We wrote down the full value of the inventory as we determined the inventory on hand to be either obsolete or slow-moving. We included the effect of the write-down on the condensed consolidated statements of operations in cost of goods sold.

Reclassifications

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

Recently Issued Accounting Pronouncements

The Financial Accounting Standards Board and other entities have issued other new or modifications to, or interpretations of, existing accounting guidance during 2018. Management has carefully considered the new pronouncements that altered generally accepted accounting principles and does not believe that any other new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term.

Note 2 — Accounts receivable, net

The following is a summary of accounts receivable:

	September 30, 2018			December 31, 2017
Customer receivables	$	37,788		$	35,821
Less:  Allowance for uncollectible accounts		(35,821	)		(35,821	)
	$	1,967		$	–

Note 3 — Debt, net

Debt is comprised of the following:

Description	Note	September 30, 2018			December 31, 2017
Line of credit	A	$	6,531		$	31,588
Note payable to distribution partner	B		550,000			550,000
Investor debt	C		371,507			371,507
Related party debt	D		12,659,270			10,038,037
Other notes payable	E		642,444			1,021,937
Cash draw notes	F		717,590			338,083
Convertible promissory notes	G		58,937			58,937
Total			15,006,279			12,410,089
Less: unamortized discount and debt issuance costs			(530,979	)		(484,948	)
Debt, net of unamortized discount and debt issuance costs			14,475,300			11,925,141
Less: current portion			(13,902,742	)		(11,249,083	)
Debt, long-term portion		$	572,558		$	676,058

9

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. 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. This payment was not made and the bank requested and received a judgment against both defendants jointly and severally for $61,502 plus interest of 5.25% per annum plus 9.90% per annum on the default margin. On May 10, 2017, the bank agreed to stay further execution on the judgment so long as the defendants pay the balance of the judgment in monthly payments of $5,000 per month on the fifteenth of each month, commencing on May 15, 2017. Under this agreement, interest continues to accrue at the judgment interest rate. The principal balance at September 30, 2018 was $6,531.

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.

C – Investor Debt – Notes payable to lenders having an ownership interest in Holdings at September 30, 2018 and December 31, 2017. These loans are not collateralized. The following summarizes the terms and balances of the investor debt:

September 30, 2018		December 31, 2017		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%
	113,720		113,720	various
$	371,507	$	371,507

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

	September 30, 2018		December 31, 2017		Interest Rate
D1	$	4,635,865	$	4,635,865	various
D2		34,888		34,888	12%
D3		366,550		362,550	various
D4		1,205,234		1,205,234	18%
D5		6,416,733		3,799,500	6%
Total	$	12,659,270	$	10,038,037

D1 – Notes payable to Symbiote, Inc. (“Symbiote”), entered into from December 2014 to June 2016, with monthly principal and interest payable through November 2017. Symbiote is a shareholder, is the lessor of our manufacturing facility, and the provider of our payroll services. We also owe Symbiote $1,565,207 in accounts payable and accrued interest.

D2 – Note payable to our Chief Executive Officer (“CEO”), entered into in December 2014, with monthly principal and interest originally payable through December 2016. We are still continuing to accrue interest on this note payable. We also owe our CEO $939,681 in accrued compensation, accrued interest, and expenses incurred on behalf of the Company.

D3 – Notes payable to the spouse of our CEO, entered into from September 2013 to January 2018, with principal and interest payments due upon a specific event or upon demand. We also owe her $245,444 in accrued interest.

10

D4 – Notes payable to the consulting firm that employs our Chief Financial Officer, entered into from June 2015 to December 2017. These notes aggregated previous accounts payable and accrued interest due to the consulting firm at the time the notes were made. These notes mature at various dates through December 2019. We also owe this firm $456,673 in accrued interest.

D5 – Notes payable to the principal shareholders of Symbiote, entered into from April 2016 to September 2018, with principal and interest payments due upon a specific event or upon demand. We also owe them $264,492 in accrued interest.

E – Other Notes Payable – Represents the outstanding principal balance on six separate notes bearing interest at between 6% and 24% 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 one of these notes prior to using the proceeds for any other purpose. During November 2017, one of these noteholders requested a summary judgment for a note that is in default as principal and interest payments were not made in accordance with the note. The note had consolidated past due rent amounts and interest to one of our former landlords. In January 2018, a summary judgment in the amount of $475,832, which represents the total principal and interest outstanding on the note as of October 31, 2017 was granted by the court.

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 of principal and interest due under these arrangements was $717,590 as of September 30, 2018. The maturity dates of the agreements range from November 2018 to January 2019. During 2018, judgment was entered against us and in favor of ML Factors Funding, Green Capital Funding, and Queen Funding, whereby we are required to pay the outstanding principal and interest balance on the agreements. In addition, ML Factors Funding, Green Capital Funding, and Queen Funding also claim that they are to be paid additional interest, attorney’s fees, and other ancillary expenses. While we are vigorously defending ourselves in these matters and believe that we will not be required to pay more than the total principal and interest outstanding on the agreements, we have recorded the entire amount of all judgments into our financial statements as of September 30, 2018. We recorded the entire requested amount from ML Factors Funding of $240,480, the entire requested amount from Green Capital Funding of $312,056, and the entire requested amount from Queen Funding of $304,826. In addition, we have reclassified these amounts to accrued liabilities.

G – Convertible promissory notes – Represents the outstanding principal balance related to a convertible promissory note entered into during October 2014. In May 2017, LG Capital Funding LLC (“LG”), filed a complaint against us in the U.S. District Court for the Southern District of New York, Civil Action No. 17-cv-4006-(RJS), alleging that we owed LG the principal balance of $75,000 plus interest, costs and attorneys’ fees, arising out of two convertible notes issued to LG. LG amended its complaint in July 2017 and we filed our answer a week later denying any liability and affirmatively stating that LG had been repaid many times over. LG then immediately filed a pre-discovery motion for summary judgment. We submitted our opposition to the motion on September 25, 2017. LG filed reply papers in further support on October 5, 2017. LG asserts that no factual issues exist and that summary judgment is therefore appropriate. Our opposition asserts that summary judgment, as to both liability and damages, is woefully premature and unwarranted given the many factual issues that exist regarding, among other things, LG’s failure to disclose material facts, potential short selling and fraudulent concealment, usury, and fraud on the market. The motion remains pending before the Court.

Our defense in this matter is based in part on a separate action filed by the Securities and Exchange Commission against unrelated defendants in the U.S. District Court for the Southern District of Florida alleging that the defendant there, which follows the same business model as LG, has violated federal securities laws by not registering as a dealer. We understand that LG also was not and is not registered as a dealer even though it too should be given it too trades securities for its own account as part of its business. The SEC asserts that all gains reaped by defendants in the attached complaint should be disgorged due to the ill-gotten gains received. LG has, admittedly, likewise received substantial profits trading our stock for its own account.

As a result, we have filed an amended answer, alleging that LG is entitled to no recovery, and that it should disgorge to us all gains unlawfully received from selling our shares of common stock.

Debt issuance costs of $530,979 are being amortized over the life of the respective notes.

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Note 4 — Commitments and Contingencies

To the best of the Company’s knowledge and belief, no current legal proceedings of merit are currently pending or threatened against the Company, other than those described in the paragraph below as well as in Notes 3 (E), 3 (F), and 3 (G).

During November 2017, Autumnwood Investments, LLC requested a summary judgment for a note that was in default as principal and interest payments were not made in accordance with the note. The note had consolidated past due rent amounts and interest due to Autumwood. In January 2018, a summary judgment in the amount of $475,832, which represents the total principal and interest outstanding on the note as of October 31, 2017, was granted to Autumnwood by the court. The principal balance of the note has been reclassified from debt to accrued liabilities. The interest that had accrued on the note was already included in accrued liabilities.

Note 5 — 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.

There are no dilutive instruments outstanding during the nine months ended September 30, 2018 and 2017.

Note 6 — Subsequent Events

There are no events subsequent to September 30, 2018 and up to the date of this filing that require disclosure.

12

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

The following discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto included herein. 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 except as may be required under applicable securities laws.

Overview

ExeLED Holdings Inc. (“we,” “us,” “our”) 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, Énergie LLC (hereinafter referred to as “Énergie”), and OELC, LLC. All references herein to “us,” “we,” “our,” “Holdings,” or the “Company” refer to ExeLED Holdings Inc. and its subsidiaries, and their respective business, unless the context otherwise requires.

We are a holding company 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 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 LED 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. 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. These objectives are subject to our obtaining additional financing, of which there can be no assurance.

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.

Our principal place of business is located at 5310 Ward Road, Suite 106, Arvada, Colorado, 80002. Our telephone number is (720) 361-2056. We also maintain a production and assembly facility in Zeeland, Michigan. Our website is www.exeledholdings.com.

Énergie acts as our operating subsidiary. 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. 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.

Our unaudited 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 unaudited condensed consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.

13

Results of Operations

Comparison of results of operations for the three months ended September 30, 2018 and 2017

	Three months ended September 30,
	2018			2017			Change			%
Sales revenue	$	1,706		$	5,167		$	(3,461	)	(67)%
Cost of revenue		64,013			3,036			60,977		2008%
Gross profit (loss)		(62,307	)		2,131			(64,438	)	(3024)%
Total operating expenses		(383,198	)		(261,815	)		(121,383	)	46%
Interest expense		(1,192,194	)		(648,131	)		(544,063	)	84%
Other expense		(79,466	)		(101,486	)		22,020		(22)%
Net loss	$	(1,717,165	)	$	(1,009,301	)	$	(707,864	)	70%

Sales Revenue, Cost of Revenue and Gross Profit

Sales revenue decreased during the three months ended September 30, 2018 compared to the same period in 2017 due to an overall lack of funding necessary for development and product launch costs. While we are continuing to seek out and discuss external financing, no assurances can be made that we will be successful in our efforts. See “Liquidity and Capital Resources” below. Cost of revenue increased dramatically during the three months ended September 30, 2018 compared to the same period in 2017 as we wrote down all inventory during the quarter. The write-down of the inventory was booked to cost of goods sold.

Operating expenses

	Three months ended September 30,
	2018		2017		Change			%
Research and development	$	48,214	$	60,535	$	(12,321	)	(20)%
Sales and marketing		230		79		151		191%
General and administrative		334,754		201,201		133,553		66%
	$	383,198	$	261,815	$	121,383		46%

Operating costs increased during the three months ended September 30, 2018 compared to the same period in 2017 as legal fees were charged in connection with judgments entered against us in connection with loans from ML Factors Funding, Green Capital Funding, and Queen Funding.

Other expense

During the three months ended September 30, 2018, interest expense increased from $648,131 incurred during the three months ended September 30, 2017, to $1,192,194, an increase of $544,063, due to additional debt of approximately $3,900,000 over the same point in 2017.

Other expense consists primarily of other fees expenses related to seeking and securing debt and other external financing.

As a result, we incurred a net loss of $1,717,165 during the three month period ended September 30, 2018 (approximately $0.01 per share), compared to a net loss of $1,009,301 during the three month period ended September 30, 2017.

14

Comparison of results of operations for the nine months ended September 30, 2018 and 2017

	Nine months ended September 30,
	2018			2017			Change			%
Sales revenue	$	25,107		$	49,721		$	(24,614	)	(50)%
Cost of revenue		74,222			23,430			50,792		217%
Gross profit		(49,115	)		26,291			(75,406	)	(287)%
Total operating expenses		(911,590	)		(787,323	)		(124,267	)	16%
Interest expense		(2,950,490	)		(1,776,470	)		(1,174,020	)	66%
Other expense		(851,908	)		(156,698	)		(695,210	)	444%
Net loss	$	(4,763,103	)	$	(2,694,200	)	$	(2,068,903	)	77%

Sales Revenue, Cost of Revenue and Gross Profit

Sales revenue during the nine months ended September 30, 2018 was $25,107, compared to revenue of $49,721 generated during the nine months ended September 30, 2017, a decrease of $24,614. This decrease was attributable to our lack of available capital in which to generate sales in 2018. Cost of revenue increased dramatically during the nine months ended September 30, 2018 compared to the same period in 2017 as we wrote down all inventory during the quarter. The write-down of the inventory was booked to cost of goods sold.

Operating expenses

	Nine months ended September 30,
	2018		2017		Change		%
Research and development	$	214,598	$	204,292	$	10,306		5%
Sales and marketing		4,014		2,341		1,673		71%
General and administrative		692,978		580,690		112,288		19%
	$	911,590	$	787,323	$	124,267		16%

Operating Costs increased during the nine months ended September 30, 2018 compared to the same period in 2017 as legal fees were charged in connection with judgments entered against us in connection with loans from ML Factors Funding, Green Capital Funding and Queen Funding.

Other expense

During the nine months ended September 30, 2018, interest expense increased due to additional debt of approximately $3,900,000 over the same point in 2017.

Other expense consists primarily of other expenses related to costs associated with attempts to secure external funding.

We have created a joint venture with Kasper Consulting called Kas-Exe Parking Solutions LLC (“Kas-Exe”). The purpose of the joint venture is to capitalize on attractive business opportunities that present themselves. As of September 30, 2018, we have paid Kasper Consulting $43,148 in order to help launch Kas-Exe. At this point, the joint venture no longer seen as viable and we are in the process of being refunded the amounts paid to Kasper Consulting. The amount is included as Prepaid expenses and other in the accompanying unaudited condensed consolidated financial statements.

As a result, we incurred a net loss of $4,763,103 during the nine month period ended September 30, 2018 (approximately $0.02 per share), compared to a net loss of $2,694,200 during the nine month period ended September 30, 2017.

15

Liquidity and Capital Resources

At September 30, 2018, we had $675 in cash and cash equivalents.

We have not generated positive cash flows from operations in any year since our inception. Accordingly, our sources of liquidity may include potential debt and/or equity offerings. We believe that our principal difficulty in our inability to successfully implement our business plan and generate positive cash flows has been and continues to be the lack of available working capital to operate and expand our business. While we are in discussions with various potential financing groups, 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 and continue operations.

To fund our acquisition plan and fund working capital for our continuing operations we will require and are continuing to seek out and discuss financing with potential partners or lenders. These efforts have been unsuccessful thus far and there are no assurances that they will be successful in the future. Failure to obtain the financing necessary will have a significant negative impact on our Company and our ability to remain in business. We have identified multiple potential funding sources and have diligently pursued receiving financing from these sources for varying lengths of time. Management believes that these efforts will be coming to a conclusion in the near future and will either result in significant funding for us or in no funding at all. There are no assurances that these pursuits will be successful and, if none of them are successful, we will not have the financial resources to continue operations and may require relief from bankruptcy court.

Working Capital

Working capital is the amount by which current assets exceed current liabilities. We had negative working capital of $21,545,632 and $16,658,489, respectively, as of September 30, 2018 and December 31, 2017. The increase in negative working capital is due to the increase in debt of approximately $2,550,000 and a resulting increase in accrued liabilities of approximately $1,945,000 from interest expense and reclassifications to accrued liabilities. 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:

	Nine months ended September 30,
	2018			2017
Net cash used in operating activities	$	(2,551,058	)	$	(1,406,985	)
Net cash from investing activities		–			–
Net cash provided by financing activities		2,562,851			1,402,579

Net cash used in operating activities increased in 2018 by $1,144,073 compared to 2017.  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 2018, we relied on additional borrowings under both new and existing debt agreements. In 2018, net cash flows provided by financing activities were composed of $3,778,825 of additional borrowings and $1,215,974 of debt pay down. In 2017, we borrowed $1,891,283 of additional debt and paid down $488,704 of debt.

16

We believe that our principal difficulty in our inability to successfully generate revenues and corresponding profits has been the lack of available capital to implement our business plan. We believe that Energie will need a minimum of approximately $2,000,000 in additional working capital to be utilized for a) development and launching of new products; b) funding the business development efforts to identify, qualify and acquire other LED lighting companies; and c) the balance for working capital, and general and administrative expenses. In addition, we believe we need more than $10,000,000 to pay off a significant portion of our debt and to begin funding the business development efforts to identify, qualify and acquire other LED lighting companies, with the balance for working capital and general and administrative expense. As of the date of this report, we have no commitment 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 and to stay in business in the future. 

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 nine month period ended September 30, 2018.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of September 30, 2018 and December 31, 2017.

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, 2017 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 September 30, 2018.   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 September 30, 2018, 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.

Our Board of Directors has assigned a priority to the short-term and long-term improvement of our internal control over financial reporting. We are reviewing various potential solutions to remedy the processes that would eliminate the issues that may arise due to the absence of separation of duties within the financial reporting functions. Additionally, the Board of Directors will work with management to continuously review controls and procedures to identified deficiencies and implement remediation within our internal controls over financial reporting and our disclosure controls and procedures.

17

We believe that our financial statements presented in this quarterly report on Form 10-Q fairly present, in all material respects, our financial position, results of operations, and cash flows for all periods presented herein.

Inherent Limitations – Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple error or mistake. In particular, many of our current processes rely upon manual reviews and processes to ensure that neither human error nor system weakness has resulted in erroneous reporting of financial data.

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.

18

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. This payment was not made and the bank requested and received a judgment against both Defendants jointly and severally for $61,502 plus interest of 5.25% per annum plus 9.90% per annum on the default margin. On May 10, 2017, the bank agreed to stay further execution on the judgment so long as the defendants pay the balance of the judgment in monthly payments of $5,000 per month on the fifteenth of each month, commencing on May 15, 2017. Under this agreement, interest continues to accrue at the judgment interest rate. The current principal balance is $6,531.

In May 2017, LG Capital Funding LLC (“LG”), filed a complaint against us in the U.S. District Court for the Southern District of New York, Civil Action No. 17-cv-4006-(RJS), alleging that we owed LG the principal balance of $75,000 plus interest, costs and attorneys’ fees, arising out of two convertible notes issued to LG. LG amended its complaint in July 2017 and we filed our answer a week later denying any liability and affirmatively stating that LG had been repaid many times over. LG then immediately filed a pre-discovery motion for summary judgment. We submitted our opposition to the motion on September 25, 2017. LG filed reply papers in further support on October 5, 2017. LG asserts that no factual issues exist and that summary judgment is therefore appropriate. Our opposition asserts that summary judgment, as to both liability and damages, is woefully premature and unwarranted given the many factual issues that exist regarding, among other things, LG’s failure to disclose material facts, potential short selling and fraudulent concealment, usury, and fraud on the market. The motion remains pending before the Court.

Our defense in this matter is based in part on a separate action filed by the Securities and Exchange Commission against unrelated defendants in the U.S. District Court for the Southern District of Florida alleging that the defendant there, which follows the same business model as LG, has violated federal securities laws by not registering as a dealer. We understand that LG also was not and is not registered as a dealer even though it too should be given it too trades securities for its own account as part of its business. The SEC asserts that all gains reaped by defendants in the attached complaint should be disgorged due to the ill-gotten gains received. LG has, admittedly, likewise received substantial profits trading our stock for its own account.

As a result, we have filed an amended answer, alleging that LG is entitled to no recovery, and that it should disgorge to us all gains unlawfully received from selling our shares of common stock.

During November 2017, Autumnwood Investments, LLC (a former landlord of ours) requested a summary judgment for a note that is in default as principal and interest payments were not made in accordance with the note. The note had consolidated past due rent amounts and interest due to Autumwood. In January 2018, a summary judgment in the amount of $475,832, which represents the total principal and interest outstanding on the note as of October 31, 2017 was granted in favor of Autumnwood by the court.

During 2018, judgment was entered against us and in favor of ML Factors Funding, Green Capital Funding, and Queen Funding, whereby we are required to pay the outstanding principal and interest balance on the agreements. In addition, ML Factors Funding, Green Capital Funding, and Queen Funding also claim that they are to be paid additional interest, attorney’s fees, and other ancillary expenses. While we are vigorously defending ourselves in these matters and believe that we will not be required to pay more than the total principal and interest outstanding on the agreements, we have recorded the entire amount of all judgments into our financial statements as of September 30, 2018. We recorded the entire requested amount from ML Factors Funding of $240,480, the entire requested amount from Green Capital Funding of $312,056, and the entire requested amount from Queen Funding of $304,826. In addition, we have reclassified these amounts to accrued liabilities.

19

As a result of our lack of available capital we are unable to pay many of our bills and outstanding promissory notes when they become due. While we have not been threatened specifically with litigation, it is impractical to believe or assume that our creditors will not pursue actions against us to collect balances due. Many of these obligations and agreements contain provisions requiring us to pay costs of collection and attorneys’ fees over and above the principal amounts due, which may increase these outstanding balances.

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

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

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
101.INS	XBRL Instance Document*
101.SCH	XBRL Schema Document*
101.CAL	XBRL Calculation Linkbase Document*
101.DEF	XBRL Definition Linkbase Document*
101.LAB	XBRL Label Linkbase Document*
101.PRE	XBRL Presentation Linkbase Document*

______________________

* Pursuant to Rule 406T of Regulation S-T, these interactive data files are not deemed filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act or Section 18 of the Securities Exchange Act and otherwise not subject to liability.

20

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:  January 17, 2019	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)

21

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 September 30, 2018;

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:     January 17, 2019
		/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 September 30, 2018;

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:     January 17, 2019
		/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 quarter ended September 30, 2018, 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:     January 17, 2019
		/s/ Harold Hansen
	By:	Harold Hansen
		Chief Executive Officer (Principal Executive Officer)

Dated:     January 17, 2019
		/s/ Richard Cole Dennard
	By:	Richard Cole Dennard
		Chief Financial Officer (Principal Financial and Accounting Officer)

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Jan. 17, 2019
Document And Entity Information
Entity Registrant Name	ExeLED Holdings Inc.
Entity Central Index Key	0000774937
Document Type	10-Q
Document Period End Date	Sep. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		249,447,433
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2018
Entity Small Business	true
Entity Emerging Growth	true
Entity Ex-transition	false

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 675	$ 0
Accounts receivable, net	1,967	0
Inventory	0	69,498
Prepaid expenses and other	73,725	54,163
Total current assets	76,367	123,661
Noncurrent assets:
Deposits and other	35,167	14,627
Total assets	111,534	138,288
Current liabilities:
Cash overdraft	0	11,118
Accounts payable	3,147,973	2,893,614
Accrued liabilities	4,571,284	2,628,335
Debt, current portion, net of discount and debt issuance costs	13,902,742	11,249,083
Total current liabilities	21,621,999	16,782,150
Debt, long-term portion	572,558	676,058
Total liabilities	22,194,557	17,458,208
Commitments and contingencies (Note 4)
Equity:
Preferred stock, $.0001 par value; 5,000,000 shares authorized; no shares issued and outstanding at September 30, 2018 or December 31, 2017	0	0
Common stock, $0.0001 par value; 250,000,000 shares authorized; 249,447,433 shares issued and outstanding at September 30, 2018 and December 31, 2017	24,743	24,743
Additional paid-in capital	2,635,896	2,635,896
Accumulated deficit	(24,743,662)	(19,980,559)
Total deficit	(22,083,023)	(17,319,920)
Total liabilities and equity	$ 111,534	$ 138,288

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 0.0001	$ 0.0001
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	$ 0.0001	$ 0.0001
Common stock, shares authorized	250,000,000	250,000,000
Common stock, shares issued	249,447,433	249,447,433
Common stock, shares outstanding	249,447,433	249,447,433

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Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Income Statement [Abstract]
Sales revenue	$ 1,706	$ 5,167	$ 25,107	$ 49,721
Cost of goods sold	64,013	3,036	74,222	23,430
Gross profit (loss)	(62,307)	2,131	(49,115)	26,291
Operating expenses:
Research and development	48,214	60,535	214,598	204,292
Sales and marketing	230	79	4,014	2,341
General and administrative	334,754	201,201	692,978	580,690
Total operating expenses	383,198	261,815	911,590	787,323
Loss from operations	(445,505)	(259,684)	(960,705)	(761,032)
Other income (expense):
Interest expense	(1,192,194)	(648,131)	(2,950,490)	(1,776,470)
Other expense	(79,466)	(101,486)	(851,908)	(156,698)
Other income (expense), net	(1,271,660)	(749,617)	(3,802,398)	(1,933,168)
Provision for taxes on income	0	0	0	0
Net loss	$ (1,717,165)	$ (1,009,301)	$ (4,763,103)	$ (2,694,200)
Net loss per common share - Basic and diluted	$ (0.01)	$ (0.00)	$ (0.02)	$ (0.01)
Weighted average common shares outstanding - Basic and diluted	249,447,433	249,447,433	249,447,433	249,447,433

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Operating Activities:
Net loss	$ (4,763,103)	$ (2,694,200)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt issuance costs and debt discount	826,380	502,481
Write-down of inventory	64,635	0
Changes in operating assets and liabilities:
Accounts receivable	(1,967)	(2,394)
Inventory	4,863	5,335
Due from related parties	0	(21,270)
Prepaid expenses and other	(19,562)	(11,269)
Other assets	(20,540)	250
Accounts payable	254,359	188,518
Accrued liabilities	1,103,877	625,564
Net cash used in operating activities	(2,551,058)	(1,406,985)
Investing Activities
Net cash from investing activities	0	0
Financing Activities:
Proceeds from debt	3,778,825	1,891,283
Payments of debt	(1,215,974)	(488,704)
Net cash provided by financing activities	2,562,851	1,402,579
Net change in cash (overdraft)	11,793	(4,406)
Cash (overdraft), beginning of period	(11,118)	5,454
Cash, end of period	675	1,048
Cash paid for:
Interest	1,287,848	679,222
Income taxes	0	0
Non-cash transactions:
Debt issuance costs	872,411	687,000
Debt reclassified as accrued liabilities	$ 839,072	$ 0

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1. Description of Business and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

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. On December 31, 2013, we entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with OELC, LLC, a Delaware limited liability company, and its wholly-owned subsidiary, Énergie LLC (hereinafter referred to as, “Énergie”). The Share Exchange Agreement was not effective until July 2, 2014. We issued 33,000,000 shares of our common stock, representing approximately 65% of our then issued and outstanding voting securities, in exchange for all of the issued and outstanding member interests of Énergie. 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, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with two of our then wholly owned subsidiaries, Energie Holdings, Inc. and Alas Acquisition Company. 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 our entry into the LED lighting industry. Our management also changed.

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.

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.

Our headquarters is located in Arvada, Colorado, and we also maintain a production and assembly facility in Zeeland, Michigan.

Basis of Presentation

The accompanying unaudited condensed consolidated balance sheet as of September 30, 2018, has been derived from our 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 year ended December 31, 2017.

Significant Accounting Policy Updates

Revenue Recognition

During the first quarter of 2018, we adopted the following accounting principles related to revenue recognition: (a) FASB ASU 2016-12 “Revenue from Contracts with Customers (Topic 606);” (b) FASB ASU 2016-11 “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815);” and (c) FASB ASU 2016-10 “Revenue from Contracts with Customers (Topic 606).” Due to the nature of our contracts with customers, adopting the new accounting principles did not have a significant impact on our prior period results of operations, cash flows or financial position.

Our revenues arise from contracts with customers and consists of operations segment product sales.  The majority of our revenue is derived from distinct performance obligations, such as the delivery of a specific product.

We may also enter into contracts with customers that identify a single, or few, distinct performance obligations, but that also have non-distinct, underlying performance obligations.  These contracts are typically fulfilled within one to three months.  Only an insignificant portion of our revenue would be assessed for allocation between distinct (contractual) performance obligations and non-distinct deliverables between reporting periods and, accordingly, we do not record a contract asset for completed, non-distinct performance obligations prior to invoicing the customer.

We recognize revenue when the following criteria are met:

Identify the contracts with the customer – our customary practice is to obtain written evidence, typically in the form of a contract or purchase order.

Identify the performance obligations in the contract –  we have rights to payment 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.

Determine the transaction price – prices are typically fixed and no price protections or variables are offered.

Allocate the transaction price to the performance obligations – our contracts disclose exact products and therefor allocate the transaction price by individual product.

Recognize revenue when (or as) the performance obligation is satisfied –  payment terms are typically zero to fifteen days within delivery of the good.

Customer deposits are contract liabilities with customers that represent our obligation to either transfer goods or services in the future, or refund the amount received. Customer deposits are recognized as revenue as we perform under the contract.

Going Concern

As shown in the accompanying condensed consolidated financial statements, we had an equity deficit of $22,083,023 and a working capital deficit of $21,545,632 as of September 30, 2018, and have reported net losses of $4,763,103 and $2,694,200 for the nine months ended September 30, 2018 and 2017, 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.

Some of our debt agreements are due on demand. 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.

Prepaid Expenses and Other

We have created a joint venture with Kasper Consulting called Kas-Exe Parking Solutions LLC (“Kas-Exe”). The purpose of the joint venture is to capitalize on attractive business opportunities that present themselves. As of September 30, 2018, we have paid Kasper Consulting $43,148 in order to help launch Kas-Exe. At this point, the joint venture no longer seen as viable and we are in the process of being refunded the amounts paid to Kasper Consulting. The amount is included as prepaid expenses and other in the accompanying unaudited condensed consolidated financial statements.

Inventory

During the third quarter of 2018, we wrote down the full value of all inventory. We wrote down the full value of the inventory as we determined the inventory on hand to be either obsolete or slow-moving. We included the effect of the write-down on the condensed consolidated statements of operations in cost of goods sold.

Reclassifications

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

Recently Issued Accounting Pronouncements

The Financial Accounting Standards Board and other entities have issued other new or modifications to, or interpretations of, existing accounting guidance during 2018. Management has carefully considered the new pronouncements that altered generally accepted accounting principles and does not believe that any other new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term.

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2. Accounts receivable, net

9 Months Ended

Sep. 30, 2018

Receivables [Abstract]

Accounts receivable, net

Note 2 — Accounts receivable, net

The following is a summary of accounts receivable:

	September 30, 2018			December 31, 2017
Customer receivables	$	37,788		$	35,821
Less:  Allowance for uncollectible accounts		(35,821	)		(35,821	)
	$	1,967		$	–

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3. Debt, net

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

Debt, net

Note 3 — Debt, net

Debt is comprised of the following:

Description	Note	September 30, 2018			December 31, 2017
Line of credit	A	$	6,531		$	31,588
Note payable to distribution partner	B		550,000			550,000
Investor debt	C		371,507			371,507
Related party debt	D		12,659,270			10,038,037
Other notes payable	E		642,444			1,021,937
Cash draw notes	F		717,590			338,083
Convertible promissory notes	G		58,937			58,937
Total			15,006,279			12,410,089
Less: unamortized discount and debt issuance costs			(530,979	)		(484,948	)
Debt, net of unamortized discount and debt issuance costs			14,475,300			11,925,141
Less: current portion			(13,902,742	)		(11,249,083	)
Debt, long-term portion		$	572,558		$	676,058

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. 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. This payment was not made and the bank requested and received a judgment against both defendants jointly and severally for $61,502 plus interest of 5.25% per annum plus 9.90% per annum on the default margin. On May 10, 2017, the bank agreed to stay further execution on the judgment so long as the defendants pay the balance of the judgment in monthly payments of $5,000 per month on the fifteenth of each month, commencing on May 15, 2017. Under this agreement, interest continues to accrue at the judgment interest rate. The principal balance at September 30, 2018 was $6,531.

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.

C – Investor Debt – Notes payable to lenders having an ownership interest in Holdings at September 30, 2018 and December 31, 2017. These loans are not collateralized. The following summarizes the terms and balances of the investor debt:

September 30, 2018		December 31, 2017		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%
	113,720		113,720	various
$	371,507	$	371,507

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

	September 30, 2018		December 31, 2017		Interest Rate
D1	$	4,635,865	$	4,635,865	various
D2		34,888		34,888	12%
D3		366,550		362,550	various
D4		1,205,234		1,205,234	18%
D5		6,416,733		3,799,500	6%
Total	$	12,659,270	$	10,038,037

D1 – Notes payable to Symbiote, Inc. (“Symbiote”), entered into from December 2014 to June 2016, with monthly principal and interest payable through November 2017. Symbiote is a shareholder, is the lessor of our manufacturing facility, and the provider of our payroll services. We also owe Symbiote $1,565,207 in accounts payable and accrued interest.

D2 – Note payable to our Chief Executive Officer (“CEO”), entered into in December 2014, with monthly principal and interest originally payable through December 2016. We are still continuing to accrue interest on this note payable. We also owe our CEO $939,681 in accrued compensation, accrued interest, and expenses incurred on behalf of the Company.

D3 – Notes payable to the spouse of our CEO, entered into from September 2013 to January 2018, with principal and interest payments due upon a specific event or upon demand. We also owe her $245,444 in accrued interest.

D4 – Notes payable to the consulting firm that employs our Chief Financial Officer, entered into from June 2015 to December 2017. These notes aggregated previous accounts payable and accrued interest due to the consulting firm at the time the notes were made. These notes mature at various dates through December 2019. We also owe this firm $456,673 in accrued interest.

D5 – Notes payable to the principal shareholders of Symbiote, entered into from April 2016 to September 2018, with principal and interest payments due upon a specific event or upon demand. We also owe them $264,492 in accrued interest.

E – Other Notes Payable – Represents the outstanding principal balance on six separate notes bearing interest at between 6% and 24% 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 one of these notes prior to using the proceeds for any other purpose. During November 2017, one of these noteholders requested a summary judgment for a note that is in default as principal and interest payments were not made in accordance with the note. The note had consolidated past due rent amounts and interest to one of our former landlords. In January 2018, a summary judgment in the amount of $475,832, which represents the total principal and interest outstanding on the note as of October 31, 2017 was granted by the court.

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 of principal and interest due under these arrangements was $717,590 as of September 30, 2018. The maturity dates of the agreements range from November 2018 to January 2019. During 2018, judgment was entered against us and in favor of ML Factors Funding, Green Capital Funding, and Queen Funding, whereby we are required to pay the outstanding principal and interest balance on the agreements. In addition, ML Factors Funding, Green Capital Funding, and Queen Funding also claim that they are to be paid additional interest, attorney’s fees, and other ancillary expenses. While we are vigorously defending ourselves in these matters and believe that we will not be required to pay more than the total principal and interest outstanding on the agreements, we have recorded the entire amount of all judgments into our financial statements as of September 30, 2018. We recorded the entire requested amount from ML Factors Funding of $240,480, the entire requested amount from Green Capital Funding of $312,056, and the entire requested amount from Queen Funding of $304,826. In addition, we have reclassified these amounts to accrued liabilities.

G – Convertible promissory notes – Represents the outstanding principal balance related to a convertible promissory note entered into during October 2014. In May 2017, LG Capital Funding LLC (“LG”), filed a complaint against us in the U.S. District Court for the Southern District of New York, Civil Action No. 17-cv-4006-(RJS), alleging that we owed LG the principal balance of $75,000 plus interest, costs and attorneys’ fees, arising out of two convertible notes issued to LG. LG amended its complaint in July 2017 and we filed our answer a week later denying any liability and affirmatively stating that LG had been repaid many times over. LG then immediately filed a pre-discovery motion for summary judgment. We submitted our opposition to the motion on September 25, 2017. LG filed reply papers in further support on October 5, 2017. LG asserts that no factual issues exist and that summary judgment is therefore appropriate. Our opposition asserts that summary judgment, as to both liability and damages, is woefully premature and unwarranted given the many factual issues that exist regarding, among other things, LG’s failure to disclose material facts, potential short selling and fraudulent concealment, usury, and fraud on the market. The motion remains pending before the Court.

Our defense in this matter is based in part on a separate action filed by the Securities and Exchange Commission against unrelated defendants in the U.S. District Court for the Southern District of Florida alleging that the defendant there, which follows the same business model as LG, has violated federal securities laws by not registering as a dealer. We understand that LG also was not and is not registered as a dealer even though it too should be given it too trades securities for its own account as part of its business. The SEC asserts that all gains reaped by defendants in the attached complaint should be disgorged due to the ill-gotten gains received. LG has, admittedly, likewise received substantial profits trading our stock for its own account.

As a result, we have filed an amended answer, alleging that LG is entitled to no recovery, and that it should disgorge to us all gains unlawfully received from selling our shares of common stock.

Debt issuance costs of $530,979 are being amortized over the life of the respective notes.

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4. Commitments and Contingencies

9 Months Ended

Sep. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 4 — Commitments and Contingencies

To the best of the Company’s knowledge and belief, no current legal proceedings of merit are currently pending or threatened against the Company, other than those described in the paragraph below as well as in Notes 3 (E), 3 (F), and 3 (G).

During November 2017, Autumnwood Investments, LLC requested a summary judgment for a note that was in default as principal and interest payments were not made in accordance with the note. The note had consolidated past due rent amounts and interest due to Autumwood. In January 2018, a summary judgment in the amount of $475,832, which represents the total principal and interest outstanding on the note as of October 31, 2017, was granted to Autumnwood by the court. The principal balance of the note has been reclassified from debt to accrued liabilities. The interest that had accrued on the note was already included in accrued liabilities.

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5. Net Loss Per Share

9 Months Ended

Sep. 30, 2018

Earnings Per Share [Abstract]

Net Loss Per Share

Note 5 — 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.

There are no dilutive instruments outstanding during the nine months ended September 30, 2018 and 2017.

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6. Subsequent Events

9 Months Ended

Sep. 30, 2018

Subsequent Events [Abstract]

Subsequent Events

Note 6 — Subsequent Events

There are no events subsequent to September 30, 2018 and up to the date of this filing that require disclosure.

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

9 Months Ended

Sep. 30, 2018

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.

Our headquarters is located in Arvada, Colorado, and we also maintain a production and assembly facility in Zeeland, Michigan.

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated balance sheet as of September 30, 2018, has been derived from our 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 year ended December 31, 2017.

Revenue Recognition

Significant Accounting Policy Updates

Revenue Recognition

During the first quarter of 2018, we adopted the following accounting principles related to revenue recognition: (a) FASB ASU 2016-12 “Revenue from Contracts with Customers (Topic 606);” (b) FASB ASU 2016-11 “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815);” and (c) FASB ASU 2016-10 “Revenue from Contracts with Customers (Topic 606).” Due to the nature of our contracts with customers, adopting the new accounting principles did not have a significant impact on our prior period results of operations, cash flows or financial position.

Our revenues arise from contracts with customers and consists of operations segment product sales.  The majority of our revenue is derived from distinct performance obligations, such as the delivery of a specific product.

We may also enter into contracts with customers that identify a single, or few, distinct performance obligations, but that also have non-distinct, underlying performance obligations.  These contracts are typically fulfilled within one to three months.  Only an insignificant portion of our revenue would be assessed for allocation between distinct (contractual) performance obligations and non-distinct deliverables between reporting periods and, accordingly, we do not record a contract asset for completed, non-distinct performance obligations prior to invoicing the customer.

We recognize revenue when the following criteria are met:

Identify the contracts with the customer – our customary practice is to obtain written evidence, typically in the form of a contract or purchase order.

Identify the performance obligations in the contract –  we have rights to payment 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.

Determine the transaction price – prices are typically fixed and no price protections or variables are offered.

Allocate the transaction price to the performance obligations – our contracts disclose exact products and therefor allocate the transaction price by individual product.

Recognize revenue when (or as) the performance obligation is satisfied –  payment terms are typically zero to fifteen days within delivery of the good.

Customer deposits are contract liabilities with customers that represent our obligation to either transfer goods or services in the future, or refund the amount received. Customer deposits are recognized as revenue as we perform under the contract.

Going Concern

Going Concern

As shown in the accompanying condensed consolidated financial statements, we had an equity deficit of $22,083,023 and a working capital deficit of $21,545,632 as of September 30, 2018, and have reported net losses of $4,763,103 and $2,694,200 for the nine months ended September 30, 2018 and 2017, 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.

Some of our debt agreements are due on demand. 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.

Prepaid Expenses and Other

Prepaid Expenses and Other

We have created a joint venture with Kasper Consulting called Kas-Exe Parking Solutions LLC (“Kas-Exe”). The purpose of the joint venture is to capitalize on attractive business opportunities that present themselves. As of September 30, 2018, we have paid Kasper Consulting $43,148 in order to help launch Kas-Exe. At this point, the joint venture no longer seen as viable and we are in the process of being refunded the amounts paid to Kasper Consulting. The amount is included as prepaid expenses and other in the accompanying unaudited condensed consolidated financial statements.

Inventory

Inventory

During the third quarter of 2018, we wrote down the full value of all inventory. We wrote down the full value of the inventory as we determined the inventory on hand to be either obsolete or slow-moving. We included the effect of the write-down on the condensed consolidated statements of operations in cost of goods sold.

Reclassifications

Reclassifications

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

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

The Financial Accounting Standards Board and other entities have issued other new or modifications to, or interpretations of, existing accounting guidance during 2018. Management has carefully considered the new pronouncements that altered generally accepted accounting principles and does not believe that any other new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term.

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2. Accounts receivable, net (Tables)

9 Months Ended

Sep. 30, 2018

Receivables [Abstract]

Accounts Receivable

	September 30, 2018			December 31, 2017
Customer receivables	$	37,788		$	35,821
Less:  Allowance for uncollectible accounts		(35,821	)		(35,821	)
	$	1,967		$	–

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3. Debt, net (Tables)

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

Schedule of debt

Description	Note	September 30, 2018			December 31, 2017
Line of credit	A	$	6,531		$	31,588
Note payable to distribution partner	B		550,000			550,000
Investor debt	C		371,507			371,507
Related party debt	D		12,659,270			10,038,037
Other notes payable	E		642,444			1,021,937
Cash draw notes	F		717,590			338,083
Convertible promissory notes	G		58,937			58,937
Total			15,006,279			12,410,089
Less: unamortized discount and debt issuance costs			(530,979	)		(484,948	)
Debt, net of unamortized discount and debt issuance costs			14,475,300			11,925,141
Less: current portion			(13,902,742	)		(11,249,083	)
Debt, long-term portion		$	572,558		$	676,058

Schedule of investor debt

September 30, 2018		December 31, 2017		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%
	113,720		113,720	various
$	371,507	$	371,507

Schedule of related party debt

	September 30, 2018		December 31, 2017		Interest Rate
D1	$	4,635,865	$	4,635,865	various
D2		34,888		34,888	12%
D3		366,550		362,550	various
D4		1,205,234		1,205,234	18%
D5		6,416,733		3,799,500	6%
Total	$	12,659,270	$	10,038,037

D1 – Notes payable to Symbiote, Inc. (“Symbiote”), entered into from December 2014 to June 2016, with monthly principal and interest payable through November 2017. Symbiote is a shareholder, is the lessor of our manufacturing facility, and the provider of our payroll services. We also owe Symbiote $1,565,207 in accounts payable and accrued interest.

D2 – Note payable to our Chief Executive Officer (“CEO”), entered into in December 2014, with monthly principal and interest originally payable through December 2016. We are still continuing to accrue interest on this note payable. We also owe our CEO $939,681 in accrued compensation, accrued interest, and expenses incurred on behalf of the Company.

D3 – Notes payable to the spouse of our CEO, entered into from September 2013 to January 2018, with principal and interest payments due upon a specific event or upon demand. We also owe her $245,444 in accrued interest.

D4 – Notes payable to the consulting firm that employs our Chief Financial Officer, entered into from June 2015 to December 2017. These notes aggregated previous accounts payable and accrued interest due to the consulting firm at the time the notes were made. These notes mature at various dates through December 2019. We also owe this firm $456,673 in accrued interest.

D5 – Notes payable to the principal shareholders of Symbiote, entered into from April 2016 to September 2018, with principal and interest payments due upon a specific event or upon demand. We also owe them $264,492 in accrued interest.

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1. Description of Business and Summary of Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Equity deficit	$ (22,083,023)		$ (22,083,023)		$ (17,319,920)
Working Capital	(21,545,632)		(21,545,632)
Net Income Loss	(1,717,165)	$ (1,009,301)	(4,763,103)	$ (2,694,200)
Prepaid expenses	73,725		73,725		$ 54,163
Kas-Exe Parking Solutions [Member]
Prepaid expenses	$ 43,148		$ 43,148

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2. Accounts receivable (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Receivables [Abstract]
Customer receivables	$ 37,788	$ 35,821
Less: Allowance for uncollectible accounts	(35,821)	(35,821)
Accounts receivable, net	$ 1,967	$ 0

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3. Debt, net (Details - Debt) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Debt Disclosure [Abstract]
Line of credit	$ 6,531	$ 31,588
Note payable to distribution partner	550,000	550,000
Investor debt	371,507	371,507
Related party debt	12,659,270	10,038,037
Other notes payable	642,444	1,021,937
Cash draw notes	717,590	338,083
Convertible promissory notes	58,937	58,937
Total	15,006,279	12,410,089
Less: unamortized discount	(530,979)	(484,948)
Debt, net of unamortized discount	14,475,300	11,925,141
Less: current portion, net of unamortized discount	(13,902,742)	(11,249,083)
Debt, long-term portion	$ 572,558	$ 676,058

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3. Debt (Details - Investor Debt) - USD ($)	9 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Investor Debt	$ 371,507	$ 371,507
Investor Debt 1
Investor Debt	$ 87,787	$ 87,787
Investor Debt, Interest Rate	24.00%	24.00%
Investor Debt 2
Investor Debt	$ 50,000	$ 50,000
Investor Debt, Interest Rate	24.00%	24.00%
Investor Debt 3
Investor Debt	$ 50,000	$ 50,000
Investor Debt, Interest Rate	24.00%	24.00%
Investor Debt 4
Investor Debt	$ 25,000	$ 25,000
Investor Debt, Interest Rate	8.00%	8.00%
Investor Debt 5
Investor Debt	$ 25,000	$ 25,000
Investor Debt, Interest Rate	8.00%	8.00%
Investor Debt 6
Investor Debt	$ 20,000	$ 20,000
Investor Debt, Interest Rate	2.00%	2.00%
Investor Debt 7
Investor Debt	$ 113,720	$ 113,720
Investor debt, interest rate	various

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3. Debt (Details - Related Party Debt) - USD ($)	9 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Related Party Debt	$ 12,659,270	$ 10,038,037
Symbiote [Member]
Related Party Debt	$ 4,635,865	4,635,865
Related party interest rate	various
Accounts payable, related parties	$ 1,565,207
Chief Executive Officer [Member]
Related Party Debt	$ 34,888	34,888
Related party interest rate	12%
Accounts payable, related parties	$ 939,681
Spouse of CEO [Member]
Related Party Debt	$ 366,550	362,550
Related party interest rate	various
Interest payable	$ 245,444
Consulting Firm [Member]
Related Party Debt	$ 1,205,234	1,205,234
Related party interest rate	18%
Interest payable	$ 456,673
Shareholders of Symbiote [Member]
Related Party Debt	$ 6,416,733	$ 3,799,500
Related party interest rate	6%
Interest payable	$ 264,492

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3. Debt, net (Details Narrative) - USD ($)	9 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Line of credit balance	$ 6,531	$ 31,588
Accrued liabilities	4,571,284	$ 2,628,335
Debt issuance costs	$ 530,979
Note payable to distribution partner [Member]
Interest rate description	5% payable quarterly
Debt maturity date	Sep. 30, 2019
Other notes payable [Member]
Interest rate description	between 6% and 24%
Cash draw agreements [Member]
Interest rate description	no stated interest rate
Debt maturity dates	November 2018 to January 2019
ML Factors Funding [Member]
Accrued liabilities	$ 240,480
Green Capital Funding [Member]
Accrued liabilities	312,056
Queen Funding [Member]
Accrued liabilities	$ 304,826
Line Of Credit [Member]
Line of credit interest rate	10.50%
Line of credit balance	$ 6,531

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4. Commitments and Contingencies (Details Narrative)	Sep. 30, 2018 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Other commitment	$ 475,832

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5. Net Loss Per Share (Details Narrative) - shares	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Earnings Per Share [Abstract]
Antidilutive securities	0	0